Strong Baht Hurts Thailand’s GDP

[george]

Strong baht hurts Thailand’s export-related industries

BANGKOK: -- Current strengthening of the Thai currency, the baht, has hurt the country’s export-related industries as well as the gross domestic product (GDP), a ranking industry ministry official said.

Nattapol Nattasomboon, deputy director-general of Industrial Economics Office, quoted a study conducted recently by his office which cited that if the baht strengthened by another 10 per cent, the country’s GDP would lower to 3.09 per cent from 4 per cent projected earlier.

And every volatility of the baht at one per cent will hurt national GDP by approximately 0.1 per cent and the industrial GDP at 0.09 per cent, said Mr. Nattapol.

Other sectors which will be impacted include declines in public consumption to 1.87 from 2.36 per cent, private investment to 0.13 from 0.59 per cent and exports to 8.49 from 13.23 per cent, he said.

On the other hand, imports will rise to 9.34 from 7.28 per cent.

But GDP could jump marginally to 3.26 per cent from an assumption that it would retreat to 3.09 per cent if labour and capital productivity rose which could cushion the impact from the strong baht, he said.

Since the beginning of 2006 up till now, the baht has appreciated more than 15 per cent against the US dollar, causing Thai manufacturing industries which have to depend on exports to have been impacted significantly. Thai industries which have been affected most are food, textile and furniture.

By late Friday, the baht moved at around Bt34.58-34.61 against the dollar on the onshore market compared to Bt34.59-34.62 on Thursday.

--TNA 2007-06-23

[Jai Dee]

Baht ranges from 34.50 – 34.65 in upcoming week

The Kasikorn Research Center forecasts that the baht currency will stay around 34.50 – 34.65 a U.S. dollar next week. The stock index is expected to have the support level of 770 and 757 points and the resistance level of 790 and 805.

The center says the value of the baht next week, or the period during June 25th – 29th, will be mainly affected by the meeting of the Federal Reserve System (FED) which is scheduled to take place from June 27th – 28th and the announcement of the U.S.’s economic figures.

As for trading in the Stock Exchange of Thailand (SET), the index is likely to drop from last week due to the country’s political situation and a possible increase of the return on U.S. bonds which might occur if the announcement of the economic figures is positive to the U.S.’s economy.

The center also indicates that the buying force of foreign investors is still positive to the SET index.

Source: Thai National News Bureau Public Relations Department - 24 June 2007

[Martin]

Such a strengthening of the baht, despite the 'short-term picture' being so confused politically, makes one suspect that there is some strong, but discreet, buying of the long-term baht going on.

The obvious candidates are Central Banks that are trying to divest themselves of some of their US-dollar holdings, but without 'rocking the boat'.

Those countries who will in future be the ones with nett gas and oil exports (Russia, the Gulf States and Brunei) could be quietly getting themselves some rice-buying bahts stashed away, with an eye to future decades when their present holdings of US dollars could have very little purchasing power.

There must be those, who have regard and duties to their countries' long-term futures, who are expecting to look back on the present period of 'financial gambling bubble' with all the bemusement with which we look back at the one in 1928.

The difference this time, though, is that there isn't the background of resources becoming more-cheaply available in the next decades, which enabled the industrial countries to gradually recover from the bursting of that bubble in 1929.

We live in interesting times.

[BigSnake]

It, the storng baht is also hurting my little old pocketBOOK!! oh well TIT!!

[lazeeboy]

It, the storng baht is also hurting my little old pocketBOOK!! oh well TIT!!

hurting a lot of my freinds whose pensions are in dollars too

[Mid]

Govt to cut its overseas borrowing

Published on August 16, 2007

Move follows concern over strong baht

The government plans to borrow less from overseas for the next fiscal year in light of the Finance Ministry's concern about the stronger baht.

Foreign borrowing will be US$800 million (Bt27.2 billion) for the fiscal year 2008, down from the original plan of about $900 million, Finance Minister Chalongphob Sussangkarn said yesterday.

snip

nationmultimedia.com

[Freddyrocks]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

[rychrde]

Good questions. I looked at the IPOs on SET about a week ago and they were all infrastructure and utilities companies - pity I didn't copy them down.

Now we find:

Thai Yuan Metal

C.P. Petrochemical Business Group. Part of C P Asia.

Major Development PCL. construction.

SENA Development. construction.

Thai Tap Water Supplies. project started in 1997.

Chu Kai PCL. construction services. first reg in 1997.

