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Thailand's Nation Thailand reported on August 25 that the Thai government is pressing ahead with a three-pronged cooperation plan aimed at narrowing its trade deficit with China, with Deputy Prime Minister and Commerce Minister Suphajee Suthumpun leading negotiations with Chinese counterparts. According to Thailand's Ministry of Commerce, the country's trade deficit with China widened to US$46.22 billion in the first half of 2026 (January-June), an increase of US$17.63 billion from the same period a year earlier, underscoring the growing imbalance between the two countries. The report said China has accepted the three measures Thailand proposed in principle, but has asked for a transition period for affected companies to adjust to the new requirements, and both sides have agreed to set up a joint working group to speed up further negotiations and push the plan toward implementation.

The deficit has been widening for years, and the pace of widening keeps accelerating. Thai data show the trade gap with China grew 41 percent year-on-year in the first quarter of 2026 alone, to 679.737 billion baht, while the full-year 2025 deficit expanded nearly 40 percent to 2.26 trillion baht. Projected forward, Thailand's cumulative trade deficit with China from 2016 to 2026 could reach 12.14 trillion baht, making it one of the most glaring structural imbalances in the Thai economy — and one of the hardest to reverse in the short term.

The widening gap is driven largely by Thailand's heavy reliance on imports of capital goods, intermediate products and production materials from China, including electrical machinery and components, mechanical machinery, chemicals, computers and parts, integrated circuits, steel and printed circuit boards. Analysts link this to the recovering global electronics cycle in 2025-2026 and rising demand for infrastructure linked to artificial intelligence; as an important production base for the electronics and automotive industries, Thailand's import needs have climbed accordingly. Meanwhile, Thai exports to China remain concentrated in lower-value agricultural products such as fresh and chilled fruit, leaving the two countries' trade structures mismatched and the deficit persistently widening.

The sheer scale of Thailand-China trade and Chinese investment in Thailand forms the structural backdrop behind the persistently high deficit. Chinese data show China has been Thailand's largest trading partner for 13 consecutive years, with bilateral trade growing from roughly US$4 billion to about US$153 billion over some 25 years, one of the fastest-expanding bilateral trade relationships in Asia. At the same time, capital goods and intermediate products together account for nearly 80 percent of what China exports to Thailand, meaning China's export structure to Thailand is dominated by production inputs — so the deficit is rooted largely in Thai manufacturing's dependence on Chinese components and raw materials, rather than in an imbalance in general consumer goods trade.

Suphajee raised the "co-creation" approach to rebalancing Thailand-China trade during bilateral talks with Chinese Vice Premier He Lifeng on the sidelines of an APEC-related meeting in China in May 2026. The first measure focuses on local content and rules of origin: Chinese-invested manufacturers in Thailand, particularly electric-vehicle makers, would be asked to source more components and raw materials domestically rather than importing near-complete knock-down kits for assembly, raising domestic value-added, complying with rules of origin and reducing transshipment risk.

The second measure aims to open China's e-commerce channels to Thai small and medium-sized enterprises. Thailand has proposed a "Thai Pavilion" project to showcase quality- and standards-compliant SME products, using Chinese e-commerce platforms to reach a consumer market of more than 1.4 billion people and helping Thai SMEs move beyond reliance on exporting bulk primary agricultural goods into higher value-added consumer markets.

The third measure is to encourage greater Chinese investment in Thailand's agricultural processing sector. Thailand has proposed a pilot project that would draw on Chinese technology and innovation to upgrade Thailand's quality agricultural raw materials into "high-quality" or "premium" products for export to China and global markets. Thai officials say the model plays to each side's strengths: Thailand's base of quality agricultural raw materials paired with China's processing technology and market access, jointly opening higher value-added markets. Thai officials added that, if the pilot proves successful, it could be extended to other agricultural product categories in the future, becoming a sustainable model for cooperation.

On all three measures, China has responded that it accepts them in principle, but has asked for time for affected companies to make a transition and adjust to new requirements such as local sourcing, so that supply chains are not disrupted by an abrupt change in rules. Both sides have agreed to form a joint working group to work out implementation details, timelines and supporting measures, with the aim of accelerating the rollout of the cooperation; Thai officials say they hope to turn the principled consensus reached in this first round of talks into a concrete, workable action plan.

At the same time, Thailand is pursuing broader trade diversification, pushing to conclude free trade agreement negotiations with the European Union by September and looking to emerging markets such as India to reduce reliance on any single trading partner and lower the risk of a similar structural imbalance emerging elsewhere. Analysts note that gold trade and food security are also emerging as pillars of Thailand's new trade strategy, echoing Thailand's broader effort to reposition itself amid volatile global commodity markets and geopolitics.

For Thailand, whether it can effectively implement the three measures will directly shape whether it can reverse the long-term trend of trade imbalance with China. If Chinese-invested companies step up participation in local sourcing, market access and agricultural-processing investment, Thailand could improve the value-added structure of its domestic supply chains while maintaining close economic ties with China, creating more opportunities for small and medium-sized enterprises to take part in international trade. Suphajee has previously warned that the Thai economy is showing "K-shaped growth," with large firms driving strong export performance — exports grew 17.6 percent in the first quarter of 2026 and surged 23 percent in April — while roughly 80 to 90 percent of that growth came from large companies, and SMEs recovered slowly, with some still struggling to regain firm footing. That is why the SME-focused e-commerce access and agricultural-processing investment measures are seen by Thai officials as key levers not only for narrowing the trade deficit but also for easing the country's underlying structural imbalance.