The Impact of Geo-economic Uncertainty on Trade and Foreign Direct Investment between Thailand and China
Keywords:
Geo-economic Uncertainty, Trade Policy Uncertainty, Trade War, Thailand–China Trade, Chinese Foreign Direct Investment, Seemingly Unrelated Regression ModelAbstract
This study examines (1) the impact of geo-economic uncertainty under the context of the trade war between the United States and the People’s Republic of China on Thailand–China trade value, and (2) its impact on foreign direct investment from China to Thailand. The Trade Policy Uncertainty Index (TPU) is used as a proxy for geo-economic uncertainty in the dimension of trade policy. The study uses quarterly time-series data from the first quarter of 2009 to the fourth quarter of 2024, covering 64 quarters, and applies the Seemingly Unrelated Regression (SUR) model. The results show that TPU has no statistically significant relationship with Thailand–China trade value or foreign direct investment from China to Thailand. The interaction term between TPU and the Trade War Dummy is also not statistically significant in either the trade or investment equation. Therefore, the study does not find empirical evidence that TPU has a direct relationship with Thailand–China trade and investment under the model used. However, the final model shows that Thailand’s GDP and China’s GDP have a positive and statistically significant relationship with Thailand–China trade value. Meanwhile, the interaction term between Thailand’s GDP and the Trade War Dummy has a negative and statistically significant relationship with trade value, indicating that the relationship between Thailand’s GDP and Thailand–China trade changed after the trade war. For the investment equation, SHIBOR has a positive and statistically significant relationship with foreign direct investment from China to Thailand. The findings suggest that Thailand should strengthen its economic fundamentals, improve export competitiveness, adjust its trade structure, and monitor China’s financial conditions when designing policies to attract Chinese investment.
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