Thailand Law Journal 2010 Spring Issue 1 Volume 13

These Chinese companies cover agricultural products (e.g., Changlong Foods Co., Ltd., Hua Tai Rubber Co., Ltd.), minerals & ceramics (e.g., New Moon Industrial Co., Ltd., Rung Siam Fertilizer Co., Ltd.), light industries & textiles (P.H. Garment Manufacturing Co., Ltd., Worldbest Group.), metal products & machinery (e.g. Asia Thai Thong Metal Co., Ltd., Holley Hangshen Electric (Thailand) Co., Ltd.) electric and electronic products (Linkword Electronic (Thailand) Co., Ltd., Compass East Industrial (Thailand) Co., Ltd.) chemicals and paper (Tonrich Plastic Factory (Thailand) Co., Ltd., Thai Chong Chemical Industrial Co., Ltd.) and services (Tong Thai Real Estate Co., Ltd., Phuket Merlin Co., Ltd., Rojana Real estate Co., Ltd.) (BOI, 2006).

These companies are involved in manufacturing (computer hardware, garment, machinery and electronics), resource extraction (coal, mining), food processing, power generation, petrochemical and chemical plants, telecommunications, and the IT industry. Some of the larger investments have been undertaken by companies such as Dalian West Pacific Petrochemical, China National Electronics Import and Export Corporation, Haier, and China Minmetals Corporation. It is interesting to note that among Chinese companies investing in Thailand are Dongguan Nokia, and Intel China, all subsidiaries of well known companies headquartered abroad.

The main aim of oversea FDI by Chinese companies was to organize China's rapidly expanding international trade and secure natural resource inputs, although there was some mainly market seeking investment in manufacturing operations outside China.

3. The Motives of China's Outward FDI in Thailand
The motives for Chinese outward FDI are generally similar to those for FDI from other developing market economies (United Nations, 1993, Dunning, 1993, 2000 and Wall, 1997). China's outward FDI has increased rapidly for several motives. There are many push and pull factors that encourage Chinese companies to expand their business abroad in Thailand. Specifically, the following major motives can be discerned in Chinese outward FDI.

3.1 Market-and Export-seeking Investment
The growth of Chinese industrial conglomerates propelled by fast domestic consumption and rising exports urges these enterprises to expand their global brands and international presence. Among the best know brands are Lenovo, Haier, TCL and Huawei. With substantial local market bases, these brands are venturing into offshore markets in substantial ways. Some groups even take over local companies to increase local distribution networks and market shares. Chinese companies have all attempted to increase their exports through foreign investments and forming business partnership with local companies. Some also move to transfer certain industries such as textiles to other low-income countries in order to avoid trade restrictions of Chinese-made products in World markets. Thailand is characterized by its the open market economy with the population of 62 million. The increase of Chinese investment in Thailand depends on the close geographic location and thus becomes the good market in the region. As a result, Chinese manufacturers are naturally looking abroad for new markets with less competition and higher profit potentiality. The setup of trade and representative offices were the first step to enter the Thai market along with the construction companies that have been a favorite pet of Chinese authorities and have received extensive supports in exporting Chinese engineering skills and contract labour. By the end of 2001, more than 2,200 contracts per engineering project and labour service had been signed totaling US$ 2,176 million (Chinese Embassy in Thailand, 2003). Chinese company investment is an attempt to seek market in constructions (e.g., China State Construction Engineering (Thailand) Co., Ltd., CHEC (Thai) Co., Ltd., CWE (Thailand) Co., Ltd.) and trade (e.g. Teo Thai Trading Development Co., Ltd., Representative Office of China Shipbuilding Trading Co., Ltd. (Thailand), Hua Xiang Company Limited., LORIC-Thai International Co., Ltd.) (China-Thai Enterprises Association, 2002).

