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Southeast Asia embraces China trade, but how's the relationship? It's complicated.

Lower export barriers are spurring trade and investment from China, but local producers now worry that a flood of cheap Chinese imports will put them out of business.

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Last month, a Chinese company, Ashima Group, unveiled plans for a 2-million-square-meter "China City Complex" outside Bangkok. The project, due to open by the end of 2012, is modeled on Yiwu International Trade City, a wholesale market in China’s Zhejiang Province that advertises itself as the world’s largest such outlet and has become a magnet for foreign importers of low-end Chinese products.

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In a promotional book, Ashima said the China City Complex represented the “globalization of the Yiwu model” and would create a “Southeast Asia distribution center of small goods.” Dong Hongqi, the chairman of Ashima Group, told the state-owned China Daily in Beijing that the Thai complex was aimed at Chinese tenants selling made-in-China goods.

Chinese investors are also building smaller wholesale markets in two other Thai cities, said Wang Ar-Chern, a Chinese businessman based in Bangkok who is in an investor in one of them in Phuket. It is due to open next month and will sell only Chinese goods. “Thailand has the land. China has money to invest,” he says.

Benefits of China's investment in smaller countries?

Thai companies are asking what they stand to gain from such investments. Manufacturers have complained that China City Complex will undercut local products and divert business from existing Thai-run wholesale markets in downtown Bangkok.

“Our product is quite good. However, the price compared to China means we cannot compete,” says Tanit Sorat, vice chairman of the Federation of Thai Industries.

A Thai deputy minister told reporters last month that 30 percent of rental spaces in the new market would be offered at discounted rates to Thai companies. He said that China’s government had also agreed to help Thai agricultural producers to sell their goods at the Yiwu market, effectively a reciprocal benefit for Thailand’s open-door policy.

Mr. Tanit said such assistance would be useful for Thai exporters but criticized the 30 percent quota as inadequate, given the potential impact on Thai companies who distribute Chinese-made goods. “If we have a shopping complex owned by Chinese businessmen, the question is what should Thai businessmen do? They could lose their [distribution] business,” he says.

Boonchai Limsuksrikul, a Thai official in the ASEAN-China Economy and Trade Promotion Association, defended the market as a modern distribution hub for Thai and Chinese producers. “This will be the biggest and best for logistics,” he says, noting its location near Bangkok’s international airport and its main seaport.

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