Kasikornbank is warning local exporters, particularly small and medium-sized entrepreneurs, to exercise caution before extending credit to Chinese trading firms in the wake of that country's economic slowdown.
Executive vice-president Songpol Chevapanyaroj said Chinese importers in some sectors such as agriculture are requesting their trading partners allow them to stretch out payments to 1-3 months instead of paying cash on the spot.
A decline in trading value with China and higher turnover in the number of Chinese trading partners are negative signs pointing to vulnerability during the slowdown, he said.
Signs have also appeared that gross domestic product (GDP) in the world's second-largest economy may come in lower than expected this year.
Chinese exports rose by less than 1% year-on-year in May compared with a more normal 10%.
Mr Songpol attributed the slowdown to the Chinese government's economic reforms aimed at sustaining growth in the long term and curbing shadow-banking risks.
He also urged Thai exporters to check the financial reliability of Chinese financial institutions that issue export credit insurance.
The Kasikorn Research Center (K-Research) expects China's second-quarter figures will not improve from the first quarter.
Full-year GDP may fall short of the 7.5% forecast if the government does not introduce any stimulus measures, it said.
Deputy managing director Pimonwan Mahujchariyawong said Thailand's exports to China, comprising 12% of total shipments, also grew by less than 2% in the first quarter, compelling K-Research to trim this year's Thai export growth estimate to 4% from 7%.
The research house projects Chinese exports will expand by 6% this year.
Separately, Thiti Tantikulanan, the executive chairman of Kasikorn Securities, said his company has raised this year's baht forecast to 30 to the US dollar from 28.50 after the US Federal Reserve issued a time frame for phasing out its asset-buying programme.
It will start paring the stimulus measure this year and terminate it in mid-2014 if the US economic recovery is sustained.
"Effects from China's economic slowdown are escalating around the world, so it will be impossible for us not to feel any pinch," said Mr Thiti.
About the author
- Writer: Darana Chudasri
Position: Business Reporter