NextGen Day

On October 18, 2021, the chair of the House Ways and Means Committee stated that the country’s economic managers should prepare a contingency plan to insulate the Philippines from spillover effects as China’s economic growth slowed to 4.9 percent in the third quarter amid the debt crisis surrounding property giant Evergrande.

Rep. Joey Salceda of Albay suggested preparing a “low-hanging package” that includes fast-tracking infrastructure next year, increasing food production, a proactive rollback of policy rate reductions early next year, and continued spending on the emergency employment fund to assist displaced workers during the pandemic.

According to Salceda, the country’s experience with global systemic threats has shown that “the sooner it prepares, the better it performs.”

“There are indications that the Evergrande issue is systemic.” In China, new buildings declined for the sixth month in a row in September, the country’s longest streak of monthly decreases since 2015. Another real estate firm has also defaulted on its obligations,” he added in a statement.

Salceda was alluding to a liquidity problem at China Evergrande Group, which has liabilities totaling more than USD300 billion. Global markets have been shaken by the news.

He also said that Fantasia Holdings, a South China-based luxury real estate developer, failed to make a $206 million US dollar bond payment two weeks ago.

“So, even if the Chinese economic authorities are attempting to calm market concerns, I would be on high alert, particularly given that many of our major companies have exposure in the Chinese real estate market,” Salceda added.

According to him, China’s economic situation may be a “mistake in disguise” for the Philippines to open up its economy and accept more investment from businesses looking to diversify supply chains.

While the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is the most effective instrument in this respect, he said that amending the Retail Trade Liberalization Act, the Public Service Act, and the Foreign Investments Act would also be helpful.

“If there is any kind of capital flight in China, it will all have to go someplace.” It will be like collecting raindrops with a thimble if our economy is not sufficiently open. “Let’s loosen some of our antiquated limitations so that when it rains, we have something larger to collect water with,” Salceda remarked.

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