China and its territorial claims have been pushed off the front pages lately in lieu of more domestic issues. The latest news is that the United States sent an aircraft carrier strike group to the area. Chinese media, on the other hand, reported a new passenger ship made its first voyage from the southern province of Hainan carrying 300 tourists to visit the disputed Paracel Islands.
The economic ties between the Philippines and China stretch back to the Manila Galleon trade route, carrying largely Chinese goods between Manila and Acapulco, which lasted from 1565 to 1815. After World War 2, San Miguel Corp. opened its first brewery in Hong Kong.
We know that the Chinese sailed around the Philippine islands in the 9th century based on the artifacts found in Philippine waters. Unfortunately, genuine historical documents show Chinese presence in the Paracels dating from that same period. With the Chinese immigration to the Philippines over the past 1,000 years, it was inevitable that close
associations would result.
The 21st century has seen increasing business interests in China from the Philippines regardless of periods when Chinese businesses posted signs saying “No dogs or Filipinos allowed”. Maybe better realizing the future potential, SM built its first supermall in Xiamen City in Fujian province when the Chinese per capita GDP was less than $2,000 in 2001.
The SM Tianjin mall—its seventh—opened last year. The Chinese economy now produces $6,500 per year per person.
Many other Philippine companies have a strong and growing presence in China, investing through a variety of schemes. The Philippine National Bank has two branches in China operating under the Allied Commercial Bank name. Metro Bank as Metropolitan Bank (China) Ltd. has three offices.
A variety of Filipino companies have used different approaches to doing business in China. SM did not build “ghost malls” and is competing for local consumer spending. Robinsons Land Corp. is building a 1,300-unit master-planned township project in Chengdu, still seeing a future in the Chinese property sector.
While Jollibee Foods Corp. has its own brand in various countries, it chose the joint venture route with existing Chinese “fast-food” firms with some if not outstanding success. Publicly listed Agrinurture Inc. took a different approach. While it intends to raise capital to expand its own Big Chill brand operation into China, it also has a joint venture with the Japanese founder of Tully’s Coffee Asia to enter the Chinese market. Agrinurture has also taken a majority interest in a Chinese fruit trading company and is exporting sought-after Philippine fruits, including mango, banana, pineapple and papaya, to customers in China.
Philippine beverage company Zest-O Corp. joint ventured with a Chinese firm to form Huadong Zest-O Beverage Co. Ltd. as its entry into the carbonated-beverage market. Privately held Liwayway Marketing Corp. now has 16 factories in China, making its Liwayway Marketing Corp. Oishi snacks. The firm has risen to the top 5 snack-food producers in China.
With the potential now of improved, if not totally acceptable, government-to-government relations, Filipino companies are eager to tap or expand in the Chinese market. Diverse local companies from the Sterling Paper Group to power companies are currently turning toward China.
Let’s be practical and realistic. Revenue and profit opportunities will always be narrow in the Philippines and we need outside sources of both. While several local companies have expanded into Africa, that is a comparative drop in the ocean of financial promise. Filipino companies never received and will never get similar growth opportunities in the United States, Japan, Australia, Europe, or anywhere else like China offers in terms of size and economic potential.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
1 comment
No one could say or explain this situation any better. Thank you Mr. Mangun. Hope you can print and spread this information to all and sundry.