The Philippines, a trade war profiteer?

How the US-China trade war could trigger an economic upswing for the Philippines and cushion the devastating effect of Covid-19 on the country.

By Jeremiah Capacillo

Is the phrase “made in China” soon to be a relic of the past? Not quite, as it appears that the country’s global manufacturing industry is still going strong. That said, China’s economy is bound to take a big hit this year as several US companies consider relocating their operations from the country elsewhere as the US-China trade war continues to persist.

Relocate where to, exactly? Surprisingly, the Philippines is among those countries. The developing nation isn’t exactly top of mind as a hotbed for global businesses, but US investors are increasingly taking note of its potential. In fact, shipping giant FedEx is currently building a regional cargo terminal in Clark Air Base as it migrates its operations from Guangzhou, China.

Amid reports that the country’s supposedly thriving diplomatic relations with China have soured, the Philippine government has drastically improved its business climate to attract more foreign investors. According to the World Bank’s latest Doing Business Report, when it comes to the ease of doing business, the country jumped 29 notches to 95th from the previous 124th position in the respective ranking.

And it’s not just the Philippine manufacturing industry expecting a business boost. As more US companies make the jump to halt their China operations, they find a promising new frontier in the Asia-Pacific region.

An economic kerfuffle

The US economic vendetta against China began in 2018, when US President Donald Trump enacted high tariffs on Chinese exports to protest against “unfair trading practices” and alleged intellectual property theft. In response, the Chinese government retaliated with equally high tariffs on US products.

So far, the tariff hikes have been astronomical. The US has imposed tariffs on more than $360 billion worth of Chinese goods, and China has retaliated with tariffs on more than $110 billion worth of US products. This stand-off has proven catastrophic for the countries’ bilateral trade, with export proceeds of effected companies eroding as thousands of them struggle to keep up with the tariffs and consumers grappling with higher prices for imported goods.

The pandemic has only continued to fuel the mass migration of US companies from China. Unfortunately located at the epicenter of the Covid-19 outbreak, many China-based US companies suffered drastic economic losses as their factories were forced to close for months under strict lockdown policies.

Banking on Philippine business

Enter: The Philippines. Thanks to its strategic location at the eastern edge of Southeast Asia, the country is rapidly attracting new US-based stakeholders. A study by JP Morgan Chase found that eight per cent of US companies moving out of China are considering the Philippines as a potential new homestead.

Besides FedEx, the tech accessories company Ever Win International Corp. moved its operations from China to the Philippines in 2019. Furthermore, US-owned companies such as Cargill and Proctor & Gamble have additionally invested millions of dollars to expand their existing Philippine operations.

As more companies are moving out of China, the Philippine government continues to actively woo US businesses to relocate to local shores. In fact, out of the 159 business leads the US Department of Trade and Industry is currently pursuing, 64 are formerly China-based US companies looking to relocate within the Asia-Pacific region.

Too much to handle?

Still, some local experts remain apprehensive about the country’s capacity to accommodate the increasing US demand with its lack of infrastructure and patchy legal framework with regards to foreign-owned businesses.

Besides the US, Japanese companies are also looking to move their operations out of China to elsewhere in Southeast Asia. However, they usually consider countries like Vietnam and Thailand owing to the latter’s more favourable business policies and low operating costs.

In response, the Philippines is working hard to make itself more attractive for foreign direct investment as the country faces growing competition by its regional peers. With the new Ease of Doing Business Act cracking down on bureaucratic red tape, foreign investors can now enjoy speedier and more efficient government services. Additionally, senator Imee Marcos is pushing for deeper cuts on corporate income tax from the current 30-per cent rate to compete with the lower 20-per cent rate in Vietnam and Thailand. Recognising the promising impact of the US-China trade war on the Philippines, Marcos called the influx of US-owned companies “a silver lining to the dark cloud of the coronavirus disease.”



