China will probably overtake Japan and the U.S. to become the Philippines’ largest export market as the Southeast Asian nation works to keep a territorial spat from disrupting trade ties, Trade Secretary Gregory Domingo said.
“We are separating the commercial relationship from the political and security relationship,” Domingo said today in an interview in Bali, Indonesia. “The sheer size of China’s market and their proximity to us makes it natural that trade flows will increase significantly in the years to come.”
Leaders from Asia-Pacific economies meeting this week are seeking to boost trade to fend off slowing growth that prompted the World Bank to cut forecasts for East Asia’s developing nations this year and next. China and the Philippines are embroiled in a territorial dispute over the ownership of fish and gas-rich waters in the South China Sea.
“We are treating everything like business as usual,” Domingo said, calling the disputes an “irritant” in the two nations’ economic relationship. Philippine President Benigno Aquino in August canceled a trip to Nanning city at China’s request.
The Philippines is considering expanding a trade agreement with Japan, studying a free trade deal with the European Union and may join the Trans-Pacific Partnership in the longer term, Domingo said.
Philippine exports rose 2.3 percent in July from a year earlier. Shipments abroad totaled $52 billion in 2012 with sales to China accounting for 12 percent of exports.
Moody’s Investors Service upgraded the Philippines to investment grade last week and assigned a positive outlook. Standard & Poor’s and Fitch Ratings earlier this year awarded it investment rankings.
Philippine expansion held above 7 percent for a fourth quarter in the three months through June, defying a regional slowdown to remain, along with China, one of Asia’s best performers.