Amid tension, PH may benefit from China growth

China’s aspired transformation to a more consumer-driven market led by its emerging middle class could drive more tourists to Southeast Asian countries like the Philippines, despite geopolitical tensions between the region and Asia’s largest economy.

Global debt watcher Fitch Ratings said export-oriented countries like Malaysia and Indonesia, which have benefited from China’s investment-driven growth in the past decade, may feel a pinch as the mainland’s growth slows down.

“The future pace of China’s economic development is also likely to continue to pose a number of challenges for emerging Asia,” Fitch said in a report Friday.

Fitch noted that a number of Southeast Asian economies have been large beneficiaries of China’s economic transformation, particularly since the early 2000s.

China’s economy has begun to exhibit stronger signs of leveling off, which could ultimately have large implications for many of its neighbors, Fitch said.  The rating firm expects China to grow by 7 percent this year, slower than the double-digit growth rates it enjoyed in past years.

Beijing has also announced plans to refocus the mainland’s economic growth away from its current investment-driven model to a more equitable expansion that emphasizes the welfare of its middle class.

“Countries which are capable providing services such as tourism (e.g. Thailand, Sri Lanka, and the Philippines)… could become large beneficiaries of China’s rising middle-class,” the Fitch report read. The rating firm’s optimism comes despite geopolitical tensions between Southeast Asian nations.

Data from the Department of Tourism showed international tourists to the Philippines rose by 3.51 million in January to September of 2013, up 11.4 percent year-on-year. This represented 63.80 percent of the targeted 5.5 million visitors for 2013.

Chinese tourists were the fourth-largest portion of the Philippine tourism market. Data showed that 327,054 tourists from China visited the Philippines in in the nine-month period, growing 66.08 percent year-on-year.

The growth in tourists from China was the fastest expansion among the top markets for tourists to the Philippines.

Overall, Fitch said it expects the “emerging Asia,” which includes China, India, Mongolia, Malaysia, the Philippines, Sri Lanka, Thailand, and Vietnam, to remain one of the fastest-growing regions in the world, despite the slowing down of the US Federal Reserve’s monetary stimulus.

The strengthening of sovereign credit fundamentals since the Asian crisis of 1998 should broadly see the region navigate these challenges without systemic stress,” Fitch said. The rating firm sees emerging Asia growing by 6.5 percent this year. The Philippine economy, meanwhile, is expected to grow by 5.5 percent this year from a likely 7-percent expansion in 2013.