Yiwu Model Penetrate the Market through Complexity: Part 3
veiw 370 Thai-China International City or China City Complex was a joint venture between Thai businessmen and Chinese Capital group. The main purpose is to open economic trading gates among China-Thailand-ASEAN. This center will be located on Bangna-Trad road with area of 64 Rai, and uses about 6,200 million Yuan of capital. Moreover, this complexity will become the second distribution center under “Yiwu Model” which will consist of two phrases. First phrase will use about 1,500 million Yuan that will cover 500,000 – 700,000 square meter and was start sine March 2011. This phrase is expected to finish no later than second quarter of 2012, and will allow 10,000 retail stores, 30 percent of Thai stores and 70 percent of Chinese’s. Merchandises will be selected and categorized into 7 groups, clothing, appliance, Gem and jewelry, automotive parts, home decoration, toy and life style product, food, and processed product.
Second phrase will start once first one is successfully completed. The major Chinese investors, who are supported by private sector in China under ASEAN-CHINA Economic and Trade Promotion Association, will transfer their production lines into China City Complex in Thailand. Therefore, Thailand will be considered Chinese exporting base, as well as ASEAN distribution hub to the other third countries. The logistic from China will take R3/R8/R12 routes to Thailand within 3 days instead of 15 days by boat.
According to the primary study by calculating the Input-Output Table from The National Economic and Social Development, Yiwu Model that expected to be implemented in Thailand will provide extremely impacts to 8 industrial groups, 20 item lists as follow; machinery group, manufacturer in food industry, restaurant and hotel, transport and education, medical service and others, construction industry, gem and jewelry manufacturer, furniture, leather product, rubber and plastic products, textile and chemical industries. The total value of all industries will estimate to be 365,000 million Baht. The impacts could be analyzed as following.
Trading, China Daily newspaper, February 6, 2011, refer to the government source said that China invest 4.5 trillion Baht to develop complexity in Thailand in order to use it as the re-export center. This way the Chinese exporters will not have to pay custom tax, and they could develop a new promotion strategy for developed countries like EU and USA to accept their products as they will be coming from Thailand. Therefore, Thai authorities need to establish certain regulations, for example, exporting merchandises need to have the Certification of Origin (C/O) otherwise the cheap low-quality merchandises will be changed their packaging to be ‘Made in Thailand’ and be exported. The world consumers perceive bas image of Thailand with low-quality products.
Production, once this distribution center open, many merchandises from China, such as clothing, jewelry, souvenir, automobile parts, alliance, agricultural product, canned and products will be imported to Thailand. Thai merchandises, which have higher material and labor costs, will face higher competition. Moreover, Chinese entrepreneurs gain fully supports from their government, in terms of production and marketing. Consequently, Thai entrepreneurs need to develop new strategies by improving their product quality, creating new pattern or designs, and increasing variety of products; otherwise Thai entrepreneurs will be forced to close their businesses finally.
The last chapter will present the other two impacts to Thai businesses; logistic and consumer, as well as recommendations and policies that entrepreneurs expect from government.
Reference: Exporter Magazine, September 2011
