AS the novel coronavirus outbreak cripples business operations in China, local exporters are being advised to ship to alternative markets for now to make up for the projected purchase slowdown from the country’s largest trading partner.
Philippine Exporters Confederation Inc. President Sergio R. Ortiz-Luis Jr. warned that the spread of the coronavirus in China is sure to pull down the country’s trade figures, especially exports. He said the temporary shutdown of factories there will reduce purchase orders, mostly electronic parts, from manufacturers here.
“Our trade [with China] is affected, even with Hong Kong,” Ortiz-Luis told the BusinessMirror. “Our electronics is affected because we import from and export to them. Add to the injury the countries connected to the electronics supply chain of China.”
Exports to China from January to November of last year improved 6.28 percent to $8.79 billion, from $8.27 billion during the same period in 2018, according to Philippine Statistics Authority (PSA) data. More than half—over 56 percent—of this are shipments of electronic parts, which also grew above 6 percent to $4.95 billion, from $4.66 billion.
Although it has yet to be identified exactly which exporters will be affected, Ortiz-Luis said the electronics industry will bear most of the brunt in China’s decision to temporarily close many of its shops in a measure to prevent the further spread of the virus.
Last week technology giants Google, Amazon and Microsoft took action to protect their labor force from possible infection. For one, Google, which has four offices in the mainland, directed its workers in China, and Hong Kong, to leave the country immediately and to work from home for a minimum of two weeks.
On the other hand, Amazon restricted its staff from traveling to and from China until the virus is contained, encouraging its employees as well to follow the health and safety guidelines issued by international health agencies.
Further, Toyota announced it is keeping its China plants closed until February 9, in adherence to the transport lockdowns placed by authorities. General Motors followed lead by extending its Lunar New Year holiday, maintaining factories shut also until February 9.
Wuhan hosts ecozone
Wuhan, the capital of the Hubei province and the epicenter of the coronavirus, is home to the Wuhan Economic and Technological Development Zone, an economic zone where carmakers, including China’s own Dongfeng Motor, is located.
“I have no knowledge as of now who among our firms will be affected by the shutdowns, but it will certainly affect our exports. In two weeks time, we need to see if China can arrest the virus spread,” Ortiz-Luis said.
The industry leader advised exporters to seek alternative markets for now to fill in the gap left by China, telling them to double their shipments to traditional partners outside of the Southeast Asian region—also troubled by the viral infection—such as the Middle East.
However, the Department of Trade and Industry denied that there is a purchase slowdown from China. DTI’s Export Marketing Bureau Director Senen M. Perlada told the BusinessMirror it’s business as usual for the country’s usual buyers in China, as some of them start to transfer production to nearby countries to keep operations running.
For instance, Ayala-owned Integrated Micro-Electronics Inc. is ready to move its supply chain from China to the Philippines in case the situation worsens there, its CEO Arthur M. Tan bared in a television interview last week.
“No projection of purchase slowdown from China thus far,” Perlada said. “As to factories being closed there, those owned by foreign companies have reportedly started diversion of sourcing, and even relocation of their manufacturing for certain critical parts and components to nearby countries, including the Philippines.”
There are at least 14,549 confirmed cases of and 305 recorded deaths—nearly all of which are in China and one in the Philippines—from the novel coronavirus as of Sunday morning.
The respiratory illness first detected in Wuhan has spread throughout many parts of the world, including in Southeast Asia, where there are now 19 cases in Thailand, 18 in Singapore, eight in Malaysia, six in Vietnam and one in Cambodia. The Philippines last week reported its first case of coronavirus in a Chinese woman who arrived here on January 21 from Wuhan.
In response, President Duterte first issued a ban on the entry of foreigners from China’s Hubei province before expanding its coverage to the whole of the mainland, Hong Kong and Macau.
The Philippines is enjoying warmer relations with China under Duterte, resulting in the influx of mainland tourists here and the rise of online gambling services. In 2018, merchandise trade with Beijing jumped 21 percent to $30.83 billion from $25.48 billion in 2017, making it the country’s largest trading partner.