Hidden costs of cheap Chinese imports: Economic struggles in Thailand, Africa

Thailand is grappling with the consequences of cheap Chinese imports. The recent establishment of electric car factories by Chinese companies like BYD was initially seen as a positive development but it is no longer the case as reports of numerous factory closures and significant job losses emerge.

The closure of Suzuki Motor’s factory is the latest incident. The factory used to produce up to 60,000 cars annually. This closure reflects a broader trend affecting Southeast Asia’s second-largest economy, driven largely by the inability to compete with lower-priced Chinese goods. Rising energy costs and an ageing workforce have further eroded Thailand’s industrial competitiveness.

The statistics are disturbing. Nearly 2,000 factories closed in Thailand over the past year, resulting in over 51,500 job losses. This industrial downturn has severely impacted the country’s economy, which relies heavily on manufacturing, contributing nearly a quarter of its GDP. Workers like Chanpen Suetrong, a former employee at VMC Safety Glass, have found themselves unemployed and in dire financial straits.

Thai Prime Minister Srettha Thavisin faces the huge task of reversing this trend and achieving his promise of 5% annual GDP growth. The introduction of a 7% value-added tax on cheap imported goods is a step in the right direction, but more comprehensive measures are needed to protect local industries and restore economic stability.

The impact of cheap Chinese imports is not just restricted to Thailand. US Treasury Secretary Janet Yellen recently accused China of creating unfair competition that distorts global prices by ramping up production of technologies aimed at shifting the world towards net zero. Yellen highlighted that the increased production in solar energy, electric vehicles, and lithium-ion batteries by Beijing hurts American firms and workers, as well as firms and workers around the world.

Analysis by Transport & Environment indicates that a quarter of EVs sold within the EU this year will come from China. These developments underline the need for strategic responses from affected countries to safeguard their economic interests.

China’s role as Africa’s largest trading partner has also had mixed results. While the trade relationship has opened new markets, it has simultaneously undermined local industries. Past studies have confirmed it. For instance, in 2021, China accounted for $254 billion in trade with Africa and was the primary source of manufacturing imports, contributing 16% of the continent’s total in 2018. The influx of cheaper Chinese products has become a major concern for many African countries. Local industries, unable to compete with the low prices of Chinese goods, are often forced to shut down, leading to job losses and stunted industrial growth. Industrialization, crucial for improving living standards, suffers a significant setback.

Ethiopia is one example of how Chinese imports can disrupt local economies. A study analyzing the relationship between Chinese import competition and labor market outcomes revealed a decline in employment levels for both men and women in the manufacturing sector. Women, in particular, bore a disproportionate burden, with fewer female production workers employed in firms exposed to increased Chinese competition. The rise of Chinese imports has coincided with low levels of industrialization in most African countries, exacerbating gender disparities in the labor market. African women already lag behind men in economic opportunities, with lower labor market participation and earnings. The impact of Chinese trade relations on employment highlighted the need for policies that address these gender disparities and promote equal opportunities.

The influx of cheaper Chinese products has become a major concern for many African countries. Local industries, unable to compete with the low prices of Chinese goods, are often forced to shut down, leading to job losses and stunted industrial growth. Industrialization, crucial for improving living standards, suffers a significant setback.

How to mitigate the adverse effects of cheap Chinese imports
It is time for Thailand and those in Africa to diversify their economic focus. This includes developing industries that China does not dominate and strengthening sectors such as agriculture. Such diversification can help reduce dependence on Chinese imports and enhance economic resilience. Implementing tariffs and value-added taxes on imported goods can help protect local industries from unfair competition. However, these measures must be part of a broader strategy that includes improving industrial competitiveness through innovation, skills development, and infrastructure investment.

Addressing gender disparities in the labour market is also crucial for economic development. Policies that promote equal opportunities for women, such as education and training programs, can help improve their economic and social status. This, in turn, can enhance their bargaining power within households and contribute to overall economic growth.

Strengthening regional cooperation among developing countries can provide a counterbalance to China’s economic influence. By collaborating on trade and industrial policies, these countries can create a more balanced and equitable economic environment. This includes sharing best practices, coordinating tariffs and trade policies, and investing in regional infrastructure projects.