Exports watched as China’s economic expansion slows

By Jenina P. Ibañez

CHINA’s slowing economic growth bears watching, especially for its implications on specific Philippine merchandise exports, experts said last weekend.

In a phone interview, University of Asia and the Pacific economist George N. Manzano, a former tariff commissioner, said that China’s slowing growth — in the face of its trade war with the United States — will likely impact Philippine electronics exports which account for more than half the country’s total overseas sales of goods. Bulk of Philippine electronics exports goes to China, which uses them as components for final assembly.

“We are not expecting the same vigorous growth in electronic products exports to China destined to the US market,” Mr. Manzano said, even as he added that “[f]ood product [exports to China] will increase and other raw materials destined for final consumption and not re-export.”

China reported on Friday last week that its economy grew by a slower-than-expected six percent year on year in the third quarter — the slowest pace in nearly three decades — as its trade war with the United States hit factory production.

At the same time, Mr. Manzano added, China needs to import food as its agricultural sector cannot cover all of the country’s demand.

And while slowing economic growth could also impact food imports, he said domestic demand may be buoyed by government stimuli to increase consumption.

Hence, Philippine exports for final consumption, rather than intermediate goods for re-export, will have better chances in the current Chinese economy, Mr. Manzano said.

He added that Philippine exporters can reposition themselves as the US starts looking to buy from other countries.

“We can gear towards an investment policy that is an attractive alternative to the Chinese,” he said, noting that a Philippine-US free trade agreement could improve Philippine exports to the US.

The Philippines’ electronics industry recognizes the possibility of its exports taking a hit, given that China is a top export destination, according to Semiconductor and Electronics Industries of the Philippines Foundation, Inc. President Danilo C. Lachica in a recent interview.

“We hope this is offset by the uptick of electronics exports to countries where companies have relocated due the US-China trade war,” he said.

Preliminary Philippine Statistics Authority (PSA) data show a 1.905% year-on-year rise in value of electronics export sales to $26.054 billion in the eight months to August, easing from the 5.7% growth recorded in the same period last year, again using preliminary data. Semiconductor shipments, which contributed 73% to total electronics shipments, edged up by 0.441% to $18.96. billion in the same period.

Meanwhile, Finance Undersecretary Gil S. Beltran, the department’s chief economist, said that the Philippines should further strengthen its local economy as a buffer to headwinds abroad, emphasizing that the country “should continue implementing economic reforms.”

“This will offset the negative impact of adverse external developments. The PH[ilippine] economy is domestic-led so the China factor should not bother us that much,” Mr. Beltran said in a mobile phone message.

Latest available PSA data show mainland China as the third-biggest market for Philippine goods with 13.784% of the total at $6.429 billion in the eight months to August, up 7.483% year on year, after the United States (16.429% at $7.663 billion, up 9.416%) and Japan (14.901% at $6.95 billion, down 0.549%).

The same data counts Hong Kong Special Administrative Region separately, which placed fourth in the same period with 13.297% at $6.202 billion, down 5.663% from the past year.