Page last updated at 05:59 Asia/Manila, Monday, 09 May 2016 PH
There is too much anxiety among business people about the slowdown in the Chinese economy. In fact, a recent trip of mine to General Santos City and the surrounding areas of Southern Mindanao convinced me that the ongoing slowdown of the Gross Domestic Product (GDP) of China from the high of 8 to 10% in the first decade of the Third Millennium to 6 to 7% (some even say 4 to 5%) can be converted into an opportunity by the Philippines if the next Administration will give the highest priority to increasing agricultural productivity in the growing of high-value crops like fruits, vegetables, fisheries and livestock. Because the ongoing slowdown in China is due to the end of double digit growth in investments and exports, the Chinese Government has no alternative but to turn to consumption as the new engine of growth. That means at least 500 million middle-income Chinese consumers will consume bigger volumes of these high-value food products, such as bananas, pineapple, papaya, tomatoes, etc.
Already, as the China Daily Asia Weekly reported (February 16 to March 3, 2016), Minister of Commerce Gao Hucheng announced that consumption is growing at a rapid pace in 2016. Consumption expanded 10.7 percent year-on-year and contributed 66.4 percent to China’s economic growth in 2015, compared with 51 percent in 2014 (it has been traditionally below 50 percent during the heyday of infrastructure spending and FDI inflows). There is a lot of talk about “supply side reforms” which refer to restraining the build up of capacity and the encouragement of less savings and more consumption. This emphasis on consumption seems to be finally working as a result of continued rapid growth in people’s incomes (at least among the 500 million people who belong to the middle class), improved social security and better supplies of goods.
It must be recalled that over the last thirty years since Deng Xiao Peng first introduced market reforms in 1978, China has accomplished an admirable feat of liberating some 400 to 500 million Chinese from the abject poverty that resulted from the Marxist policies during the time of Mao Zedung, especially as they were applied to agriculture. Those who sell consumer products from all over the world, especially high-value food items, should tap this largest consumer market in the world. It is well known that there are now more billionaires and millionaires in China than in the U.S. that has a total population of only 320 million, more than 12 per cent of whom still live below the poverty line. Investors from different parts of the world should no longer consider China as an export machine as it has been in the last thirty years. It should be considered for its huge consumer market which is bound to grow even more as the remaining 800 million poor Chinese are helped to improve their incomes.
One of the reasons why I have maintained that the Chinese Government will not provoke a war in the South China Seas, despite their stubborn insistence on building structures in some of the islands there, is the imperative of addressing the poverty in which some 800 million of their citizens still find themselves. China has to devote a great deal of resources and energy to complete its poverty eradication campaign. It cannot afford to divert too much resources to the militarization that will be needed if it is to engage in a Third World War against powers such as the United States, Japan and South Korea that will never permit Chinese control over the South China Seas. The urgency of uplifting the 800 million still-poor Chinese is intensified by the growing contrast between the Chinese rich and poor. Those left behind can see the way their richer neighbors are flaunting their wealth through conspicuous consumption. This glaring contrast in standards of living could lead to a social volcano waiting to erupt unless economic progress is more quickly brought to the inner provinces instead of being concentrated on the coastal areas.
Precisely because we can expect China to increasingly expand its middle class in the next ten to twenty years, the Philippines (together with resource-rich ASEAN countries like Thailand, Indonesia, Malaysia, and Vietnam) should continue their efforts to modernize their agricultural sector so that they will have a big surplus to export to the China whose demand for fruits, vegetables, seafood, and livestock will be insatiable. It is already axiomatic that the greatest challenge to the global economy in the next decades will no longer be the supply of energy with which the world is already awash. The most serious shortages will be in food and water (since water is needed to produce food). This indubitable fact makes it even more necessary that the next Administration and all successive ones should assign the highest priority to increasing agricultural productivity, especially in the high-value crops.
For their part, Filipino investors should already target as early as possible the food market of China. The vanguards are Liwayway Manufacturing Corporation, producer of the number one snack food in China (Oishi brand) that has more than a dozen factories all over China; and Jollibee Foods Corporation that recently bought out its partner in Happy Bee Foods Processing Pte. Ltd, which supplies the requirements of JFC’s Younghe King and other business institutions. Younghe King plans to expand its store network that already comprises 321 stores. Except for a temporary slowdown resulting from the South China Sea conflict, the banana producers of Mindanao have been among the largest suppliers of the product to Chinese consumers, who like the Japanese, have become “addicted” to Philippine bananas. If the next Administration improves our ability to negotiate peacefully with China, many other high-value products can be exported to China: pineapples (where Palawan can be another Mindanao), coffee, cacao, palm oil and coconut products. We should not forget the old housewife’s adage that the best way to a man’s heart is through his stomach. For comments, my email address is email@example.com.