China-Philippines Territorial Standoff Leads To Clampdown on Trade; Economic Sanctions Likely

Trade relations between China and Philippines are likely to go downhill unless territorial dispute between the two governments over the South China Sea is resolved, experts believe.

The standoff has apparently extended to economic crisis, with fruit trade and tourism sectors already taking a hit, the China Daily reported. Unless bilateral tensions ease over disputed ownership of the Huangyan Island, the problem may worsen with economic sanctions imposed.

For the moment the dispute will not have a great effect on bilateral trade because government decisions have a delayed impact on trade performance, economic expert Zhao Jianglin from the China Academy of Social Sciences' Institute of Asia-Pacific Studies was quoted saying to the publication.

But if the tensions continue to develop with no relief, the bilateral trade relationship as well as tourism and investments will have a negative effect and China may consider economic sanctions against the Philippines, she continued.

Jianglin believes that the sanctions imposed will significantly affect the economy in the Philippines, a statement that was complemented by Wang Zaibang, vice-president of the China Institute of Contemporary International Relations, who said that, China is expanding domestic consumption and economic sanctions against the Philippines will deprive the country of the huge market in China and a good chance for the country to maintain high-speed economic growth.

The two nations have long shared bilateral trade ties with each other. China is currently the Philippines' third largest trade partner, while the Philippines ranks sixth on China's export market. The report also noted that bilateral trade between the neighboring countries shot to $30 billion and now will aim at achieving a target of $60 billion by 2016.

Among the agricultural products, the Philippines exports several fruit varieties, banana being the second largest export after coconuts to China. Banana shipments reached $470.96 million the previous year, the Associated Press said.

The country, however, suffered losses in fruit exports to China after some varieties of fruit were found carrying harmful bacteria and pests, thereby causing massive delays in shipments, following tighter inspections from China. It was claimed that the inspections were a part of a regulatory issue and not in any way linked to the ongoing maritime spat, the news service said.

The tourism sector has also faced a major setback, with Chinese nationals now instructed to limit their visits to the Philippines on account of safety reasons. Approximately nine percent of arrivals in the country constitute Chinese nationals, The Inquirer noted.

In addition to the great effect on Philippines' tourism, the country's exports to China will be severely affected if the situation is not resolved. The bilateral trade, a small share of China's foreign trade, is closely related to the Philippines' economic growth, Zaibang said to the China Daily.

According to a report in Manila Standard Today, stocks associated with tourism dropped for the third session on Friday, with Philippine Stock Exchange index going down 33 points ending at 5,158.14.