A Hiatus in the Sino-Thai “Special Relationship”

The ongoing political crisis in Thailand, which forced Prime Minister Thaksin Shinawatra to temporarily resign in April and has now resulted in a coup by the Thai military, has not been good news for the People’s Republic of China (PRC). Since taking office in 2001, Thaksin has prioritized relations with China, emphasizing the importance of boosting economic linkages between the two countries and often bending over backwards so as not to offend Beijing on a range of political issues. As a result, the Sino-Thai relationship, already one of the closest between China and a Southeast Asian country, has become even closer. The current political quandary in Thailand, however, has meant that plans to upgrade bilateral relations have been placed on hold, resulting in a hiatus for the Sino-Thai “special relationship.”

The “special relationship” between Thailand and the PRC predates the Thaksin era. Its origins lie in the mid-1970s when, after over two decades of mutual hostility, the two countries established formal diplomatic relations in July 1975. In 1979, the relationship was transformed when the two countries forged a de facto alliance in opposition to Vietnam’s occupation of Cambodia. When Hanoi withdrew its forces from Cambodia in 1989, the Sino-Thai strategic alliance ended but was quickly replaced by shared economic interests. Since the late 1980s, successive Thai governments have regarded China as part of its economic hinterland, together with Vietnam, Cambodia, Laos and Burma. For China, access to the Thai market has been a prerequisite for the development of the country’s landlocked southwest provinces, such as Yunnan and Sichuan. In order to exploit the economic synergies between the two countries, since the early 1990s Bangkok and Beijing have prioritized the development of the subregion’s road, rail and river networks, especially those linking the two countries through Burma and Laos.

Other factors have contributed to the special relationship. The absence of territorial or maritime boundary disputes has been one. Similarly, there has been no friction over the status of Thailand’s sizeable ethnic Chinese community, which has been fully assimilated into Thai society and acts as a useful bridge between the two countries. Another important factor was Beijing’s financial assistance to the Kingdom during the 1997-1998 economic crisis. Beijing’s contribution to the international bailout fund and its pledge not to devalue the yuan won China kudos, and reinforced the perception held by many in the Thai elite that the PRC could be counted on to help Thailand in times of crisis. China’s support was unfavorably contrasted at the time with the United States’ seemingly indifferent attitude to Thailand’s plight. As a capstone to the trust and goodwill built up during the 1990s, in 1999 Thailand and China issued a Plan of Action in the 21st Century, an agreement aimed at promoting bilateral economic, political and military cooperation in the new century. This agreement served as a model for future bilateral agreements between other Southeast Asian countries and the PRC.

The Thaksin administration has sought to build on the 1999 agreement. In particular, Thaksin, a billionaire businessman whose grandparents emigrated from China’s Guangdong province, has been keen to bolster economic linkages with the world’s fastest growing economy. One of his most important initiatives in this regard was the 2003 Sino-Thai Free Trade Agreement (FTA), the first between China and an ASEAN country. The FTA, part of the “early harvest” program under the 2010 ASEAN-China FTA, eliminated the tariffs on 188 fruits and vegetables. The Thaksin government lauded the FTA as a key driver of two-way trade, which grew from $6.57 billion in 2001 to $20.28 billion in 2005 [1].

The reality, however, is that although the volume of trade has indeed expanded, Thailand continues to suffer from a trade deficit with the PRC. In 2005, for example, Thailand exported $9.12 billion worth of goods to China but imported $11.2 billion [2]. The Sino-Thai FTA in particular, which came into effect on October 1, 2003, has been a mixed bag for the Thai economy. Overall, Thailand enjoys a trade surplus with China in the fruit and vegetable trade, but one product in particular, cassava, accounts for that surplus. While large producers of cassava have prospered, small farms growing other crops have been unable to compete with cheaper and better quality Chinese imports, causing economic hardship among Thai farmers. In 2002, there were only two kinds of fruits and vegetables with which Thailand had a trade deficit with China: by 2004, this had risen to 63 different kinds (Bangkok Post, August 13). Thailand’s trade gap with the PRC is widening, creating concern among Thai manufacturers and farmers that once the ASEAN-FTA comes into effect in 2010, the Thai market will be flooded with cheap Chinese goods and agricultural products. Acutely conscious of this concern, the Thaksin government has called on China to increase the volume of Thai imports, particularly fruits and vegetables grown in the country’s northeast, an area Thaksin has relied on in the past for electoral support.

As two-way trade has flourished under Thaksin, so too have political relations. Thaksin has been a frequent visitor to China, choosing the country as his first destination as prime minister in 2001. Beijing reciprocated the gesture in October 2003 when Thailand became the first country Hu Jintao visited as state president. The 30th anniversary of the establishment of diplomatic ties in 2005 provided a good opportunity for both countries to showcase their strong relationship. Thaksin paid a state visit to the PRC in July 2005, and at a banquet to celebrate the anniversary, Thaksin declared, “Thailand and China are like brothers” (Xinhua, July 1, 2005). During his visit, the two sides agreed to negotiate a strategic framework to update the 1999 agreement. The new framework was supposed to have been concluded by the end of 2005, but, as noted above, the political crisis has led to its postponement.

