China slowdown to impact Philippines

MANILA, Philippines — The Philippine economy would be among those to be hurt most by the slowdown in China, the country’s largest trading partner, a global think tank said.

In its latest research brief, Oxford Economics said China’s growth slowdown would dampen economic activity across Asia-Pacific in various degrees, depending on trade linkages with the world’s second largest economy.

After bouncing back from the pandemic last year ahead of everyone else, China is experiencing an economic slowdown amid a power crunch and weak real estate and consumption.

This puts the Philippines, alongside Thailand, as the most affected among the largest trading partners of China in the region.

“Thailand and the Philippines are exposed to all of the indicators. In other words, exports from these countries have high connectivity with the Chinese business cycle in general,” Oxford economists Norihiro Yamaguchi and Makoto Tsuchiya said.

Oxford used five Chinese indicators, namely exports from China, manufacturing fixed asset investment, infrastructure FAI, real estate FAI and retail sales.

Its evaluation showed the Philippines and Thailand will experience significant impact across the five indicators using the Granger-causality analysis.

The dominant share in exports to China from the Philippines is made up of electronic components and other parts.

The Oxford economists noted that if an economy exports intermediate goods to China, then a causality is likely and is particularly true in the case of the Philippines, Japan, Malaysia and Thailand.

Intermediate goods are products used to produce a final good or finished product. China accounts for 16 percent of the Philippines’ total exports, nearly 60 percent of which are electronic products.

Nonetheless, Yamaguchi and Tsuchiya noted that the Philippines, Japan, Malaysia and Thailand could be supported by China’s relatively healthy export and manufacturing FAIs, “although Thailand and the Philippines’ sensitivity to overall Chinese indicators adds downside risks to the outlook.”

“No Asia-Pacific economy can escape from the impact of softening in China, given the importance of the Chinese economy either, and the negative impact could be amplified by the regional supply-chain structure,” they said.