Better World Green PCL. waste management.

OK, as I said, pity I didn't keep the list of last week, but any hunting around should find them. Also, no sensible company would make an IPO now, unless very desparate, or for other than financial reasons.

Also

SET index plunge parallels regional markets

BANGKOK, Aug 15 (TNA) – The Stock Exchange of Thailand (SET) composite index continued to nose-dive in the morning trading session in tandem with other markets in the region, pressed by heavy selling by foreign investors.

The index plunged 10.09 points to 783.73 at the opening bell of the trading session and dropped further to a strong support level of 770 points before recouping its loss and closing at 779.87, down 13.95 or 1.76 per cent, with a trading value of 8.08 billion baht.

An analyst said the Thai stock market remained pressed by external negative factors including a continued decline in regional stock markets and heavy selling by foreign investors.

Positive internal factors such as improved performance results of listed companies and dividend payments appeared not to have enough momentum to stimulate the market sentiment for now.

However, the analyst viewed the SET index is likely to recover following the referendum on Thailand's draft constitution to be held this Sunday.

It is believed foreign investors would have confidence and return to invest in the post-election period because a new government is expected to follow through an implementation of many mega-projects. (TNA) – E005

source etna.mco.net

As we know only too well, the whole point of taxation is to take from the poor and give to the rich. In this case private investors are lining up to buy on the cheap state or semi-state enterprises with the prospect of mega-projects.

rych

PS found the page with recent SET IPOs and all the ones I saw seem to have been pulled as no record of them! what do I know?!!

Edited August 15, 2007 by rychrde

[LaoPo]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Edited August 15, 2007 by LaoPo

[Freddyrocks]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Thank you LaoPo!! I'm really trying to gain perspective as far as Asian economies, especially the Thai economy.

[Carmine6]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Thank you LaoPo!! I'm really trying to gain perspective as far as Asian economies, especially the Thai economy.

In my book, competition rather than interconectedness is the real influencer on Thailand's economy. If the yuan were 10% stronger for example, their products would be 10% more expensive. Note that if the baht were 10% weaker, a lot of the businesses currently shutting down would still probably be in business. But there is a cheaper alternative in China in many cases so companies can't price appropriately. Vietnam is another country with a controlled currency and not surprisingly that's where some manufacturers are moving.

Relative to the US $ the baht has strengthened about 19% in the time that the yuan moved the 10%. How many more textile and other manufacturers could compete back then versus now? I don't know that they were making outrageous money, but they were still in business.

But the estimates of how undervalued the yuan is are usually higher than 10%. Who knows what the figure really is or if it is undervalued, but if the yuan were 20% stronger, think how many Thai manufacturers could have grown over the years. Lots of the things Thailand imports from China would be made in Thailand. Lots of the things the US imports from China would be made in Thailand, or Indonesia, or Malasia, or South America, etc.

[Mid]

Baht drops to 34.69 -- weakest in a month

Friday 17 August 2007 04:59:43 PM (GMT+7:00)

BANGKOK, Aug 17 (TNA) – The baht has dropped to 34.69 to the US dollar, its weakest in one month, since foreign investors continued to sell off Thai stocks and bring the money out of the country, according to a money dealer

The dealer of Kasikornbank said the baht had further depreciated to stay in a range of 34.67-34.68 to the dollar in the morning trading session compared with 34.50 to the dollar in Thursday's trading.

snip

MCOT Public Company Limited

[Mid]

PM pledges to maintain baht stability

August 18, 2007 : Last updated 11:25 am

Prime Minister Surayud Chulanont Saturday pledged to maintain baht stability.

Speaking during the Open House at Ban Phitsanulok programme on Channel 11, Surayud said his government would try to maintain baht stability and would map out measures to prevent the currency from being affected by the fluctuations of foreign currencies and foreign stock markets.

He said Deputy Prime Minister Kosit Panpiemras, Finance Minister Finance Minister Chalongphob Sussangkarn and Bank of Thailand Governor Tarisa Watanagase would meet every Friday morning to discuss the baht situation and consider measures for maintaining its stability.

The Nation

[AGareth2]

68 to the pound today. Great news.

