ASEAN agreement is expected to fully actualize in 2015 to help member countries transfer their products, services, investments, and skilled labors freedomly. Countries who are members will able to develop their economy and trading as well as choosing materials and labor from other members for their own businesses. Therefore, production costs will be able to compete in the world market. Moreover, the Free Trade Area agreement between ASEAN and China will provide more benefits since the agreement will be considered the laragest FTA covers 1,900 million populations with the total Gross Demestic Product (GDP) of 6,000 million US Dollars. Moreover, it will cover more than 7,000 items of product or 90% of trading products. The average import tax of China will decrease from 9.8% to be 0.1% while the average import tax of ASEAN will decrease from 12.8 to be 0.6%
Thailand as a member of ASEAN has advantage from geography and location that benefit for trading, investment, and transportation. These factors will help make ASEAN as a HUB or complete the whole supply chain. China also realized these advantages and considered Thailand as a distribution center. They started to import products to Thailand but most of the merchandises are low quality and life hazard. Many consumers are unaware and not realize all the danger and since the selling prices are very cheap, consumers easily neglect all negative consequences.
The main distribution channels of Chinese products are from traders and border trading, such as, Mea Sai market, Indochina markets at Nakornphanum, Nong Khai, and Mukdaharn, Talat Rong Kluea at SaKaew, as well as Sumpeng, Phahurat, Bo-Bea, and Pratunam markets in Bangkok. Most of the trading forms are retails, wholesales, and groceries. Products are included Thai’s competed items and brand name imitation items. Most of Chinese traders import products from Yiwu International Trade City, Zhejiang Province, the main wholesale market that Chinese government promotes as a proactive strategic model.
Thailand is one of the target markets that China planed on implementing Yiwu model. There was an announcement about distribution center grand opening in capital of Thailand called “China City Complex”. This has drawn concerns from both small and large Thai businesses regarding the ability of Thai’s products to compete with Chinese’s. The only party that would gain benefit is Chinese traders, moreover, this complex will also cut down middle man who importing products from China. Thai importers, hence, will directly suffer and might have to be out of business eventually. This article is presenting characters and potential of Yiwu model (Part 1) as well as the effects that might occur to Thai entrepreneurs (Part 2).
Yiwu is a small city located in the center of Zhejiang Province, where consists the ability of production, tourism, and infrastructure. Yiwu covers 45 square kilometers and takes about 30 minutes’ drive through the town. From 150 kilometers East of Yiwu is Ningpo port, 300 kilometers north is Shanghai port, and 120 kilometers to Hangzhou. There are many ways to get to Yiwu including highway, express way, train, boat, and airplane which are more than 20 flights to Beijing, Guangzhou, Shanghai, Qingdao, Xiamen, Shenzhen, and Shantou.
Currently, Yiwu is the largest center of international wholesale and distribution, certified by United Nations, World Bank, and Morgan Stanley. It covers more than 4 million square kilometers, 70,000 stores, more than 2 million products and about 700 million Yuan of investment. Furthermore, Yiwu is also the information center and China’s export base that complete with many systems, such as inventory, transport, taxes, financial, and insurance. Each day there are about 2,000 containers shipped to other countries. In addition, inside the complex provides showroom and business agreement areas that zoning by products, such as, watch, electronic, tools, Information Technology, bag, jewelry, and gift.
Yiwu model has been unexpected succeed for China and has been implemented in many ASEAN and other countries by China. This type of real estate development has been applied in many countries before, such as Dubai, Russia, Spain, and Laos. However, many countries refused to integrate this model because they concerned about negative affects with their own local businesses, manufacturers, traders, especially the small and medium ones. Likewise, Thailand still rising concerns regarding accepting this Yiwu model which will be discussed in the next article.
Reference: Exporter, Second Half of August 2011