Also, Chinese companies invests in trade, service, and tourism (e.g., Teo Thai Trading Development Corp., Ltd., Shipbuilding Trading Co., Ltd., Hua Xiang Co., Ltd., Yunnan Travel (Thailand) Co., Ltd., and Thai Xi Hu Co., Ltd. and airline company (e.g., China Southern Airlines, Air China, China Eastern Airlines, China Southwest Airlines, China Yunnan Airlines and Xiamen Airlines) Transporation (e.g., COSCO (Thai) Holding Ltd., Gold Ship Co.,Ltd., Cosiam Transport Co.. Ltd., and China Shipping (Bangkok) Co., Ltd.). And Thailand has industrial locations supported by the BOI, for example Hemaraj Land Development Co., Ltd. (Public Company), Rojana Industrial Park, Amata Cooperation and Win Coast Industrial Park Co., Ltd.

Meanwhile, Chinese investment in Thailand can benefit from the same investment with other members of ASEAN because of the free trade area in ASEAN which will be effective in the year 2010. As Liu Chongming says during an interview "Chinesecompanies have money, expertise, experience and technology so they can increase their potentiality to seek new foreign markets."He Junfeng also shares his opinion during an interview that, "Thegovernment should be aware of the problem of competition betweenChinese companies and foreign companies in China, so that therepresentative office of Chinese investment in Thailand can establishmarket networks among neighbors and members of ASEAN." For instance, before the ASEAN Free Trade Agreement came into effect,some producers like China Worldbest Group., TCL, Haier, andI Huawei, has already set up manufacturing operations in Thailand to take advantage of AFTA's preferential tariff rate and sell their goods competitively. Chinese companies are also locating their manufacturing plants in other countries in order to export to other advanced markets.

3.2 Resource-Seeking Investment
China's oversea expansion has also been driven by the need to secure access to raw materials and natural resources. As its per capita natural resource endowment is poor, China needs to acquire a stable supply of resources to sustain its rapid economic development (Wang and Chan, 2003 p. 285). China's industrialization requires a constant supply of global commodities ranging from oil and gas to steel, plastic, resin, and rubber. China has been forced to invest offshore in order to secure the flow of these raw materials and commodities.

As Thailand is a country with substantial agricultural resources; basic staples such as rice, vegetables and fruits are abundant. As China has an increasing problem in feeding its growing population, the match for such a motive is present. Given the geographical proximity of the two countries, it is quite feasible that Thailand could continue being a supportive food chamber for China. China has also actively encouraged the import of fruits and vegetables from Thailand to China through the Thailand-China Free Trade Agreement of 2003 and the ASEAN "Early Harvest Programs" which came into effect on January 1,2004. Under this program, both sides have reduced tariff on about 600 gricultural imports between 2-5 per cent and have agreed to abolish these tariffs by 2006 (BOI, 2005).

Thailand's agriculture sector is the most prominent part of Chinese investment. It has attracted significant resource-seeking investment in areas such as fertilizer and rubber production, along with efficiency-seeking investment. According to the Chinese embassy in Bangkok, while trade-related investments were the dominant form of Chinese investment in the past, manufacturing investments, especially in machinery production and assembly trade, have risen in recent years (Wu and Sia, 2002, p. 51).

The Chinese also invested in raw materials and resources in Thai agriculture, (e.g., Pan Asia (Thailand) Co., Ltd., Siam Preserved Foods Co., Ltd., Thai-China Flavours and Fragrances Industry), rubber products ( e.g., Hua Tai Rubber Co., Ltd., Thai Yok Rubber Co., ltd., Latex Industries Co., ltd.), Para woods (e.g. Choosak and Punnee Leader Co., Ltd. and T.C.L. Parawood Co., Ltd.), fruits and longan fruit (e.g., In Pung Co., Ltd., Changlong Foods Co., Ltd., Shangsirikankaset Co., Ltd.) and aquatics(e.g., T.S. Wattana Co., Ltd. and Chanthaburi Aquaculture Fram Co., Ltd.) (BOI, 2006).