The Philippines, which suffers huge trade deficit against China, has the potential to expand exports by an additional $14.1 billion in the next few years from the current $11.55 billion level as it courts Chinese manufacturers, particularly in steel, green metals, electric vehicles, agriculture and renewable energy, to invest in the country to improve bilateral trade, the Department of Trade and Industry (DTI) said.
Trade and Industry Secretary Alfredo E. Pascual said this as he cited huge investments and trade potential to emerge from the visit of President Marcos to China on Jan. 3-5.
Given the size of the Chinese market and the supply capabilities of the Philippines, Pascual said the latter has an opportunity to further expand exports to China by an additional $14.1 billion in the next few years, based on the Export Potential Assessment (EPA) undertaken by the International Trade Centre (ITC). This means more than double of the Philippines exports to China from the $11.55 billion level in 2021.
China is the Philippines’ top trade partner in 2021 with total trade valued at $38.35 billion. China is also Philippines second largest export market ($11.55 billion) and a leading import source ($ 26.8 billion).
“With current trade figures, we also hope to achieve a more balanced level of trade through, among others, further market access to agricultural commodities,” Pascual said.
Pascual also emphasized that the President's visit to China is a “recognition that it is an important trading and investment partner of our country. The visit will pave the way for further strengthening our trade and investment relations, particularly as we work to recover from the pandemic and position the Philippines as a regional hub for sustainable and innovative manufacturing and services industries.”
The President will be accompanied by a business delegation comprised of business executives from Philippine companies with existing and/or prospective business partnerships with Chinese enterprises. Such partnerships include investments and exports.
The DTI has organized a series of roundtable meetings for the President during the state Visit with major Chinese companies with existing and planned investments in the Philippines in the key sectors of complementation with China, specifically agribusiness, renewable energy, steel making, nickel ore processing and battery production, and electric vehicle (EV) manufacturing. Chinese importers of tropical fruits from the Philippines will also participate in the meetings.
“The President's visit to China also aims to build on our export gains and further strengthen relations with key partners in China to help the Philippines realize this additional export potential,” he said.
The sectors with the most considerable export potential to China include, among others, electronic equipment, electrical machinery, metals, optical products, watches, and medical instruments, fruits, motor vehicle parts, processed or preserved food products, and fish and shellfish.
The country’s eventual participation in the Regional Comprehensive Economic Partnership (RCEP), which means further tariff liberalization with wider cumulation for raw materials and trade facilitation, is also foreseen to make preferential market access easier for Philippine exporters catering to RCEP member states, particularly China.
Philippine exports to RCEP economies account for roughly half of our total exports. Based on the same EPA undertaken by ITC, the Philippines has an unrealized export potential to RCEP economies valued at $27.8 billion. “Enhanced market access to these economies thru RCEP will help Philippine exporters unlock these export potential,” he said.
Also, Pascual said, improved market access for certain Philippine products is secured in RCEP for the China market, such as preserved pineapples, pineapple juice, coconut juice, ignition wiring sets, and flexographic plates.
RCEP will support the Philippines' goal of seeking a more robust and beneficial partnership with China. “The long history of business relations between our two countries, the cooperation in the Belt & Road, and now RCEP will facilitate the further growth and deepening our bilateral business relations,” he added.
In addition, the Philippines has attractive proposition for business based on many vital factors. These include the country’s large market of 107 million consumers and a resilient and growing economy; the availability of skilled, young people that are a strategic resource for growing global businesses; and the Philippines' strategic and preferential access to other markets like the US and EU.
“As Chinese companies pursue opportunities in RCEP, those looking to diversify their business locations to sustain and enhance regional competitiveness can consider the Philippines a complementary location. We can also be an alternative hub for their production and service facilities,” he added.
With RCEP participating countries also making significant commitments under the services trade, the DTI also sees this as another area for increased bilateral collaboration.
As Chinese companies pursue "going out" strategies, Pascual said “We can partner while providing support through Philippine talent as a strategic resource.”
In particular, technological, soft, and people skills will be critical in the services and digital industries. “With this in mind, our country has an excellent track record in supporting the global operations of companies worldwide. Our workforce's strong customer service orientation also makes the Philippines an ideal location for services for getting in touch with customers globally,” he concluded.