THE economics of the Philippines’s relations with China is simple: these ties will be unambiguously beneficial to us. It is politics that makes them seem nebulous, or even harmful, to the Philippines. China occupying islets within our exclusive economic zone? No way.
Ignore the nationalistic jingoism and consider these facts: In 2013 China had a population of 1.357 billion, more than twice Southeast Asia’s 625 million; a gross domestic product of $9.240 trillion, making it the second-largest economy in the world; and a per-capita income of $6,560, compared with the Philippines’s $3,270. Though China’s economy has slowed in the last two years, mainly because of the global recession, its current annual expansion of 7 percent is still one of the highest in the world.
What do these numbers mean to us? It simply means that China, by its size alone, has the capacity to absorb “all” we can export to it and provide the financial resources necessary to industrialize the Philippine economy. The annual average of our exports to China from 2010 to 2013 was $6 billion. This average can be easily doubled in three years, and decisively contribute to the doubling of our exports in six years.
Let us not forget that the growth of the countries earlier known as the “tigers”—South Korea, Taiwan, Hong Kong and Singapore—was “export-led”—that is, led by the export of “tiger-made” products to the markets of industrially advanced countries. China’s own rapid expansion after Deng Xiaoping took over was fueled not only by the conversion of state-owned-enterprises into efficient profit-maximizing firms, but also by the rapid growth of exports, induced by what Washington has labeled an artificially undervalued yuan.
Doubling our exports to China within three years will mean, in that period, a marked growth in employment, an effective tool in eradicating our “favorite” problem, poverty. On the import side, the fact that China is as close to Manila as Davao City should make a difference, and reduce the insurance and freight costs of our imports.
On capital account, we can expect an increase in Chinese investments in the Philippines, which are currently nominal. Chinese capital entering the Philippine economy can only provide a stimulus to the expansion of the Philippine industrial sector and the deepening of the country’s capital market.
We can also expect improved access to the resources of the newly established Asian Infrastructure Investment Bank (AIIB). With a seed fund of $50 billion from China, the AIIB will provide development loans to countries in need of them on internationally competitive terms. This institution can only be beneficial to the Philippines.
These foreign-sector impulses can be expected to generate some of the forces that can propel the Philippine economy toward a growth path that’s decisively higher than the one on which it is currently treading.
In the meantime, what should we do with the politics hounding Philippine-Chinese relations? Being neither diplomats nor political scientists, we are calling on the Chinese and Philippine sides to show flexibility and restore their relations to what they were in 2009.
Image credits: Jimbo Albano