Slowing China economy may turn out to be good for PH

As the rest of the region braces for the effects of a cooling Chinese economy, the Philippines can take heart in the fact that the slowdown being felt by the Asian giant may work to the country’s advantage.

In a report this week, Moody’s Investor Service said most countries in the region rely heavily on export revenues from China. But trade links between the Philippines and China are weaker compared with that of other Southeast Asian countries. This means the Philippines will not be affected by a slowing Chinese economy as much as other countries in the region.

Philippine exports to China “have actually diminished in terms of economic significance over the past decade,” the rating firm said in the latest of its quarterly report “Inside Asean” (Association of Southeast Asian Nations).

Moody’s, which has a positive outlook on the country’s sovereign rating, said because of reduced trade with China, the Philippines was the “most insulated” market in the region, or the least to be affected by the slowdown in the world’s second largest economy.

Trade between China and the Philippines has declined over the last 10 years, the Moody’s report said. In contrast, 12.2 percent of Asean’s exports went to China last year—up from just 7.3 percent a decade ago.

“Instead, the Philippines’ growth story has been underpinned by robust domestic demand which has, in turn, been fueled by structural reform and an upswing in the country’s credit cycle,” Moody’s said.

The rating firm said China’s slowdown may even help correct weaknesses in the Philippine economy.

“The Philippines would feel some positive spillover impact from weakening Chinese demand, as lower commodity prices would serve to keep a lid on consumer prices despite the strength in domestic consumption,” Moody’s said.

According to the rating firm, China has been trying to wean its economy off the trade-oriented and investment-driven growth seen in the past years.

Instead, Beijing has emphasized the need for its economy to rely more on domestic consumption, which is expected to temper China’s expansion.

In the past decade, the Chinese economy has been growing by an average of 10.5 percent annually.

This year, the International Monetary Fund sees China growing by 7 percent, citing potential risks from excessive credit buildup and slowing construction.