Cambodia Now:
  • Sen Monorom Waterfall - Mondulkiri

    Sen Monorom Waterfall - Mondulkiri

  • Royal Palace - Phnom Penh City

    Royal Palace - Phnom Penh City

  • Angkor Cycling Tours
  • Bus Tickets Service

    Bus Tickets Service

  • Explore Cambodia with Us

Changing China economy seen benefiting Philippines

Posted Date: Wednesday, 18-Jul-2012

China is expected to make a crucial shift from an investment to a consumer-driven economy.

This means Asian countries that have low labor cost and strong logistics, including the Philippines, should benefit as global manufacturers seek new locations, a research from Citigroup said.

But China may also turn out to be a competitor, as it is likely to develop its competitiveness in high-tech manufacture and gradually end its reliance on other countries to supply intermediate goods, according to the Citi research, “GPS: Global Perspectives and Solutions,” dated July 16.

The research analyzed the potential impact on emerging markets of the rebalancing of China’s economy.

Citi’s view is that China’s investment spending as a ratio of gross domestic product is nearing its peak, and that a rebalancing of China’s economy—wherein consumer spending will play an increasingly dominant role—will be the most likely outcome in the next few years.

There is no country that currently has a better combination of low wages and good logistics than China, the research said, but in forecasting as to where else the factories may relocate, the most obvious possible beneficiary noted was Malaysia, where wages and logistics are near China’s levels.

“Indeed, most of the other beneficiaries are likely to be Asian: Thailand, India, Philippines, Vietnam and possibly Indonesia all score reasonably well here,” the research said.

Citi said that away from Asia, the country that seems to have the brightest prospects is Turkey, whose trade logistics is good and whose manufacturing wages are only twice China’s.

“All in all, this analysis helps to draw the conclusion that China’s rebalancing will not only benefit Asia more than the rest of emerging markets, but that further regional integration within Asia has a considerable tailwind behind it. For Latin America, however, the implications of a rebalanced China are more discouraging,” the research said.

Citi also pointed out that it is not just manufacturing that might expand away from China as it grows richer.

Services are likewise seen to relocate away from China and tourism was seen as one area with important implications.

The research said it appears that Asia would be the biggest winner from rising Chinese tourism expenditure, at least in the foreseeable future.

For the time being, the paper said Chinese tourism seemed likely to reinforce the argument that a more consumer-oriented China was likely to deliver more benefits to Asia than to anyone else.

The research also said the wealthier Asian economies could become victims of a ‘boomerang effect,’ as higher costs force Chinese firms to add more value to their products—including brand value—and so compete with their former suppliers.

The research said the paradox here is that Asia may have the most to lose in the short run if China’s rebalancing doesn’t follow a benign path, but it probably has the most to gain in the long run.

“In every slice of analysis that we’ve performed for this paper—to see which countries can sell consumer goods to China; to see which countries might benefit from factory relocation away from China; and to see which countries might benefit from higher Chinese expenditure on services like tourism—Asia scores highly. When one couples the prospects for future Asian integration together with the competitiveness of Asian economies that we’ve unveiled here, the case for an ‘Asian century’ becomes compelling,” the research said.

Sourced: business

Read More News: