Anxiety as China Influences Thailand's Economy

BANGKOK, Thailand -- A birthday party's dinner guests were bubbling with cheer until the subject of China came up, causing some of the Thais to suddenly turn gloomy.

"People in Thailand are worried," said a former foreign ministry diplomat, placing down his glass of red wine.

"China's economy is so big, and ours is so small, that we cannot compete with all the Chinese things being sold here. It is especially a problem for Thai S.M.E.s," he said, referring to small and medium-sized enterprises.

"China will own us!" said an official interpreter for top government leaders, expressing her outrage at Beijing's rapidly growing influence on Bangkok's economy.

"Of course China will also own America, but your economy is so big you can just tell Beijing that you won't pay all the money you owe, and they can't do anything about it. But Thailand is small. We can't say no to Beijing.

"Thailand will be like a vassal of China," she said.

U.S. corporations are also fretting about how to compete in a region where the shared knowledge of Chinese dialects and an ancient heritage, give China some unique advantages over America.

China's ability to sell food, household goods and other items at lower prices than Thai manufacturers has also pleased customers in this Southeast Asian nation.

Beijing is simultaneously increasing its military and cultural influence in Thailand, trying to wean Bangkok away from Washington and other foreign governments while expanding China's reach southward.

Chinese migrants have been settling in Thailand for generations, arriving through Laos and across the Mekong River or, more often, by sea from China's southeast coastal towns to Bangkok.

The earliest arrivals melded into a relatively unpopulated land centuries ago, maintaining some Chinese roots while mixing with ethnic Mon, Shan, Khmer and Thais to produce offspring who are today generally called Sino-Thais.

During the 1950s and 60s, Chinese fled the Communist takeover of their country, seeking greater freedom, safety and a capitalist economy in Thailand.

Some of the Chinese where suspected -- rightly or wrongly -- of being communist infiltrators and were arrested, imprisoned or shot dead by Thailand's U.S.-backed military which supported America's Vietnam War and believed Washington's "domino theory" of communist expansion across the region.

Many of the Chinese who survived, however, advanced upward and their descendants now occupy some of Thailand's highest political, economic, military and cultural positions.

Today, Chinese faces, fashions and symbols are promoted in Thai advertisements and pop culture as badges of financial success.

Many Thais admire local Chinese for educating their kids in Thailand's private "Chinese schools" while keeping their families united and working hard as a business team.

Thailand's newly elected government meanwhile is expected to confirm Yingluck Shinawatra as the country's first female prime minister in August.

She appears eager to allow China to construct high-speed trains on five main routes across Thailand, replacing this country's decrepit, accident-prone railway.

The first 380-mile (615-km) Chinese rail line would link Bangkok and Thailand's northern border town of Nong Khai, where a railway bridge over the Mekong River already leads to Vientiane, the capital of tiny Laos -- an impoverished country wedged between Thailand and China.

The Chinese railway projects could take a decade or more to complete, but Thailand's integration with China would be greatly enhanced.

The collision in China on July 24 of two bullet trains, which killed at least 39 people, has raised questions however among some Thais about Beijing's ability to build safe trains.

In January, Chinese investors began building a $1.5 billion China City Complex near Bangkok which could employ more than 70,000 Chinese citizens.

They would be able to import parts from China, manufacture the items into finished products on Thai territory, and export them elsewhere as "made-in-Thailand" without suffering some of the expensive tariffs which made-in-China products must pay.

The Chinese will also be able to sell the 700,000-sq-meter complex's clothing, household items and other goods to people within Thailand, free of tariffs.

"Apart from the business opportunities in Thailand, Chinese exporters can also promote their products to developed markets such as the European Union and the United States through this project," said Yang Fangshu, chairman of the ASEAN-China Economic and Trade Promotion Center, according to Beijing's China Daily.

In 2006, when Thailand's military staged a coup and toppled the prime minister, Washington suspended $24 million in military assistance and restricted high-level meetings.

Beijing, however, described the coup as Bangkok's internal affair and gave $49 million in military aid and credits to Thailand, while increasing the number of exchange students at both countries' staff colleges, and convincing the Thai military to participate in yearly, small-scale Special Forces joint exercises.

Chinese and Thai special forces held a 15-day joint anti-terrorism drill, "Strike-2010," during October in China's southern Guilin city to practice shooting, assaults and strategy.

During the same month, more than 100 troops and officers from the China Marine Corps' amphibious special warfare unit participated in a 10-day "Blue Strike-2010" drill with their Thai counterparts, using light weapons, underwater combat equipment, amphibious reconnaissance and anti-terrorism equipment.