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How the US-China trade war could trigger an economic upswing for the Philippines and cushion the devastating effect of Covid-19 on the country. By Jeremiah Capacillo Is the phrase “made in China” soon to be a relic of the past? Not quite, as it appears that the country’s global manufacturing industry is still going strong. That said, China’s economy is bound to take a big hit this year as several US companies consider relocating their operations from the country elsewhere as the US-China trade war continues to persist. Relocate where to, exactly? Surprisingly, the Philippines is among those countries. The...

How the US-China trade war could trigger an economic upswing for the Philippines and cushion the devastating effect of Covid-19 on the country.

By Jeremiah Capacillo

Is the phrase “made in China” soon to be a relic of the past? Not quite, as it appears that the country’s global manufacturing industry is still going strong. That said, China’s economy is bound to take a big hit this year as several US companies consider relocating their operations from the country elsewhere as the US-China trade war continues to persist.

Relocate where to, exactly? Surprisingly, the Philippines is among those countries. The developing nation isn’t exactly top of mind as a hotbed for global businesses, but US investors are increasingly taking note of its potential. In fact, shipping giant FedEx is currently building a regional cargo terminal in Clark Air Base as it migrates its operations from Guangzhou, China.

Amid reports that the country’s supposedly thriving diplomatic relations with China have soured, the Philippine government has drastically improved its business climate to attract more foreign investors. According to the World Bank’s latest Doing Business Report, when it comes to the ease of doing business, the country jumped 29 notches to 95th from the previous 124th position in the respective ranking.

And it’s not just the Philippine manufacturing industry expecting a business boost. As more US companies make the jump to halt their China operations, they find a promising new frontier in the Asia-Pacific region.

An economic kerfuffle

The US economic vendetta against China began in 2018, when US President Donald Trump enacted high tariffs on Chinese exports to protest against “unfair trading practices” and alleged intellectual property theft. In response, the Chinese government retaliated with equally high tariffs on US products.

So far, the tariff hikes have been astronomical. The US has imposed tariffs on more than $360 billion worth of Chinese goods, and China has retaliated with tariffs on more than $110 billion worth of US products. This stand-off has proven catastrophic for the countries’ bilateral trade, with export proceeds of effected companies eroding as thousands of them struggle to keep up with the tariffs and consumers grappling with higher prices for imported goods.

The pandemic has only continued to fuel the mass migration of US companies from China. Unfortunately located at the epicenter of the Covid-19 outbreak, many China-based US companies suffered drastic economic losses as their factories were forced to close for months under strict lockdown policies.

Banking on Philippine business

Enter: The Philippines. Thanks to its strategic location at the eastern edge of Southeast Asia, the country is rapidly attracting new US-based stakeholders. A study by JP Morgan Chase found that eight per cent of US companies moving out of China are considering the Philippines as a potential new homestead.

Besides FedEx, the tech accessories company Ever Win International Corp. moved its operations from China to the Philippines in 2019. Furthermore, US-owned companies such as Cargill and Proctor & Gamble have additionally invested millions of dollars to expand their existing Philippine operations.

As more companies are moving out of China, the Philippine government continues to actively woo US businesses to relocate to local shores. In fact, out of the 159 business leads the US Department of Trade and Industry is currently pursuing, 64 are formerly China-based US companies looking to relocate within the Asia-Pacific region.

Too much to handle?

Still, some local experts remain apprehensive about the country’s capacity to accommodate the increasing US demand with its lack of infrastructure and patchy legal framework with regards to foreign-owned businesses.

Besides the US, Japanese companies are also looking to move their operations out of China to elsewhere in Southeast Asia. However, they usually consider countries like Vietnam and Thailand owing to the latter’s more favourable business policies and low operating costs.

In response, the Philippines is working hard to make itself more attractive for foreign direct investment as the country faces growing competition by its regional peers. With the new Ease of Doing Business Act cracking down on bureaucratic red tape, foreign investors can now enjoy speedier and more efficient government services. Additionally, senator Imee Marcos is pushing for deeper cuts on corporate income tax from the current 30-per cent rate to compete with the lower 20-per cent rate in Vietnam and Thailand. Recognising the promising impact of the US-China trade war on the Philippines, Marcos called the influx of US-owned companies “a silver lining to the dark cloud of the coronavirus disease.”



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

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