Thailand’s New Government Rebalances Its Relationship With China

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Thailand’s New Government Rebalances Its Relationship With China

While relations between Bangkok and Beijing remain warm, Prime Minister Srettha Thavisin is pursuing a more diversified foreign policy.

Thailand’s New Government Rebalances Its Relationship With China

Thai Prime Minister Srettha Thavisin walks to the podium to deliver a speech during a forum on green development during the Belt and Road Forum in Beijing, China, October 28, 2023.

Credit: Facebook/เศรษฐา ทวีสิน – Srettha Thavisin

In early January, Thai Prime Minister Srettha Thavisin enthusiastically announced that he would be waiving visa requirements for Chinese visitors to the country from March. The policy, which was formally signed by Chinese Foreign Minister Wang Yi and his Thai counterpart Parnpree Bahiddha-Nukara on January 28, was a recognition of the massive importance of Chinese tourists to the country’s tourist sector – a key pillar of the Thai economy.

In 2019, the last full year before the pandemic, 11 million Chinese visited Thailand, contributing to a record 39 million international arrivals. Since Thailand’s international borders reopened over two years ago, the Thai government has been eager for Chinese visitors to return. This is because the tourism market is crucial for Thailand, at its height contributing an estimated 12 percent of Thailand’s gross domestic product.

But Chinese tourism numbers to Thailand have failed to recover to their pre-COVID-19 levels. Fewer than 275,000 visited in 2022, largely due to Beijing’s harsh zero COVID policy, followed by 3.5 million last year, which fell well below the government’s target of 5 million.

To accelerate the recovery, Srettha announced an initial visa waiver for Chinese nationals that would temporarily run from September to February, hoping to attract a late rush of tourists before the year ended.

But China’s slowing economy, real estate crisis, and high youth unemployment level have hampered outbound tourism, including to Thailand, and flights from China to Thailand remain below pre-pandemic levels.

Benjamin Zawacki, author of the book “Thailand: Shifting Ground Between the U.S. and Rising China,” says there’s only so much Thailand can do.

“I don’t think the middle class has the means that it had pre-COVID to come to Thailand in such numbers, nor is it being encouraged the way it was before by China,” he said. “So, Thailand can do all it wants to try to pull, but if there’s not a push on the opposite end of that, then it can only do so much.”

Thailand’s heavy reliance on the Chinese tourism dollar reflects the robust economic relationship that has developed between the two nations since diplomatic relations were officially established in 1975. Since then, bilateral trade and economic ties have steadily grown, especially in the last two decades. China is Thailand’s largest trading partner, with two-way trade reaching $135 billion in 2023.

The economic partnership has been founded on geographic proximity and cultural connections. At least 11 percent of Thailand’s 71 million people are at least partly ethnically Chinese, descendants of the migrants who flocked to the kingdom of Siam from southern China in the late nineteenth and early twentieth centuries. Chinese government officials today have frequently described Thai and Chinese people as part of “one family.”

Unsurprisingly, Thailand’s new government, which has inherited an economy struggling to recover from the downturn of the COVID-19 pandemic, continues to view China as central to its economic prosperity.

Zawacki said that Srettha, a former real estate mogul, was looking to find “as many opportunities as he can” to revive the country’s economy – and that China would remain central to his goal.

“The numbers in the proximity of the Chinese population is such that he can’t not still have that as the top of his agenda in terms of the quickest way to grow his economy,” he said.

But despite the continuing economic closeness between Thailand and China, Bangkok’s heavy reliance on Beijing, which became entrenched after the military coup of 2014, might be set to change under Srettha’s leadership, analysts say.

In 2014, Gen. Prayut Chan-o-Cha, then commander-in-chief of the Royal Thai Army, led a military coup following political unrest in Thailand. The United States, Thailand’s treaty ally since the early years of the Cold War, quickly denounced the seizure of power, reduced its security cooperation, and withdrew millions of dollars in military aid with Bangkok. In response, Prayut’s military administration looked to other nations, including China, for support.

After the coup, Thailand “was ostracized by the Western democracies, the U.S., EU, even South Korea,” said Thitinan Pongsudhirak, a political analyst and professor at Chulalongkorn University.

“The military government moved closer to China by necessity because it’s the only major player out there that would accommodate, that would pursue relations with Thailand.”

Thailand remained under Prayut’s leadership for nine years – including four as prime minister following the 2019 elections – before the Pheu Thai Party returned to power following last year’s general election.