The Thaksin government has demonstrated great deference to the PRC on a number of political issues, especially those touching on core sovereignty issues. Thaksin has tightened the country’s One China policy, making it much more difficult for Taiwanese delegations to visit the Kingdom. On several occasions, the Thaksin administration has bowed to pressure from Beijing to curb the activities of the Falun Gong spiritual movement. In 2001, the Falun Gong was forced to cancel a planned meeting in Bangkok, and in 2003, Falun Gong members were barred from entering the country during the APEC Summit. Bangkok has stated that it would not allow the Falun Gong to use Thailand as a base to interfere in another country’s (read: China’s) internal affairs. In response, sections of the Thai press have chastised the PRC for interfering in the Kingdom’s internal affairs as well as the Thaksin government for allowing Beijing to do so (The Nation, February 26, 2001).

As a sign of the close relations between the two countries, Beijing has blessed several of the Thaksin government’s international initiatives, particularly its Asian Cooperation Dialogue (ACD). The ACD was created in 2002 to integrate existing regional organizations such as the Association of Southeast Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC) and the South Asian Association for Regional Cooperation (SAARC). Since the United States is not a participant of the ACD, China has viewed the organization as a very attractive venue to exert its influence; Beijing hosted ACD’s third annual meeting in Qingdao in 2004. China has also voiced its support for Thai Foreign Minister Surakiart Sathirathai’s candidacy for the post of UN Secretary General. Thai and Chinese positions on Burma, the pariah state in which both countries have significant economic interests, have also converged under Thaksin. Both countries agree that sanctions and external pressure on the military regime to move forward on political reform are counterproductive.

Defense links between Thailand and China have also expanded since 2001. During the Sino-Thai strategic alignment in the 1980s, Thailand became the first ASEAN country to buy, at “friendship prices,” military equipment from the PRC. In the past, the Thai military was consistently disappointed with the quality of the PRC’s equipment and its maintenance services and had refrained from purchasing PRC equipment whenever possible. Under Thaksin, however, Thailand has once more become a buyer of Chinese military equipment, partly because of a slight improvement in quality but primarily as a means of fostering closer links with the PRC. Over the past five years, Thailand has purchased anti-tank missiles, ammunition, armored personnel carriers and offshore patrol vessels from China, some of it paid for with Chinese credits. Since 2002, Thailand and China have conducted annual defense talks at the ministerial level, and exchange visits between the countries’ armed forces have been stepped up. In September 2005, China conducted a three-month training program with the Royal Thai Army to clear landmines along the Thai-Cambodia border, and in December 2005, Thai and Chinese naval ships conducted their first joint exercise in the Gulf of Thailand. Yet Sino-Thai defense links are dwarfed by the U.S.-Thai defense relationship. Thailand and the United States conduct over 40 bilateral exercises each year, including Asia’s largest military exercise, Cobra Gold. In addition, despite increases in PRC weapons sales to Thailand, the United States continues to enjoy a dominant market share in the country’s military procurement. While the Thai military has been attempting to diversify its sources of procurement, it has turned mainly to European and Russian manufacturers rather than the Chinese.

Although Sino-Thai relations are in excellent shape, they are not without hurdles. In addition to the previously mentioned widening trade deficit, the environmental damage caused by China’s upstream activities along the Mekong River has also resulted in significant problems. Record low water levels have been blamed on the construction of Chinese dams along the upper reaches of the river, while China’s efforts to make the river more navigable have resulted in the loss of fish breeding grounds. China’s ability to control downstream economic activities, plus the increased flow of illegal immigrants and narcotics, has raised national security concerns in Thailand. On the Chinese side, Beijing has been irked by Bangkok’s support for Japan’s bid to become a permanent member of the UN Security Council. Expanded security cooperation between the United States and Thailand post-September 11, 2001, including Washington’s conferral of Major Non-NATO Ally status on Thailand in 2003, has also created unease in Beijing, which had hoped to see U.S.-Thai military relations atrophy.

Despite the uncertainty surrounding Thaksin’s political future, the overall prospects for Sino-Thai relations remain extremely bright. The strategic framework between the two countries is likely to be concluded once a new government is in place, and two-way trade will continue to grow. Nevertheless, even as China’s power continues to rise, Thailand is unlikely to terminate its alliance with the United States and “bandwagon” with the PRC. As it has since 1975, Thailand will seek to balance its relationship with the United States and China, accruing considerable economic and political advantages from both sides in the process.

Notes

1. Asian Development Bank, Key Indicators, 2006. China is now Thailand’s number three trade partner, behind Japan and the United States, with two-way trade at $41.1 billion and $25.8 billion, respectively.

2. Ibid.