What impact is China having on Thailand's economy?

Thailand and the China effect: navigating an uncertain economic future

Thailand’s economic trajectory, once buoyed by strong regional linkages and a thriving tourism sector, is increasingly being shaped by the evolving situation in China. In the past decade, China has emerged not only as Thailand’s largest trading partner but also as a primary source of investment, tourism, and even migrant labour. However, with China now facing significant economic headwinds—including a real estate crisis, weakening consumer confidence, and tightening capital controls—Thailand is beginning to feel the pressure. Rather than a short-term bump, the ripple effects from China’s slowdown appear to be reshaping Thailand’s medium- to long-term economic outlook.

While many of the region’s economies are struggling with global trade uncertainties and a deceleration in domestic consumption, Thailand is uniquely exposed to fluctuations in Chinese activity. From declining Chinese tourist arrivals to surging investment in controversial grey-market businesses, the once-comfortable economic interdependence between the two nations is entering a new, unpredictable phase.

Tourism from China: from backbone to burden

Perhaps no other sector illustrates the dramatic shift in fortunes more clearly than tourism. Chinese visitors once represented the largest share of Thailand’s inbound travellers, often accounting for nearly a third of international arrivals. But as of early 2025, those numbers are fading. In the first quarter of the year, only 1.3 million Chinese tourists visited Thailand—a sharp 24% decline from the same period in 2024.

This downturn is more than a temporary dip. A mixture of geopolitical tensions, safety concerns, and domestic instability have made Thailand a less attractive destination for Chinese travellers. Incidents such as the collapse of a construction site in Bangkok and rising concerns along the Myanmar border have damaged Thailand’s image among Chinese tourists. Furthermore, the crackdown on call centre scams involving Chinese nationals has added to a growing perception of instability.

Thailand’s response has been to shift from focusing on sheer volume to pursuing "high-value tourism." This shift, while pragmatic, comes with its own risks. Relying on fewer but higher-spending tourists may prove challenging if outbound travel from China continues to contract due to economic pressure at home. Thai authorities have already downgraded their international tourism revenue target from THB 2.3 trillion to THB 2 trillion for 2025, citing these very concerns.

Chinese investment: a double-edged sword

In contrast to the tourism decline, Thailand is witnessing an influx of Chinese investment, particularly in the real estate and retail sectors. With weakening economic prospects at home, many Chinese investors are looking outward, and Thailand has become a favoured destination for both personal relocation and business expansion.

This trend is visible in the Thai real estate market, where demand from Chinese buyers has led to rising activity in both condominiums and low-rise housing developments. Chinese developers and contractors are bringing in their own expertise, construction techniques, and often, their own materials. This has led to an increase in the use of Chinese-sourced products in construction, furnishing, and decoration, further tightening the economic ties between the two nations.

However, not all reactions to this influx have been positive. Concerns have been raised in parliament regarding the growth of so-called “grey businesses”—enterprises that operate legally but stretch or exploit regulatory loopholes. Many of these ventures reportedly hire exclusively Chinese workers, bypassing local labour entirely and thereby raising questions about fair competition, regulatory compliance, and long-term sustainability. While Chinese investment can bring innovation and capital, the surge also highlights the need for stronger governance to prevent adverse effects on domestic businesses.

Labour dynamics and illegal migration

Alongside this wave of investment is the increasing presence of Chinese nationals in Thailand’s informal labour market. Official figures suggest that around 9,000 Chinese citizens are working in various Thai provinces, although the real number is likely far higher. In areas such as Rayong and Chonburi, estimates place the number of Chinese workers between 15,000 and 16,000. These individuals are often employed in sectors reserved for Thai citizens, such as construction, transportation, and small-scale retail.

The visa-free entry policy between China and Thailand has been cited as a major driver of this trend, facilitating easier entry for those seeking work but not always complying with labour regulations. Thai business owners and local officials have expressed growing unease over the rise of foreign-controlled enterprises that fail to integrate or invest in local communities.

In some cases, Chinese-operated businesses are reported to prioritise Chinese-speaking employees, operate under unregistered names, and maintain close networks that exclude local involvement. This has put pressure on Thai small and medium-sized enterprises (SMEs), especially in the hospitality and food sectors, where competition from Chinese investors is growing rapidly.

Changing dynamics in trade

Trade between Thailand and China has traditionally been a cornerstone of their bilateral relationship. China is Thailand’s largest trading partner, and a significant share of Thai exports—from agricultural products to electronic components—are destined for Chinese markets.

In April 2025, the Ministry of Commerce’s Trade Policy and Strategy Office (TPSO) reported that Thailand’s imports from China reached a monthly high of $8.82 billion, while exports to China reached $3.55 billion, a 3.2% increase year-on-year. The resulting monthly trade deficit stood at $5.27 billion. Thailand's imports were led by strong growth in machinery and electronics. Electrical machinery topped the list at $1.67 billion, more than doubling from last year. General machinery rose to $848 million, while imports of computers and parts reached $507 million. Home appliances also grew to $659 million. The only major category to fall was chemicals, down 11% to $497 million.

China’s economic deceleration may be starting to alter this dynamic with Chinese manufacturing output slowing and domestic consumption falling, Thai exports to China have started to plateau or even contract in certain categories. Meanwhile, Chinese exports to Thailand remain strong, leading to an increasingly unbalanced trade relationship. The risk here is that Thailand may become more of a passive consumer in the bilateral trade equation, importing lower-cost Chinese goods while struggling to find buyers for its own exports.

This imbalance is compounded by global trade tensions, particularly those involving China and the United States. As Chinese firms face export barriers in Western markets, they are redirecting goods to neighbouring economies, including Thailand. While this can result in lower prices for Thai consumers, it can also crowd out domestic producers who cannot compete with China’s scale and cost advantages.

Economic migration of Chinese businesses

Beyond traditional investment, a new form of economic migration is taking place. Many small and medium-sized Chinese businesses, particularly in the food and retail sectors, are relocating to Thailand in search of stability and market access. In 2024 alone, over 8,000 new Chinese restaurants opened in Thailand, reflecting a nearly 60% increase in Chinese involvement in the food industry.

This influx is partly driven by a crisis in China’s domestic food and beverage market, where over three million restaurants closed in the past year. Faced with shrinking demand and rising costs at home, Chinese entrepreneurs are now setting up shop in Thai cities, often using family networks and pooled resources to establish operations quickly.

While this might contribute to local economic activity in the short term, the longer-term picture is less clear. Thai restaurant owners and other SMEs have found themselves squeezed out of the market, unable to match the scale, pricing, or staffing models of their new competitors. Data suggests that despite the opening of more than 100,000 restaurants in 2024, around half of them closed within the first six months—pointing to a high rate of business turnover and instability.

Conclusion

Thailand’s relationship with China remains complex and multilayered. On the one hand, China’s slowdown is hurting key sectors like tourism and trade. On the other, it is also fuelling waves of investment and migration that are reshaping Thailand’s economy in new and unpredictable ways. The outcome of this transformation will depend largely on how well Thai institutions manage these shifting currents, ensuring that growth remains inclusive, sustainable, and anchored in national priorities.

In the medium to long term, Thailand will need to continue navigating the tension between opportunity and over dependence. As China looks increasingly inward to address its own economic difficulties, Thailand must come to terms with the new reality of its regional economic environment.

See https://www.georgejamesconsulting.com/ for more.

This article is general in nature and should not be regarded as investment advice. Readers are encouraged to conduct their own research and seek tailored advice from a licensed financial adviser.

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