New Delhi: Union Finance Minister Nirmala Sitharaman on Monday said the government is willing to listen to concerns raised by stock market investors regarding the tax system, including issues related to Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) taxation.

Speaking to the media on the sidelines of the TEXPROCIL Export Awards event on Monday, the Union Finance Minister said the government remains open to receiving suggestions and feedback from investors on the matter.

Also Read: The three Fs that Sitharaman flagged as India braces for a widening global oil shock, forex strain

“On this specific issue, and on any issue, we are always ready and willing to listen to the people. We will certainly take their inputs,” Sitharaman said while responding to questions regarding demands from stock market participants for a review of LTCG and STCG taxes.

Her remarks come amid growing discussions among market participants over the impact of capital gains taxation on equity market participation and investor sentiment.

LTCG and STCG are taxes imposed on profits earned from selling shares and other financial assets.
Short-Term Capital Gains (STCG) tax is charged when shares are sold within a shorter holding period, while Long-Term Capital Gains (LTCG) tax applies when investments are held for a longer duration before being sold.The Union Finance Minister, however, did not announce any formal review or change in the taxation structure.

Also Read: FM asks lenders to go beyond standard loans, design credit repayments around biz cycles

Her remarks only indicated that the government is open to hearing feedback and suggestions from stakeholders regarding the current tax framework.

The comments come at a time when domestic equity markets have been witnessing increased volatility due to global geopolitical tensions, crude oil price movements, foreign investor flows and concerns related to inflation and interest rates.

Sitharaman’s statement is being viewed by investors as a signal that the government is willing to engage with stakeholders and consider their concerns regarding market-related taxation issues.

She also addressed crucial domestic fiscal issues, firmly clarifying the mechanics behind recent petrol and diesel hikes before weighing in on gold optimisation, the RBI dividend, and India’s growth trajectory amid the West Asia crisis.

FM Sitharaman clarified that price hikes are purely operational and driven by global procurement realities rather than sudden government policy changes.

She also revealed that the central government had previously absorbed massive shocks–resulting in a Rs 1 lakh crore fiscal hit from reducing central taxes–to insulate consumers for over two and a half months.

Mumbai: Costs on certificates of deposit (CD), often seen as a leading proxy for the broader retail deposit rates, rose 60 to 70 basis points in May compared with April, pointing to the likelihood that banks would soon begin offering savers more returns for parking funds with them.

One basis point is a hundredth of a percentage point.

One-year CD rates are quoting at 7.70%, compared with around 7% at the end of April as tighter liquidity and demand for funds compel banks to offer higher rates for large institutional deposits, typically with a ticket size of ₹500 crore or more.

Bankers and analysts expect the price of deposits to go up, eventually buoying retail deposit rates, even if the Reserve Bank of India (RBI) does not immediately raise policy rates. To be sure, the quantum of increase in deposit rates would be in line with the rise in policy rates.

“Higher CD rates definitely indicate that money is becoming more expensive. It is correct to say that deposit rates will go higher, but when and how much will depend on how the RBI moves from here,” said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank. “The longer end of the CD curve is pricing in a repo hike sooner or later this year. Deposit rates are likely to move upwards.”

Liquidity Crunch
Tripathi pointed out that the gap between the one-year government treasury bill, the short tenure borrowing benchmark for the government, and one year CD rate is now 200 basis points. In normal course, that differential is 130 to 140 basis points, indicating tighter liquidity for the banking system. The 364-day t-bill is quoting around 5.75%.
Soumyajit Niyogi, director, core analytical group, India Ratings & Research, said the firmed up CD rates clearly point to tighter liquidity in the banking system.

“It is fair to assume that retail deposit rates will also move up. System liquidity has shrunk further from about 2.5% of banking deposits in March to about 0.5% of deposits now,” Niyogi said. “Going forward, as banks are expected to disburse large credit as part of the govt package to MSMEs, there will be more pressure on liquidity. We should expect deposit rates to go up from here.”

Average daily banking system liquidity has shrunk to about ₹50,000 crore from about ₹3 lakh crore in April. Bankers said all these facets point to more expensive deposits. “Even the mutual fund money, which made its way to CDs has shrunk; so, all in all, we are in a tighter situation,” said a senior public sector bank official.

