America Vs. China: Which Superpower Will Contribute More To The Philippine Economy?

4 min read By eCompareMo on September 27, 2016

President Rodrigo Duterte has just made another statement that can herald a shift in our economic and diplomatic alliances.

In a one-on-one conversation with Russian Prime Minister Dmitry Medvedev, the President said that he’s “crossing the Rubicon” with the United States and revealed he is asking Russia to become one of the main trade and commerce allies in the next few years.

In addition, President Duterte also asked the same thing to China’s Xi Jinping, which further solidifies the government’s stance to loosen ties with the United States.

Ever since the end of World War II, the Us has been the Philippines’ major ally, especially in trade and commerce. However, the current administration seems to have a different plan for the country, and it seems like Duterte is steering the Filipinos away from the US and toward its staunchest rivals.

Is the Philippines better off with having stronger ties with China? Or is the US still our best shot in terms of international partners for change? Let’s see what are the things at stake with the current investments these two countries have in the Philippines.

In the blue corner: America

Despite the shaky relationship between the US and the Philippines ever since Duterte assumed presidency, the bilateral relations between the two countries has always been a strong one, with the occupation of the US in the earlier part of the 20th century.

Last year alone, the US government recorded a total of $7.90 billion in total exports and $10.23 billion in total imports in the Philippines.

ABS-CBN News reports that the main products exported by the Philippines include “components and semiconductor devices, garments, coconut oil, electronic equipment and parts, electronic data processing, sugar, processed food and beverages, and machinery, among others.”

Despite the restrictive terms of foreign ownership in the country, numerous countries in the US still choose the Philippines as a hub for their investments, with the inward flow of foreign direct investment amounting to $1.3 billion having a total market share of 20% in 2013 as per Santander Trade’s data.

Meanwhile, the surge of IT-BPO firms in the Philippines has been cornered by the US. According to the Bangko Sentral ng Pilipinas, the US dominates the sector at 72.6% of the total market share in the Philippines.

Another sector that attracts a huge chunk of American money in the Philippines is the tourism industry, which has attracted a total of spending in July alone of P21.18 billion in total visitor receipts from all tourists.

According to the statistics by the Department of Tourism, the Americans are the second top spenders in the Philippines with an accumulated spending of around P3.09 billion.

Retirement is also another thing that draws in Americans in the country, with a rating of 76.3 out of 100 in International Living’s Best Places to Retire in 2015.

In the red corner: China

Our relationship with China may have been tumultuous over the past few years due to the Asian superpower’s encroachment of our territories in the West Philippine Sea.

Data from the Department of Foreign Affairs (DFA) shows that the bilateral trade between two countries alone has reached $10.53 billion in 2010. Main products exported to our Asian neighbor include electrical products, copper cathodes, nickel ores, coal, and copper ores.

The rising demand for China’s manufacturing power has led to bigger demands of raw materials from countries such as the Philippines.

While it is expected that bigger countries are the ones who should be investing a developing nation like the Philippines, the inverse is actually true.

The Philippine government has found out that the amount invested by Filipino tycoons in mainland China has reached $2.78 billion, with the likes of Henry Sy and John Gokongwei having stakes in the said Asian giant.

Meanwhile, Chinese investors have only shelled out a total of $125.41 million, which is only around 4% of what the Philippines has invested in China.

With more and more Chinese people enjoying luxury, including travel overseas, the country has also witnesses a huge influx of Chinese tourists in the country.

A total 422,801 Chinese tourists spent around P1.10 billion in July alone, being the fifth highest spending nationality in our tourism sector.

The verdict

ABS-CBN News reports that we may lose around $1.3 billion in FDI when we further loosen our ties with the United States—and these are only the figures in FDI alone.

With more strained relations with the western superpower, we’re also looking at stricter visa applications, which may spell trouble for Filipinos who seeking greener pastures in the US—this is even without considering the fact that Republican presidential candidate Donald Trump may win.

Currently, there are four million Filipinos in the US responsible for one-third of the total remittance pipeline to the country.

In addition, a Trump presidency may destabilize the IT-BPO industry with his plan repatriate jobs back in America. The only way to get out of this safely, whoever wins, is to maintain good diplomatic and economic ties with the US.

As for a potential stronger partnership with China and, by extension, Russia, the Duterte administration has yet to announce anything that will make the country benefit from this partnership.

With or without stronger ties with both Eastern countries, things, like the fiasco in the West Philippine Sea, will remain unsolved, with China being bullish about its nine-dash line claim.

Will a partnership with China become more economically viable? We have less than five years to know.