Despite his strong bid to attract more Chinese tourists to Thailand, Srettha is now taking a slightly different, and arguably more balanced, approach to its relations with China. Thitinan said that he has so far pursued a much more “omnidirectional” foreign policy than his predecessor. “It’s not [that] China relations are now bad, they are very good, very warm, and very close, but now they’re situated in the broader mix of Thai relations with other major countries,” he said.

Indeed, since taking office in September, the new prime minister has been busy.

Shortly after being sworn in, Srettha visited Beijing to attend the Belt and Road Forum and met with Chinese President Xi Jinping. He also shook hands and met with President Vladimir Putin of Russia, another key economic partner. At the same time, Srettha has aimed to re-strengthen ties with the U.S., meeting President Joe Biden and courting large tech companies such as Microsoft and Google to invest in Thailand. U.S. attitudes have shifted as well. Since the end of direct military rule, Washington has been more willing to normalize its relations with Thailand. Even while resigned to China’s growing influence in Thailand, the U.S. is eager to be competitive by reviving its long-standing relationship with Thailand.

Srettha’s main focus as prime minister has been to improve the Thai economy, but this is hard to detach from the growing geopolitical tensions. With the U.S.-China rivalry continuing to intensify, and the West continuing to back Ukraine in its war with Russia, Thailand needs to find the right balancing act.  Washington, Beijing, and Moscow are all important trading partners for Bangkok, and Srettha wants them and others to know that Thailand is open for business.

This is evident with the way the Thai government has been touting investment for Thailand’s ambitious “land bridge” project, a $28 billion plan to build a link for land transport between the Pacific and Indian oceans in southern Thailand.

The land bridge is a less costly update to older plans to build a canal across the Isthmus of Kra, a project that has been discussed for centuries. During his time in power, Prayut set up a Thai-China research facility to study the potential of the canal project. China expressed interest, with its ambassador to Thailand keen to add the Kra Canal to its Belt and Road Initiative. But with the project seemingly shelved in favor of the land bridge, China’s involvement is no longer guaranteed.

According to recent reports, Srettha’s administration does not view Beijing as a priority investor and is casting a wider net, publicly seeking investment from the U.S., the Middle East, and other regions.

“The land bridge is a big-ticket item for the Srettha government,” Thitinan said.  “They are actually approaching all kinds of players not just the Chinese, the latest being in India and Dubai.” He added that this was a good example of how he was “less beholden to China” than his predecessor.

The increasingly independent nature of Thai foreign policy is also evident from how Srettha’s administration has handled negotiations relating to a star-crossed Chinese submarine deal.

Under Prayut’s military government, Thailand and China improved their security partnership, especially as Washington pulled back from Bangkok following the 2014 coup.

That led to Thailand purchasing more military equipment from Beijing. In 2017, it announced the purchase of a Chinese Yuan-class submarine, for a total cost of $369 million. It later expanded the order to three boats, though it was forced to abandon two of them amid the economic challenges of the COVID-19 pandemic.

But the deal for the first Chinese submarine ran aground in 2020, when the state-owned China Shipbuilding & Offshore International Co., which was building the submarines, announced that it is unable to access German-made diesel engines due to an EU arms embargo on China. Despite protracted talks, it remains unclear whether Thailand will agree to purchase a submarine fitted with Chinese-made engines. Although the navy has been determined to purchase the sub, Srettha is yet to be convinced – despite the symbolic importance of the deal for Thailand-China relations.

“The Srettha government came in and they wanted to back out of this deal because it’s a bad deal,” Thitinan said. Thailand’s defense ministry for now wishes to use its credit to purchase a Chinese navy frigate instead, at a slightly higher cost.

It is still early days, but all indications suggest that Thailand under Srettha’s leadership will continue to be practical in how it engages China and other major powers. This means identifying economic solutions and partnerships that will benefit its interests, and perhaps finding more of a balance between the two superpowers. The difference is that the country now has greater scope to engage Western governments, including the U.S., that balked at the military’s takeover and domination of politics after 2014.

“Thailand will certainly go where the going is good and for years that has been China and that continues to be, but I think the past two years have given Thailand a bit of pause in terms of how much it wants to hitch its wagon to one particular economy,” Zawacki said. “I do think that Srettha is much more sensitive to be seen as being more balanced between the U.S. and China.”

“It doesn’t typically orient its foreign policy in any particular direction on account of ideology,” he added. “It’s a very pragmatic and practical country.”