Of course, it all depends on how and when RBI moves with the benchmark repo rate, which will force banks’ hands to raise deposit rates,” said a senior public sector bank official.

In 2019, a mid-sized electronics components manufacturer based in Shenzhen was producing entirely for the US market. In 2020, US tariffs made that model borderline unviable. So the company moved part of its production to Vietnam.

By 2023, rising Vietnamese labour costs and tightening rules-of-origin scrutiny prompted another rethink. This time, the answer was Thailand — specifically, a plot in the Thai-Chinese Rayong Industrial Park in the Eastern Economic Corridor, where over 100 Chinese manufacturers had already set up before them.

Thailand has long prided itself on being Southeast Asia’s industrial backbone, the “Detroit of the East,” as boosters like to call it. For decades, Japanese giants like Toyota, Honda, and Isuzu built the kingdom’s auto industry into the tenth-largest vehicle producer on the planet.

Now, a seismic shift is underway. Chinese capital is pouring into Thai industry with a velocity and breadth that is reshaping supply chains, upending established hierarchies, and raising questions that Bangkok’s policymakers have yet to fully confront.

Since the start of 2025, China has accounted for close to 40% of Thailand’s total approved foreign direct investment applications, with the majority channelled into metals, electronics, and digital sectors. In manufacturing alone, China now dominates, contributing an additional $917 million annually compared to pre-pandemic averages and accounting for 44% of total manufacturing FDI in 2024, a remarkable rise for a country where Chinese capital was barely a rounding error a decade ago. Meanwhile, Japan, Thailand’s historic industrial patron, has retreated, cutting its manufacturing investment by $1.5 billion annually. This is not an accident. It is the product of two interlocking forces, geopolitical pressure and industrial strategy, and understanding both is essential to grasping what Thailand is becoming.

The geopolitical catalyst

• The US–China trade war pushed Chinese manufacturers to relocate production to ASEAN starting in 2018 .
• ASEAN’s open trade rules and Thailand’s Eastern Economic Corridor (EEC) made Thailand a prime destination, with industrial land absorption tripling by 2024 .
• US tariffs on China have surged 145% since early 2025 , making Thailand’s tariff-free access under ACFTA strategically essential.

The story begins in 2018. When the first Trump administration fired the opening salvo of the US-China trade war, Chinese manufacturers faced an urgent calculation: absorb tariffs on exports, or find new production geographies. ASEAN, with its open trade frameworks, lower labour costs, and geographic proximity, was the obvious answer. Chinese manufacturing FDI in the region nearly doubled year-on-year in 2018 alone, and levels remained elevated in the years that followed, roughly three times above the 2014 to 2017 average.

Thailand was well-positioned to benefit. Its Eastern Economic Corridor (EEC), a government-backed industrial zone spanning Chonburi, Rayong, and Chachoengsao provinces, offered tax incentives, upgraded infrastructure, and a seasoned industrial workforce. Industrial estate absorption soared to over 1,170 hectares in 2024, nearly triple the 2019 figure, as Chinese firms scrambled for factory floor space.

Post-pandemic, the logic of China+1 supply chain diversification grew more strategic, not less. US tariffs on China escalated dramatically since the beginning of 2025, reaching an additional 145% from early-January levels by mid-April. For Chinese exporters, manufacturing in Thailand, which benefits from zero tariffs under the ASEAN-China Free Trade Agreement, is not merely attractive. It is, increasingly, essential.

The EV Sector: The Most Visible Transformation

• Chinese EV makers have invested over $3 billion in Thailand .
• BYD opened a $900 million factory in Rayong in July 2024, producing up to 150,000 vehicles/year .
• In 2024, 85% of EVs sold in Thailand were Chinese-made .
• BYD alone holds 40% of the Thai EV market .

Ultra-low-cost EVs (≈ THB 250,000) are reshaping consumer behavior, undercutting gasoline cars priced around THB 815,000

Nothing illustrates the transformation more vividly than the electric vehicle sector. China’s EV giants, locked out of the United States and facing escalating barriers in Europe, have made Thailand their regional production beachhead.