[VegasVic]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Although we disagree on the future of the chinese markets on a regular basis, I have to say that you pretty much hit the nail on the head here with this post! I happen to think that the Yuan is artificially low (but then so is the Dollar), but I don't see the chinese doing anything about it, and all world markets are truely interconnected (witness the strong day friday in the U.S. followed by all the Asian markets up big today). The political situation in Thailand could potentially have profound effect on the Thai economy in the long run, but in the short term as long as real elections are held and the baht is allowed to weaken further then of course it will be world markets not politics that move the Thai markets. There was appreciation in the U.S. dollar last week and as in most prior world crisis there is a flight to the safety of the U.S. dollar, this will likely continue for a few more weeks but then the FED will begin to cut the FED funds rate and this dollar surge will likely level off. This recent surge in the Dollar has certainly helped the baht to weaken a bit, and this should continue for a while but as the FED lowers rates the BOT will have to take a much stronger stance on weakening the baht if this trend is to continue. While I do admit the current world market situation could get worse, I think that as far as Thailand is concerned the critical things that need to happen in Thailand are legitimate elections and a continued weakening of the currency. Should the baht fall back into a strenghtening mode then there could be some permanent (long term) damage done to the export sector as well as tourisim. Lets be optimistic and hope for the best

[mrtoad]

I'd imagine that all the public holidays are hardly conducive to enhancing GDP.

[LaoPo]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Thank you LaoPo!! I'm really trying to gain perspective as far as Asian economies, especially the Thai economy.

In my book, competition rather than interconectedness is the real influencer on Thailand's economy. If the yuan were 10% stronger for example, their products would be 10% more expensive. Note that if the baht were 10% weaker, a lot of the businesses currently shutting down would still probably be in business. But there is a cheaper alternative in China in many cases so companies can't price appropriately. Vietnam is another country with a controlled currency and not surprisingly that's where some manufacturers are moving.

Relative to the US $ the baht has strengthened about 19% in the time that the yuan moved the 10%. How many more textile and other manufacturers could compete back then versus now? I don't know that they were making outrageous money, but they were still in business.

But the estimates of how undervalued the yuan is are usually higher than 10%. Who knows what the figure really is or if it is undervalued, but if the yuan were 20% stronger, think how many Thai manufacturers could have grown over the years. Lots of the things Thailand imports from China would be made in Thailand. Lots of the things the US imports from China would be made in Thailand, or Indonesia, or Malasia, or South America, etc.

.

I don't think so, I'm sorry.

Thailand is in size of population very small, like 5% of the total population of China.

Apart from that Thailand was already an emerging country, before China even started some 30 years ago with the production of all kinds of merchandise.

That has nothing to do with the value of the Baht but with entrepreneurial spirits, both in China and with western buyers.

One can ask why Thailand didn't took more advantage, but as said, Thailand is much smaller than China.

Also: we shouldn't forget about the enormous 'know-how' in Hong Kong, both in production, trading as well as finance and the HK companies had easy access to the Chinese market since Shenzhen/Guangdong province is around the corner and that's the place where it all started (China boom) besides the fact that most HK Chinese are from Cantonese origin

The knowledge of -business- English in HK (and the lack of the same in LOS) was also a very BIG pro!

Therefore the -low- value of the Baht wasn't or isn't so important as you describe.

LaoPo

[Carmine6]

Can anyone give any insight as to what effect the Chinese manipulated and artifically low currency has on Thailand and the Thai Baht? I'm just curious as to how inter-connected Asian economies are. Any input is very much appreciated.

That's almost impossible to answer. The US and EU claim that the Yuan is too low although it appreciated almost 10% in the past 2 years or so and the Chinese feel different about the Yuan, being too low.

But one thing is for sure: all Asian as well as Western economies -as well as stock markets, Banks and other financial Institutions- are inter-connected-.

The main 'failing-engine' at the moment is the subprime crisis in the US and spreading around the world, fast.

It has been felt on the SET as well (and has nothing to do, or little, with the present Thai political situation).

I posted this topic about the SET on July 26th and the signs are more worrying day-by-day:

Watch Your Steps At Thai Set..., as Global stocks end sharply lower

http://www.thaivisa.com/forum/index.php?sh...=132689&hl=

I'm afraid the crisis situation is far from over yet and will only get worse in the next months.

However, the US$ is regaining a bit against other major currencies but that's also due to the present situation. How much it will effect the Baht remains to be seen.

edit:

SET falls below 800 on US fears

http://nationmultimedia.com/2007/08/11/bus...ss_30044615.php

LaoPo

Thank you LaoPo!! I'm really trying to gain perspective as far as Asian economies, especially the Thai economy.

