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Interesting China pivot

WHILE writing this column, President Rodrigo Duterte is in Japan for a state visit as part of his current diplomatic blitz. His dramatic shift to China, highlighted by his recent visit to Beijing, however, remains an interesting subject because it represents a “game-changing pivot in trade and investments.”

As correctly pointed out by Albay Rep. Joey Salceda, a noted economist, President Duterte’s China visit was “not about aid, but trade,” which targeted US$18 billion in export deals, US$6 billion in Foreign Direct Investments (FDI), and US$10 billion in Official Development Assistance (ODA) loans for railways, aside from some three million Chinese tourists, and modern technology for renewable energy. Subsequent reports suggested the targets have substantially been met.

Japan is currently our largest trading partner involving some US$21 billion, followed by ASEAN with US$18 billion.

China with US$17 billion and the US with US$16. Contrary to common perceptions, the US came fourth only despite our long standing alliance with it in various concerns.

China’s case is doubly interesting because if informal trading is considered, it emerges as the Philippine’s largest trading partner, with about US$32 billion, a massive trade relations that do not benefit from protection nor promotion because it “concerns mostly undeclared and under-valued commodities, resulting to trade imbalance of $5 billion annually ($11 billion import and $6 billion export) that should be rectified.

Salceda said a rectified stronger bilateral trade relations with China could yield an additional P72 billion in import VAT revenue, and the Philippines can further benefit from it since trade restructuring would require Chinese investments in our country since the Philippines currently has a US$6-billion resident investments in China.

China’s strong capability and advanced technology for infrastructure particularly in railways development and renewable energy are also of special interest to the Philippines, which could be tapped through the ODA scheme.

Likewise, China is a vast 500-million strong tourist market, only 432,000 of which visited the Philippines in 2015.

Salceda recalled that when as Albay governor he opened the Xiamen-Albay direct link, some 30,000 Chinese tourists with so much purchasing power visited Albay monthly.

Duterte’s China pivot will also give the Philippines easy access to the multi-billion dollar “Belt and Road” plan that will link Asia with Europe and Africa, and the new BRICS (Brazil, Russia, India, China and South Africa) bloc.
(Johnny Dayang)