Apple, the American IT smartphone behemoth, started showing earning problems last year in November. The American stock monitor Market Watch declared: “Apple stock suffers worst day in more than four years after ‘Houdini-like move’ with earnings,” attributing the firm’s debacle to its decision to revise earnings forecast to no longer providing unit-sales figures for the iPhone.
Then came the first week of 2019 and it’s all becoming only too clear to Americans that it’s not just a reporting issue but a trade war issue, as Dan Moren writes in Macworld last 4 January 2019:
“All anybody is likely to be talking about for the next week or so is Apple’s admission that it’s going to miss its guidance for the first quarter of 2019. We won’t get any more information until the company’s next quarterly financial results, due out on 29 January…”
“Apple’s been betting big on China for the last several years… the biggest opportunity for Apple’s growth is in the world’s second-largest economy… Contrast that with markets like the US, Europe and Japan, where Apple’s… been hitting a saturation point… Increased tensions between the US and China… played a part in both the market’s volatility and consumers’ willingness to shell out lots of money, especially for a product by a non-Chinese company.”
And if that were not enough, then read this — “Trump’s Top Economic Guru: If You Thought Apple was Bad, Hold Onto Your Butts,” reports Bess Levin in Vanity Fair:
“‘It’s not going to be just Apple,’ a weirdly gleeful Kevin Hassett, who chairs Trump’s Council of Economic Advisers, told CNN on Thursday. ‘There are a heck of a lot of US companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded’ thanks to the effect of Trump’s trade war on China’s economy, he said, a point echoed by Pantheon Macroeconomics’s chief economist Ian Shepherdson…”
We could go on with plaints from US economists of the dire consequences for American business if Trump’s trade war goes unrestrained because, as Daniel Moss explained in Bloomberg, “US Earns More in China Than Trade Numbers Reveal,” “General Motors Co. sells more cars in China than at home. There are more Apple Inc. iPhones used in the Middle Kingdom than in the US. Overall, China subsidiaries of US companies sold $223 billion of stuff in 2015, reckons Deutsche Bank AG.”
Moss’ figure are vintage 2015 and sales of American companies in China have grown to about $250 billion before Trump’s trade war kicked in mid-2018. Now, all that is in jeopardy as Apple shows. As every businessman knows, retail sales earnings are multiples of what exports can bring in which earns pennies by the tons.
President Xi Jinping and China have kept to the high road in this US-initiated trade skirmishes and uncouth verbal harassment coming from all corners of the American media and ideological spectrum, lambasting non-existent “intellectual property theft,” which the US could easily demonstrate by filing cases in the World Trade Organization which it has not done.
Constructive and productive, China has always persevered in conducting its foreign and trade policies. Its answer to the US trade war has been the escalation of its Reform and Opening Up of its economy. It has shifted from the export-led economic model to the consumption-led economy with the goal of pumping prime the emerging markets of Asia, Africa, Latin America, the Middle East and Central Asia with China’s huge $2 trillion annual imports while expanding trade through the Belt and Road Initiative across the globe.
The Philippines aims to rise up this 2019 to become an upper middle-income economy, as projected by President Duterte’s economic team led by Finance Secretary Carlos Dominguez III. Speaking in September last year, he said, “The Philippine economy is strong and the growth momentum can be sustained by policy and fiscal reforms implemented by the government.”
For Budget Secretary Benjamin Diokno, the picture looks bright, “Government spending continues to boost economic activity… Our expansionary fiscal policy is prudent, sustainable and supportive of development objectives.”
Hence, the revenue efforts are being sustained with frequent adjustments for periods of unusual conditions, such as last year’s oil price spike which is now ebbing.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the economy experienced 78 quarters of uninterrupted growth, although the challenge was how to sustain this momentum. We can see that the Duterte administration has the will and the plan to see it all through, calibrating revenue generation, the right productive infrastructure investments and the stimulation of the economy.
Philippine-China trade, on the other hand, continues to grow. The tandem has become the top trading partner in 2018 and it is expected to grow in the coming years with the sustained Reform and Opening Up of China. China’s investments in the Philippines are expected to take off as the $4.4 billion steel in Mindanao and the potential $8.4 billion 500-hectare Industrial Park in Clark take shape.
While we are still waiting for the tourism arrival statistics of 2018, it is important to keep in mind that this sector is also part of the Reform and Opening Up of China. The annual China Economic Life Survey shows Chinese tourists made 129 million trips to destinations outside China and pegged tourist spending in 2017 at 748 billion yuan ($118.2 billion) which was spent on trips to international destinations. The Philippines targeted 1.5 million Chinese tourists in 2018; this year, the aim should be higher.
It’s up to Trump and the US to save face and mend their trade fences with China which Xi has provided ample room for Trump to back away from. The Philippines with its outstanding relations with China should stay one step ahead of every other country in keep up with China’s Reform and Opening Up and reap the boon from China’s consumption spending.