In my book, competition rather than interconectedness is the real influencer on Thailand's economy. If the yuan were 10% stronger for example, their products would be 10% more expensive. Note that if the baht were 10% weaker, a lot of the businesses currently shutting down would still probably be in business. But there is a cheaper alternative in China in many cases so companies can't price appropriately. Vietnam is another country with a controlled currency and not surprisingly that's where some manufacturers are moving.

Relative to the US $ the baht has strengthened about 19% in the time that the yuan moved the 10%. How many more textile and other manufacturers could compete back then versus now? I don't know that they were making outrageous money, but they were still in business.

But the estimates of how undervalued the yuan is are usually higher than 10%. Who knows what the figure really is or if it is undervalued, but if the yuan were 20% stronger, think how many Thai manufacturers could have grown over the years. Lots of the things Thailand imports from China would be made in Thailand. Lots of the things the US imports from China would be made in Thailand, or Indonesia, or Malasia, or South America, etc.

.

I don't think so, I'm sorry.

Thailand is in size of population very small, like 5% of the total population of China.

Apart from that Thailand was already an emerging country, before China even started some 30 years ago with the production of all kinds of merchandise.

That has nothing to do with the value of the Baht but with entrepreneurial spirits, both in China and with western buyers.

One can ask why Thailand didn't took more advantage, but as said, Thailand is much smaller than China.

Also: we shouldn't forget about the enormous 'know-how' in Hong Kong, both in production, trading as well as finance and the HK companies had easy access to the Chinese market since Shenzhen/Guangdong province is around the corner and that's the place where it all started (China boom) besides the fact that most HK Chinese are from Cantonese origin

The knowledge of -business- English in HK (and the lack of the same in LOS) was also a very BIG pro!

Therefore the -low- value of the Baht wasn't or isn't so important as you describe.

LaoPo

Not the low value of the baht but the strength of the yuan. And I'm not saying the whole world would be buying Thai goods, just that other countries including Thailand would be manufacturing a lot of products that are now sourced in China.

It's a hypothetical on what the effect of a controlled Chinese currency is. If it were a free float, I believe it would not only have gotten much stronger in the last couple years (way more than 10% and it would have had a big pop right at the start), but just the free float would make China less attractive.

When someone is planning a supplier arragement or factory, it's a whole lot easier buying from a country where the exchange rate a year or two down the line is pretty predicatable. You just have to draw a few lines on the yuan/$ currency exchange rate the last couple years to come up with a range for the yuan two years from now and how it'll get there. Then it's easy to estimate what price they'll be charging in 2 years. Free floating currency is a crapshoot projecting.

I don't think innovation and an entreprenurial spirit has to be rampant as long as foreign companies are allowed in. Vietnam is going to get a big spike in manufacturing in the coming years from outside companies. Some of their own companies will grow up along with them.

If the yuan is fairly valued or slightly undervalued, then yeah, no big change from how everything rolled out. But its hard to believe that boom they're having relative to other countries would be as big with a free floating rate.

[LaoPo]

Not the low value of the baht but the strength of the yuan. And I'm not saying the whole world would be buying Thai goods, just that other countries including Thailand would be manufacturing a lot of products that are now sourced in China.

It's a hypothetical on what the effect of a controlled Chinese currency is. If it were a free float, I believe it would not only have gotten much stronger in the last couple years (way more than 10% and it would have had a big pop right at the start), but just the free float would make China less attractive.

When someone is planning a supplier arragement or factory, it's a whole lot easier buying from a country where the exchange rate a year or two down the line is pretty predicatable. You just have to draw a few lines on the yuan/$ currency exchange rate the last couple years to come up with a range for the yuan two years from now and how it'll get there. Then it's easy to estimate what price they'll be charging in 2 years. Free floating currency is a crapshoot projecting.

I don't think innovation and an entreprenurial spirit has to be rampant as long as foreign companies are allowed in. Vietnam is going to get a big spike in manufacturing in the coming years from outside companies. Some of their own companies will grow up along with them.

If the yuan is fairly valued or slightly undervalued, then yeah, no big change from how everything rolled out. But its hard to believe that boom they're having relative to other countries would be as big with a free floating rate.

I think you're too focused on the Yuan and it's value versus the Baht -and other currencies- and the (im)-possibilities for Thailand and other regional countries to compete.

When the boom started, some 30 years ago, all regional countries had similar chances, not just China, but India or Indonesia also, with more than 1 Billion and 300 million people respectively and deadly cheap labor as well.

How do you explain that the western buyers didn't 'en masse' go to these countries ?

