Behind Thailand’s audacious plan to attract up to 30 million Chinese tourists and the swift implementation of visa-free access lies a more profound hidden agenda—facilitating the transfer of capital from mainland China. The veneer of tourism and visa-free access masks the real story: Chinese investors are utilizing the financial systems in Hong Kong and Thailand to move their wealth out of mainland China, according to Hong Kong Free Press on September 3, 2023.
The Hong Kong Precedent, A Blueprint for Thailand: The trend of Chinese investors seeking alternative financial havens began in Hong Kong. On July 16, 2023, the South China Morning Post (SCMP) reported a surge of Hongkongers investing in affordable properties in Thailand. This move corresponds with Thailand’s growing appeal to foreign workers and investors, particularly in the real estate market.
Parallel Trends in Hong Kong and Thailand: Parallel trends in Hong Kong, where mainland Chinese sought refuge, revealed the same underlying motivation. The first half of 2023 saw a remarkable 21 percent increase in new business premiums from mainland Chinese visitors, totalling HK$31.9 billion, driven by their purchases of insurance in Hong Kong. Mainland Chinese turned to Hong Kong for higher interest rates, financial security, and stability in the face of growing economic challenges.
Sindy, a Hong Kong insurance agent with over a decade of experience, notes that mainland China’s post-pandemic economic weakness and Beijing’s tightening grip over the market left residents feeling “unstable, unsafe, and insecure.” She requested anonymity due to the sensitivity of the topic.
Financial Commodity: Trust in the Form of Insurance: Hong Kong’s financial institutions have created a trust-based financial commodity, primarily in the form of insurance. This mechanism assured mainland Chinese investors that their deposits in Hong Kong’s banking system were secure. Hong Kong’s banks offered higher interest rates than their mainland counterparts, further attracting Chinese investors.
Sindy explains that mainland Chinese clients were already setting up Hong Kong bank accounts before the pandemic. Most also purchased local insurance policies, as they required accounts for regular fee payments. However, the motivations behind opening an account shifted toward asset allocation and enhancing their sense of security. Hong Kong banks currently offer interest rates of around four percent for Hong Kong dollar time deposits, surpassing mainland China’s rates by a significant margin.
Thailand’s Replication of the Hong Kong Scenario
Thailand is now closely emulating the strategies that drew Chinese capital to Hong Kong. On September 25, 2023, Thai Prime Minister Thaksin Shinawatra marked the inauguration of the visa-free entry program by warmly welcoming approximately 300 Chinese tourists at Suvarnabhumi Airport. Senior government officials also graced the event, which included traditional dance performances and souvenir presentations. The attention bestowed upon these Chinese tourists raises questions about their significance.
A Boost to Thailand’s Economy
Prime Minister Settha Taweesin expressed confidence that the visa-free policy would significantly invigorate Thailand’s economy.
“We are confident that this policy will greatly boost the economy,” Srettha told reporters.
He told reporters that the government’s broader aim is to promote Thailand’s smaller towns as desirable destinations for Chinese tourists, encouraging them to extend their stays and spend more.
Mr. Chai Wacharonke, the prime minister’s spokesperson, revealed that Thailand had welcomed 15 million international visitors in the first seven months of the year. The government has set ambitious targets to attract 28 million tourists and generate 1.4 trillion baht ($39.2 billion) in revenue by 2023. These numbers underscore the profound economic benefits of Chinese tourism for Thailand.
Beyond Tourism: Facilitating Chinese Asset Transfers: However, analysts argue that beneath the surface of the tourism initiative lies a more profound ambition—to rejuvenate Thailand’s economy by facilitating the transfer of Chinese assets from mainland China. This strategy takes a page from Hong Kong’s playbook, which successfully attracted mainland Chinese seeking secure investments abroad. The key to this success is the establishment of a financial system that engenders trust among mainland Chinese and facilitates the seamless outflow of their wealth.
Cambodia’s Historical Precursor: A similar phenomenon unfolded in Cambodia’s Sihanoukville before the global economic crisis. However, some economists argue that Cambodia, at that time, lacked a robust international financial guarantee system capable of ensuring the unhindered flow of Chinese capital. Consequently, the stability and confidence that Thailand now offers have shifted China’s focus from Cambodia to its neighbour, Thailand.
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