Competition from China

The delegation that accompanied President Duterte in his state visit to China may be considered the biggest ever in a presidential foreign trip.

According to reports, more than 1,000 government officials, business executives and political personalities accompanied the President in mending frayed relations with the second biggest economy in the world.

If the value of the investment and credit line agreements entered into with Chinese companies—$24-billion—is used as benchmark, the visit was fruitful.

The next item on the agenda now is for the contracting parties to flesh out those deals with mutually beneficial terms and conditions.

For the businessmen who joined the trip, in particular the Chinese-Filipinos, the visit presented an opportunity to tap into the multibillion dollar Chinese consumer and commercial markets.

This economic arena was, until 2013 when the Aquino administration filed an arbitration case against China over its takeover of certain islands in the South China Sea, practically an open field for Chinese-Filipino businessmen.

The arbitration case, however, put a damper on commercial relations between the two countries (with the Philippines at the losing end) as exports of Philippine products and services were, through covert and overt moves by the Chinese government, either discouraged or restricted.

With Mr. Duterte spearheading the reinvigoration of erstwhile strong diplomatic ties with China, the businessmen had reason to express confidence that “happy days are here again.”

After three long years, the gate has been reopened for them to expand their reach in the country that has surpassed the United States in terms of consumer purchasing power, middle class size and number of billionaires.

Or so they thought.

The scuttlebutt in the boardrooms is the expectations may not be met and that the reverse may instead happen. Practically all the agreements entered into with the Chinese government and businessmen involve the latter coming to the country.

It’s a virtual one-way ticket: Chinese businessmen will get wider access to the Philippines and take advantage of the increase in the Filipinos’ disposable income due to improvements in the economy.

The problem is, no reciprocity arrangements of similar nature have been forged for the benefit of Philippine-based companies.

The Chinese businessmen have in their favor cheap capital (courtesy of the Chinese government), friendly power rates, and efficient infrastructure facilities that can considerably bring down their operational costs.

Even without the Duterte-initiated rapprochement, Chinese products and materials have been flooding the domestic market to the detriment of local businesses and the loss of employment of thousands of Filipinos.

To aggravate matters, corrupt Bureau of Customs personnel gladly look the other way, in consideration of “tara” or bribe money, to allow the unabated entry of underdeclared or misdeclared imports from China.

With the Duterte administration’s recently found love affair with China, expect a tsunami of Chinese products and goods into the country in the name of expanded trade and commercial relations.

A looming David versus Goliath fight between Filipino and Chinese businesses right in our country is making some Filipino businessmen, particularly in areas that Chinese-Filipino tycoons dominate, nervous.

In capital-intensive businesses, like steel production, local businessmen may find themselves at a serious disadvantage if the Chinese government decides to be a co-investor of Chinese companies in those undertakings.

At present, China is awash with money that it is only too willing to spend elsewhere to minimize the inflationary effects of that wealth on its economy.

Worse, Chinese companies have a reputation of engaging in underhanded business practices to increase their market share or otherwise drive the competition to the ground.

A tough job awaits the business strategists of Philippine companies that will soon face competition from Chinese companies.

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