Made in China

The President’s trip to China is mainly for discussions around trade issues. Such trade between the Philippines and China goes back more than a thousand years, to the precolonial period.  The Chinese have always been crafty traders, and it’s time we looked back in history to pick out what we can learn from that trade.

The Spanish chronicler Francisco Combes, writing in the 16th century, describes a rather persistent datu who kept asking if the Spanish friars were interested in trading gold, civet or beeswax. He was wondering if the Spaniards were going to be like the Chinese.

Butuan was already a bustling trading hub, with the Chinese coming in to buy mainly natural products. The gold was legendary, as we know today from the many artifacts in museums and in private collections.  The civet cat was a curious commodity that the Chinese had an appetite for; I was reminded of this prehistoric trade when in Hong Kong, a few years ago, the SARS epidemic was traced to wild civet cats being eaten.  Today these wild cats are used for a different purpose: left in the wild, the cats “harvest” coffee beans by eating them, and subject the beans to special processing by their gastric enzymes so that when the beans are passed out, they make up an exotic coffee blend, costing P600 per 100 grams, if I remember right.

The demand for beeswax always puzzled me, until I read an article describing the method for making bronze objects, a method still used by the T’boli of Mindanao to make all kinds of figurines.  (My favorite one is a midwife delivering a child.)  The beeswax, together with clay, is used to make a mold, the processing resulting in the wax being discarded, thus the name “lost wax method.”  The Chinese went beyond figurines though. They used beeswax for casting larger bronze implements.

While the Chinese went for our natural products, we were importing shiploads of ceramics, many of which survive to this day in museums and private collections.  Besides the more familiar plates and bowls, there were all kinds of ceramic abubut (trinkets).  While we don’t have figures on the value of the traded products, it was probably very large, reflecting an early appetite among our ancestors for “Made in China” products.  Later, as today, cheaper “Made in Vietnam” versions appeared.   Note my use of quotation marks because, of course, the ceramic wares didn’t actually say where they were made, but people knew, and there probably were connoisseurs who could differentiate the quality of the ceramics.

Exports, imports

In many ways, the pattern of precolonial trade still exists today.  In terms of imports, China is now our second leading partner, after the United States. This is based on trading that goes through official channels; I suspect that if we include the figures from massive smuggling, China might be the No. 1 source of our imports.

What is mainly visible to the average Filipino are the many household items, from kitchen gadgets and toys to electronic appliances.  But the government’s figures identify our leading imports from China as electronics, office machine parts, liquefied petroleum gas (LPG) and, well, ceramics.

In terms of our exports, China is now our third leading partner, after the US and Japan.  We send out electronics, coal, copper cathodes and ore, nickel ore and concentrates.

The balance of trade has actually been almost equal, meaning exports and imports are about equal if we look at totals over the last five years or so. But remember the import figures may not be accurate, given the smuggling that occurs, especially of retail goods that you see not just in Divisoria but in every bazaar, every tiangge, every market from Aparri to Jolo.

Civet cats and beeswax aren’t our main exports, but natural products continue to be important, mainly in terms of minerals. The Chinese have gone into mining in the Philippines, in a sense restoring centuries-old trading ties with Mindanao.

To understand the Chinese demand for our minerals, we have to look at how China is developing. As I mentioned earlier, we think of Chinese products mainly as cheap household stuff, but the reality is that China has moved into industrial production. Besides office equipment and electronics, we are now importing more heavy-duty equipment, and vehicles (from electric bikes to the ubiquitous motorcycles and, increasingly, small cars).  Expect Chinese products to become even more sophisticated in the future.

Consumer-driven

Time and time again I have read articles claiming that China’s success comes with its huge population, i.e., more people means more consumers and therefore a bustling economy.  So, anti-family planning economists argue, we shouldn’t worry because the more Filipinos there are, the more consumers and the better it will be for our malls and, ultimately, our economy.

The reality is that the Chinese government decided in the late 1970s that their large population was becoming a liability, and launched a one-child-per family policy.  It was draconian and has led to many abuses, but population growth slowed down, allowing China to catch up in terms of economic and social development.

Their economic development is indeed consumer-driven, but with a view of producing more “value-added” products, moving from cheap toys and gadgets to more expensive electronic products. They do tap into the local market but have also started getting a larger share of the global market, putting up stiff competition for the Americans, the Japanese and even newcomer South Korea.

How do we fit in all this? The Philippine government has been trying to get the Chinese to increase their imports from the Philippines but it looks like their main interest is in our raw materials (read: minerals).

When I was doing health research in Mindanao about two years ago, I met many local government officials who had mixed feelings, appreciating the money that was coming in but wondering what the environmental and social costs would be.

Meanwhile, the Chinese will continue to churn out more products for us to buy.  Their exports have already dislodged many local manufacturing enterprises,  ironically a sector dominated by Chinese-Filipinos. It is not surprising that Chinese-Filipino tycoons don’t seem interested anymore in local manufacturing and have started putting up SM Malls and Jollibee restaurants in China.

The Chinese (as well as the Americans, Japanese and other industrial exporting countries) are noticing the potentials in the Philippines. Yes, they have noticed our large population but that in itself isn’t what attracts them. It’s the overseas remittances, and the way the money is used.

The Philippine Retail Report, compiled by professional analysts, is already forecasting that we will overtake China as the fastest-growing retail economy. Among the most lucrative commodities will be electronic products and interestingly over-the-counter pharmaceuticals. The report notes that the retail sector benefits because “the bulk of  (overseas workers’) remittances goes to consumption, rather than investments.”

Made in China, good for China. But is this good for the Philippines in the long term?

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