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The curious case of Thai-Chinese relations: Best friends forever?

The curious case of Thai-Chinese relations: Best friends forever?
Published 14 Mar 2016 

Thailand has a long tradition of balancing its relations with major powers and, since the 2014 coup, it has been shifting towards China. However, with the two countries now involved in a  complicated collaboration on high speed rail, the Thai public has started to question whether China is truly its best ally. Indeed, once one looks beyond perceptions and emotions and examines the detail of the Thailand-China relations, the best friend status is puzzling.

Sweet relationship

Thailand and China drew closer back in the late 1970s when Bangkok needed Beijing's military and strategic support to cope with an expansionist Vietnam. The friendship strengthened when China withdrew its support of the communist movement in Thailand, removing red threats from within and outside of the country. Cordial relations strengthened further in the last decade. Then, when other friends — like the US, UK, Australia and Japan —  condemned the 2014 coup, China stated that Thailand should resolve its domestic conflicts peacefully. This reaction was welcomed by many Thais who supported the overthrow of the Shinawatra government, even by unconstitutional means.

The two countries have since exchanged frequent high-level visits and strengthened and enhanced cooperation in every domain. On a visit last April, the new Thai Prime Minister General Prayuth Chan-ocha thanked China for its selfless assistance. Foreign Minister Thanasak Patimaprakorn expressed his love of China and the Chinese foreign minister at ASEAN's Annual Defense Minister's Meeting Plus last year. In his opinion, the relationship goes back more than a thousand years, is closer than friendship and more like family.

Yet China is not the most important, closest, or largest benefactor of Thailand in matters of defence, economics or development.

Blossoming but relatively limited defence ties

Thailand's contemporary military ties with China are still insignificant compared to those with other countries. There is the annual combined special forces exercise, Strike, and a biannual joint marine exercise, Blue Strike, added after the 2006 coup. The first joint air force exercise, Falcon Strike, was held last year. But this cooperation remains significantly smaller than Thailand's arrangements with other countries. In recent years, Thailand has typically held around 40 training activities per year with the US military forces. Many still continue despite the scale down of Cobra Gold and suspension of Thailand's participation in the multinational maritime exercise RIMPAC due to the coup. Annually, Thailand has around nine bilateral and five multilateral training exercises with Australia, and for decades has participated in annual military exercises with Singapore, Malaysia and Indonesia.

In terms of arms supply, Thailand traditionally receives most from the US at discounted prices. The stockpiles from China are no greater than what Thailand has procured from other countries since the Cold War. Before an agreement on defense production was struck with China last year, Thailand had collaborated with other countries such as South Korea, Israel and India. While China also provides cheap hardware to Thailand, often the equipment received has been of limited quality and not suitable for Thailand's needs. However, thanks to the recently elevated military relations, the Thai Navy decided to buy submarines from China, instead of from Germany or South Korea, as it had previously planned.

Japan is the most important economic partner

Since 2012, China has been Thailand's largest trade partner but this is a recent phenomenon. Previously, Japan held this position since at least 1993. Last year, trade volume with China was around 2% higher than that with Japan. After a Free Trade Agreement was struck in 2003, Thailand-China trade began to significantly increase, along with a widening trade deficit which rose almost three-fold within a year of enactment (from US$428 million to US$1.26 billion). This trade deficit reached US$17 billion last year. In contrast, Thailand runs a trade surplus with the US (one of its top three trade partners) of between $6 billion to $10 billion a year. China only replaced the US as top importer of Thai products during 2010–2014.

Foreign Direct Investment is the life blood of Thailand's economic growth and export-led economy. Japan always tops the list of FDI sources by a large margin. Last year, Japanese investment stood at US$4.2 billion, followed by Singapore, which contributed US$1.1 billion. China did not make the top five.

Japan is the largest development assistance provider

Japan is the largest Official Development Assistance (ODA) provider to Thailand (US$415 million in 2014), followed by the US (US$56 million), the UK, and Germany. Some 85% of Japanese assistance takes the form of cheap loans for economic infrastructure. Social infrastructure is also largely supported by Japan, the US, European countries. and South Korea. China has not been known as an ODA provider to Thailand.

The problematic Thai-Chinese railway project

This will likely change with the new collaboration on railways. However, the project has been contentious. On assuming power, the current Thai military regime followed the path of the previous government in upgrading the century-old railway system to a higher speed. Rather than taking charge of the construction and loans itself, and seeking hardware and software assistance from several countries, the government decided to partner with China. Routes were slightly adjusted to match the latter's strategic plan to connect with several parts of Southeast Asia.

The public was soon disappointed to learn that the new budget estimates for the work were 50% higher than initially envisioned; and that the return will be a medium-speed train, with a maximum speed of 180 km/hr, rather than the high-speed units planned by the previous government. China initially proposed interest rates of 2.5% to 4% and a 40% share in investment for Thailand in a deal that included train, rolling track and equipment, but not civil construction, which can account for as much as 80% of project expenses. After several negotiations, the interest rate was reduced to 2%, with China raising its share to 70% in exchange for a right to develop areas along the rail for commercial benefit. Instead of a double track, the Nakhon Ratchasima-Nong Khai route would be modified to a single one to save costs. However, the two countries have yet to reach conclusion after 10 joint committee meetings.

The Thai public is now comparing this project with the smooth Thai-Japanese collaboration on a high speed train connecting Kanchanaburi to Lam Chabang port in Rayong. The train, with Japanese technology, will run at 250 km/hr on a double track. Japan also assisted Thailand with loans and technology for the construction of the Bangkok underground and mass rapid transit train lines, with an interest rate of only 1.4%.

World best diplomacy

Two factors explain why China has become Thailand's new best friend. First, Beijing's lack of criticism of political developments in the Kingdom. Second, the great attention China has given to Thailand's leaders. High level visits and side meetings between the two countries exceed those Thailand has with other countries. Thai Princess Sirindhorn visits China every year at the invitation of the Chinese government. Princess Chulabhorn is another frequent guest. China also extended a warm welcome to and facilitated an ancestral visit by the former Thai prime ministers Thaksin and Yingluck Shinawatra last year, without provoking a spat with the present government, or being heavily criticised by the Yellow Shirts. In contrast, Western leaders and diplomats have struggled in their interactions with the military government and the Pheu Thai party, and remind Thailand to uphold principles of liberal democracy.

The Thai-Chinese relationship thus shows the strength of China's diplomacy. This has drawn Thailand towards China, even when it has not been in its own best interests.

The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.

Photo courtesy of Flickr user Shawn Huang

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