It was the first time Chinese marines conducted a drill with a foreign army abroad.

But China has sold inferior weaponry to Thailand, making some Thai military officials wary of becoming dependent on Chinese supplies.

For Bangkok, commerce with Beijing appears to be much more important than military links.

Thailand's "government officials and academics sympathetic to the U.S. see the dynamic of China rising -- and the U.S. receding -- likely to continue, unless the U.S. takes more vigorous action to follow-up with sustained efforts to engage on issues that matter to the Thai and the region, not just what is perceived as the U.S.'s own agenda," said a confidential American Embassy cable to Washington in February 2010.

The cable, "10BANGKOK269," was titled: "China's Sustained, Successful Efforts to Court Southeast Asia and Thailand -- Perspectives and Implications."

It was signed by then-U.S. Ambassador Eric John and released by WikiLeaks.

The cable's section subtitled, "China Rising, U.S. Fading?" warned: "Indications that the U.S.'s historically close relationship with Thailand and the region is being challenged by the rise of China have become increasingly evident in recent years in a variety of arenas, not just economically but diplomatically, culturally, politically, and even in some security areas."

The U.S. Embassy even felt competition on a diplomatic level.

"We have also noticed an ever increasing quality to the Chinese diplomatic presence in Thailand. Many Chinese diplomats are fully fluent in Thai, led by the Chinese Ambassador, who has spent 17 years of his career posted here and routinely makes local TV appearances.

"Those that do not have previous Thai experience, like the DCM [Deputy Chief of Mission] are smart, articulate, and increasingly confident in speaking up at English-language international relations seminars once the preserve of 'Western' diplomats," the cable said.

China's roll south also includes prostitution, gambling and other hedonistic offerings, most surprisingly in and around a tacky, Greco-Roman building complex on the Lao side of the Mekong River across from Thailand.

Chinese recently leased a 25,000-acre Special Economic Zone from the Lao government and constructed an extravagant casino, topped by a garish golden crown, in newly created Kapok City.

Gaming tables reportedly employ 2,000 people.

The Chinese complex will also offer golf, restaurants, hotels, an airport and shopping malls.

Construction includes a 46-km road linking the casino to Huay Xai town on the Mekong River, according to Chiang Mai's Citylife magazine, and will help the area prosper.

"Before, it was opium and drug businesses, maybe only 10 years before," in the area, the casino's manager told the magazine.

"There were no roads, no electricity, no water. Laos is developing, and it is good for them."

The Lao government gave the Chinese a 99-year lease to develop the complex, which already has gamblers playing at its tables. Security includes private guards and metal detectors, and a ban on alcohol and photography in the casino, though smoking is allowed, the report said.

Several top Thai corporations are meanwhile trying to make profits by investing in China, hoping to copy the perceived success of Thailand's Charoen Pokphand Group.

In 1979, CP Group -- known in China as the Chia Tai Group (Zheng Da Ji Tuan) -- was the first multinational enterprise to invest in China's agribusiness.

Famous in Thailand for chicken and other food products, they expanded into China by focusing on the growing, processing and marketing of poultry and other edibles, alongside investments in huge supermarkets, entertainment complexes, automotive and other industries, plastics, and TV media.

More recently, Thailand's agricultural exporters have been exporting magosteens, durians, pomelo, tamarind and other food to China, helped by a deal signed in April which streamlined customs checks for road shipments.

Sealed trucks are now able to speed to northern Thailand's border town of Chiang Khong, cross the Mekong into northwest Laos at Huay Sai, travel further north on Route 3 to the Lao-China border town of Mohan, and enter southern China's Yunnan province for delivery by superhighway to Jinghong and Kunming.

The journey takes about five days.

Before the agreement, trucks had to stop at the Thai-Lao border for laborious reloading onto different vehicles inside Laos, and again be unloaded and reloaded at the Lao-China border.

Alternatively, Thai exporters use Bangkok's port to ship goods along the Gulf of Thailand and South China Sea into Hong Kong.

China, however, produces much larger and more diversified foods for export into Thailand, threatening local producers and worrying consumers who fear China's deadly toxic contamination.

Thailand's Food and Drug Administration recently increased checks on food arriving from China, testing for mercury, melamine, pesticides and other hazardous substances.

Richard S Ehrlich is a Bangkok-based journalist who has reported news from Asia since 1978. He is co-author of "Hello My Big Big Honey!", a non-fiction book of investigative journalism. His web page is http://www.asia-correspondent.110mb.com.

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