On 4 July 2024, BYD opened a $900 million factory in Rayong’s Eastern Economic Corridor, its first outside China, designed to produce up to 150,000 vehicles annually for the Thai and ASEAN markets. It was joined by Great Wall Motor, SAIC Motor, GAC Aion, Changan Automobile, and Chery Automobile, all establishing or expanding production facilities across the region. In total, Chinese EV makers have poured over $3 billion into Thailand in recent years.

Meanwhile, CATL, the world’s dominant EV battery maker, announced an initial investment of over $100 million to set up an assembly plant in partnership with a Thai state-owned company, following high-level diplomatic outreach by Bangkok officials who personally travelled to Fujian and Guangdong to court the firm.

The market impact has been equally dramatic. In 2024, 85% of electric car sales in Thailand were Chinese-made. BYD alone captured a 40% share of the Thai EV market. The lowest-priced Chinese EV models entered at roughly THB 250,000, far below the average gasoline car price of THB 815,000, fundamentally altering consumer calculus in a market that, just three years ago, was overwhelmingly dominated by Japanese internal-combustion vehicles. With Chinese EV producers facing domestic oversupply and market saturation at home, Thailand and Southeast Asia have become the pressure valve and the proving ground for a global expansion strategy.

The supply chain within the supply chain

The EV surge is just the most visible dimension of a broader industrial reconfiguration. Chinese firms are not merely assembling finished goods in Thailand; they are constructing integrated supply chains that span multiple layers of production.

Thailand is now seeing significant inward FDI in the manufacturing of printed circuit boards and copper-clad laminates, driven by its booming auto and consumer electronics industries. SVOLT Energy Technology, in partnership with Thai company Banpu Next, began producing EV battery packs domestically in March 2024. Changan announced procurement partnerships with Thai parts manufacturers AAPICO Hitech and Thai Summit Group as part of a localisation effort worth THB 20 million. Computer and electronics manufacturing has seen 68% growth compared to pre-pandemic averages. Electrical equipment manufacturing grew 70%, attracting $859 million annually. From 2019 to 2024, Greater China’s share of Thailand’s total FDI portfolio grew by ten percentage points, reaching 26%.

From a bird’s-eye view, this looks like textbook industrial development: capital flowing in, technology transferring, local supply chains deepening, and employment rising. Foreign investor hiring by licensed companies reached 2,394 Thai workers in the first eight months of 2025 alone, a 96% increase from the same period in 2024.

⚠️ The Shadow Side: Disruption, Dependency, Distortion

Despite impressive investment numbers, Thailand faces serious structural risks:

1. Factory closures & SME pressure

• Thailand has been losing 100+ factories per month since 2021 .
• Cheap Chinese imports create oversupply and price wars, squeezing local firms .

2. “Zero-dollar” exports

A significant portion of Thai export growth is actually Chinese goods re-routed through Thailand, adding little domestic value

3. Auto sector decline

• Vehicle production fell 20% in 2024 .
• Domestic sales hit a 15-year low, down 26% .
• Subaru and Suzuki exited Thai production in 2024 .
• At least a dozen Thai auto parts firms shut down after BYD’s Rayong plant opened .

But the view from ground level is more complicated, and more troubling.

Thailand is losing more than 100 factories a month since 2021. Analysts point to a structural crisis in which Chinese finished goods flooding local markets are creating oversupply and price wars that squeeze local firms to the breaking point.

Traditional manufacturing supply chains are being disrupted, forcing many small and medium enterprises to exit. A significant share of what passes for Thai export growth turns out to be Chinese goods re-routed through Thailand, so-called “zero dollar” exports that inflate statistics while adding little real domestic value. Several Thai ministers have acknowledged this distortion publicly.

The auto sector tells a painful story of transition costs. Overall vehicle production dropped by 20% in the first eleven months of 2024 compared to the previous year. Domestic auto sales plunged 26% in 2024, the lowest in fifteen years. Japanese automaker Subaru ceased production in Thailand in 2024; Suzuki followed. Since BYD’s Rayong factory opened in July 2024, at least a dozen Thai auto parts firms have shut down, firms that built their business supplying the Japanese brands that Chinese EVs are now displacing.

