Economic retaliation by China is unlikely, according to analyst

July 18, 2024

Despite the ongoing geopolitical tension between the Philippines and China, economists believe that China will not take action to curtail trade activities with the Philippines as China remains the country’s top trading partner.

“It’s certainly a risk that will linger, but I don’t see anything yet in the data to suggest that China is intentionally curtailing trade with the Philippines. I don’t personally think they will go that far, as it would be somewhat self- defeating, with the Chinese economy still not in good shape,” Miguel Chanco, economist at Pantheon Macroeconomics, said in an e-mail.

China remains the Philippines’ top trading partner. Bilateral trade amounted to $3.58 billion in May, of which it registered a trade deficit of $1.89 billion, data from the Philippine Statistics Authority showed. The trade balance showed that the Philippines is importing more than it earns from export sales in China.

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In the first five months, the Philippines imported $12.99 billion worth of Chinese goods, up by 10.9 percent from the same period last year. This makes China the top importer in the country.

On the other hand, China placed as the fourth-top destination of Philippine- made goods in May with a total export of $847.12 million, down by 24.8 sent from $1.13 billion last year. In January-to-May period, total sales fell by 21.3 percent to $3.73 billion.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, shares the same sentiment, noting that China is likely to protect its generational economic gains and boost its economic growth.

China is very much aware that the costs are higher if they resort to any form of economic retaliation to any country for that matter,” Asuncion said.