Having worked and done business in various Far Eastern countries, including Thailand, I still find the entrepreneurial spirits in Hong Kong (maybe Singapore, but have no experience there) and China the most advanced, hard working and, of all advantages, FAST reacting, unless other countries/factories/managements.

As an example, labor costs are becoming more expensive in Guangdong province and what do factories do ? They simply move to areas where labor costs are lower in order to beat the -ever demanding lower prices from the buyers-, like Chongqing and Chengdu. Chongqing area alone has more than some 30-35 million people !

It's in the minds of managements and entrepreneurs to adapt very fast to the ever changing circumstances.

Thailand didn't and/or couldn't do that, just because it's a relatively small country, in comparison with giants like India and China but....maybe Indonesia could have done it with at least 4-5 times more labor force (as Thailand) and what happened ?

You tell me, since it's still far behind Thailand, let alone the other mentioned countries.

And, you're right, Vietnam will take a big piece of the cake from countries like Thailand.

Every company in Thailand is blaming the political and high Baht situation for declining demand of labor intensive products; they should have adapted sooner and faster.

edit:

A good example is this article:

Does Thailand want foreign investment?

The government's proposed changes to the Foreign Business Act (FBA) fail to recognise market realities and would send the wrong message to the outside world.

Published on August 21, 2007

http://nationmultimedia.com/2007/08/21/opi...on_30045825.php

LaoPo

Edited August 20, 2007 by LaoPo

[Carmine6]

Not the low value of the baht but the strength of the yuan. And I'm not saying the whole world would be buying Thai goods, just that other countries including Thailand would be manufacturing a lot of products that are now sourced in China.

It's a hypothetical on what the effect of a controlled Chinese currency is. If it were a free float, I believe it would not only have gotten much stronger in the last couple years (way more than 10% and it would have had a big pop right at the start), but just the free float would make China less attractive.

When someone is planning a supplier arragement or factory, it's a whole lot easier buying from a country where the exchange rate a year or two down the line is pretty predicatable. You just have to draw a few lines on the yuan/$ currency exchange rate the last couple years to come up with a range for the yuan two years from now and how it'll get there. Then it's easy to estimate what price they'll be charging in 2 years. Free floating currency is a crapshoot projecting.

I don't think innovation and an entreprenurial spirit has to be rampant as long as foreign companies are allowed in. Vietnam is going to get a big spike in manufacturing in the coming years from outside companies. Some of their own companies will grow up along with them.

If the yuan is fairly valued or slightly undervalued, then yeah, no big change from how everything rolled out. But its hard to believe that boom they're having relative to other countries would be as big with a free floating rate.

I think you're too focused on the Yuan and it's value versus the Baht -and other currencies- and the (im)-possibilities for Thailand and other regional countries to compete.

When the boom started, some 30 years ago, all regional countries had similar chances, not just China, but India or Indonesia also, with more than 1 Billion and 300 million people respectively and deadly cheap labor as well.

How do you explain that the western buyers didn't 'en masse' go to these countries ?

Having worked and done business in various Far Eastern countries, including Thailand, I still find the entrepreneurial spirits in Hong Kong (maybe Singapore, but have no experience there) and China the most advanced, hard working and, of all advantages, FAST reacting, unless other countries/factories/managements.

As an example, labor costs are becoming more expensive in Guangdong province and what do factories do ? They simply move to areas where labor costs are lower in order to beat the -ever demanding lower prices from the buyers-, like Chongqing and Chengdu. Chongqing area alone has more than some 30-35 million people !

It's in the minds of managements and entrepreneurs to adapt very fast to the ever changing circumstances.

Thailand didn't and/or couldn't do that, just because it's a relatively small country, in comparison with giants like India and China but....maybe Indonesia could have done it with at least 4-5 times more labor force (as Thailand) and what happened ?

You tell me, since it's still far behind Thailand, let alone the other mentioned countries.

And, you're right, Vietnam will take a big piece of the cake from countries like Thailand.

Every company in Thailand is blaming the political and high Baht situation for declining demand of labor intensive products; they should have adapted sooner and faster.

edit:

A good example is this article:

Does Thailand want foreign investment?

The government's proposed changes to the Foreign Business Act (FBA) fail to recognise market realities and would send the wrong message to the outside world.

Published on August 21, 2007

http://nationmultimedia.com/2007/08/21/opi...on_30045825.php

LaoPo

The original question dealt with the impact of the controlled Chinese exchange rate on China. My opinion is the main impact is competition not interconectedness.

No doubt the Chinese have been successful. It's why I can't think of a country where I haven't seen succesful Chinese businessess. Whereas many immigrant populations never become succesful business owners, Chinese seem to do well just about anywhere they land. Within China they have very fine technical colleges and a huge pool of talent to draw from.

But we're talking impact on Thailand, not whether Thailand would have been a shining star. Take away a fixed exchange rate for the yuan and a lot more folks can compete for longer. If it's not such an advantage controlling the currency, why don't they just float it? or appreciate it faster? (I know why they're not floating it, it's rhetorical.)

Maybe Thailand wouldn't have been very welcoming to foreign businesses, but I just don't believe that based on what has actually happened. They could have cracked down a long time ago on different classes of voting rights and sham Thai majority ownership. Took a coup to bring that forward.

By the way, I love that we can momentarily get back to theoretical discussions rather than fretting about daily movements in stock markets. Last week felt like the floor fell out. Every minute was stressful until Thursday and Friday. High volatility I can handle. Market panic I've rarely seen.

[Jai Dee]

Finance Ministry and BoT expedite four financial Acts

Minister of Finance Chalongphob Sussangkarn (ฉลองภพ สุสังกร์กาญจน์) and Governor of the Bank of Thailand (BoT) Tarisa Watanagase (ธาริษา วัฒนเกส) hold a press conference after they have attended a meeting on middle and long term measures to stabilize the baht currency. The meeting resolved to explain four financial Acts to the general public and expedite their enforcements.

The four Acts include Bank of Thailand Act, Currency Act, Public Debt Management Act, and Financial Institutions Act. The Ministry of Finance and BoT expects that the Acts will facilitate the work between the BoT and the government.

The Finance Minister says the measures to stabilize the currency need cooperation between the ministry, BoT, and relevant experts.

Source: Thai National News Bureau Public Relations Department - 21 August 2007

[Carmine6]

Finance Ministry and BoT expedite four financial Acts

Minister of Finance Chalongphob Sussangkarn (ฉลองภพ สุสังกร์กาญจน์) and Governor of the Bank of Thailand (BoT) Tarisa Watanagase (ธาริษา วัฒนเกส) hold a press conference after they have attended a meeting on middle and long term measures to stabilize the baht currency. The meeting resolved to explain four financial Acts to the general public and expedite their enforcements.

The four Acts include Bank of Thailand Act, Currency Act, Public Debt Management Act, and Financial Institutions Act. The Ministry of Finance and BoT expects that the Acts will facilitate the work between the BoT and the government.

The Finance Minister says the measures to stabilize the currency need cooperation between the ministry, BoT, and relevant experts.

Source: Thai National News Bureau Public Relations Department - 21 August 2007

Stabilize as in reducing volatility in the exchange rate, or stabilize as in trying to keep it at a certain level?

[LaoPo]

US $ news on the way...and Thai Baht related:

Dollar May Fall to Record Within Six Months, Goldman Sachs Says

Aug. 24 (Bloomberg) -- The dollar may decline to a record low against the euro in the next six months because U.S. economic growth will slow, forcing the Federal Reserve to cut interest rates, according to Goldman Sachs Group Inc.

From the current level of $1.3568 per euro, the U.S. currency will weaken to $1.43 per euro in the next three to six months, Goldman Sachs said in a research note yesterday. New York-based Goldman, the world's biggest securities firm by market value, lowered its dollar forecast from a prior estimate of $1.35. The dollar set a record low of $1.3852 per euro on July 24.

Concern about losses in investments related to mortgage securities has bolstered expectations the Fed will cut its benchmark interest rate from 5.25 percent at its Sept. 18 policy meeting. Traders are certain the Fed will cut its key rate to at least 5 percent by Sept. 18, futures show.

``Financial conditions are tightening at a time when clearly there's some downside risk to the growth,'' said Jens Nordvig, a senior currency strategist at Goldman Sachs in New York. Fed rate cuts ``will drag the dollar lower.''

The Fed will lower its benchmark interest rate by 0.75 percentage point to 4.5 percent by year-end, according to Goldman Sachs.

The dollar will fall also because foreign investors will reduce purchases of higher-yielding corporate bonds, said Nordvig.

Goldman also said the dollar will decline to 110 yen in the next three to six months, from 116 yen at present, compared with a previous forecast of 118 yen.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

[Carmine6]

Might have been more fun posting that in the gold thread.