The human geography of Chinese investment is also raising eyebrows. In Chonburi province, strips of Chinese restaurants and massage shops have appeared near factory zones, serving a Chinese expatriate workforce that locals say spends little in the broader Thai economy. The social compact between investment and community benefit, long taken for granted with Japanese FDI, which is deeply integrated with Thai supplier networks, is not reproducing itself automatically with Chinese capital.

There is also a strategic tension at the heart of Bangkok’s EV gamble. ASEAN governments, Thailand’s included, seek to leverage Chinese FDI to build genuine domestic industrial capabilities and move up the value chain over time. But reports emerged in 2024 that Beijing was advising its automakers to ensure key technology and production stayed in China, while exporting knock-down kits to foreign plants for assembly overseas. At the July 2024 opening of its Rayong plant, BYD promised to bring technology from China to Thailand. Whether that promise reflects reality or aspiration remains to be seen.

🌍 Geopolitical Risk: The Tariff Trap

• Much Chinese FDI in Thailand is designed to circumvent US/EU tariffs:
• If the US imposes 30%+ tariffs on ASEAN auto exports, Thailand would be among the hardest hit .
• The US is scrutinizing Chinese value-added in ASEAN exports .
• Solar panels made in ASEAN by Chinese firms already face 21–271% US tariffs .

One further complication looms. Much of the rationale for Chinese investment in Thailand has been the ability to export to third markets, notably the United States and Europe, without the full weight of tariffs applied to China-origin goods. But US trade policy is catching up with the strategy. Washington has signalled increasing scrutiny of the Chinese value-added embedded in ASEAN exports. The US has already imposed preliminary tariffs of 21% to 271% on solar panels manufactured in ASEAN countries by Chinese firms. In the auto sector, SAIC is openly discussing plans to use its Thailand plant to circumvent EU EV duties. US policymakers are watching closely.

If tariffs of more than 30% are imposed on ASEAN exports to the United States, as has been threatened, it would deal a major blow to the region’s diversification boom and to Chinese FDI across ASEAN. Thailand would be among the hardest hit, given how much of its new Chinese investment is explicitly export-oriented.

Thailand’s EV sector has already experienced a preview of this fragility. EV makers missed their 2024 local production requirements because of weak sales, forcing the government to extend deadlines for firms facing penalties of up to THB 400,000 per car. The government forecasts only 1.8% GDP growth in 2025, with high household debt dampening domestic consumption. The underlying economic foundation is shakier than the headline investment numbers suggest.

Steps Bangkok Needs to Take

None of this means that Thailand is wrong to welcome Chinese investment. The capital is real, the factories are being built, and the technology, however carefully Beijing tries to ring-fence it, is arriving. China now accounts for nearly half of ASEAN’s manufacturing FDI growth, and for a developing economy seeking to industrialise rapidly, that is not a relationship to squander.

But the Thai government must be clear-eyed about what it is managing. Chinese FDI of this scale and character requires active industrial policy, not passive attraction. Bangkok must enforce meaningful localisation requirements, including genuine technology transfer, not merely assembly of imported kits. It must protect Thai SMEs from predatory pricing and supply chain displacement through targeted support, retraining programmes, and procurement preferences. It must diversify its FDI sources so that reliance on any single country, China, Japan, or anyone else, does not harden into structural dependency.

Most critically, Thailand must develop a credible answer to the geopolitical exposure embedded in its new industrial structure. Supply chains that exist to circumvent US-China trade tensions are, by definition, vulnerable to the resolution, or escalation, of those tensions. The Eastern Economic Corridor cannot afford to become a pawn in a trade war it has no power to influence.

The investment is transformative. The risks are real. And the decisions Bangkok makes in the next few years will determine whether Thailand emerges from this moment as an industrial power in its own right, or as a sophisticated assembly platform for someone else’s ambitions.

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Next in the series — Article 3: The EV Kingdom: Thailand’s Bet on Chinese Automakers and the Electric Vehicle Revolution

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