Guangxi Chemical Enterprises Appropriately Adjust Foreign Trade Strategy to Cope with the Difficulties of Huangyan Island

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After two months of intense confrontation, the situation on Huangyan Island in the Philippines has eased. Are Guangxi affected by the complementarity with the Philippines, which is adjacent to the sea? In particular, does this situation affect the chemical trade between Guangxi, the Philippines, and even ASEAN? Through interviews, the reporter found that Guangxi's enterprises are currently calm about the crisis on Huangyan Island. Most companies have not taken excessive measures and some chemical companies have adjusted their foreign trade strategies.

A person in charge of the Guilin Rubber Machinery Factory stated that at present, the company's business in the ASEAN countries is operating normally, and the change in the situation on Huangyan Island does not significantly affect the operation of the company. The business of the company is progressing smoothly. However, the person in charge also said that due to the existence of unpredictable factors, the company has also adjusted some market strategies, such as focusing on developing and stabilizing European and American markets.

Because of the Huangyan Island crisis adjustment of foreign trade strategy, there is Guangxi Donghe New Win Environmental Protection Technology Co., Ltd. In recent years, the company has attached great importance to the development of the ASEAN market. Its environmental protection chemical products and technologies have gradually entered the ASEAN markets such as the Philippines, Vietnam, and Thailand, and have business contacts with many companies in the Philippines. According to Chen Yong, general manager of the company, due to concerns about the situation in Huangyan Island, the Philippines, the company has reduced its supply to the Philippines since April this year. “There is a Philippine company with a business relationship with the company recently sent us an order to order 300 tons of ferrous sulfate, but due to various concerns, we have not shipped to the Philippines company for the time being.” Chen Yong said.

In fact, since the Huangyan Island incident occurred, the Philippines’ agricultural and other related industries have also felt some pressure. It is understood that most Southeast Asian countries, including the Philippines, are mainly agricultural. They have rich arable land resources, and the development of agricultural machinery, pesticides, fertilizers, and other means of production has lagged behind. They have long been reliant on imports, and the market for agricultural capital consumption has great potential. China and Southeast Asian countries have strong complementarity in terms of agricultural products and agricultural production materials, and there is huge room for cooperation and development. There is an urgent need for a new platform for exchanges and cooperation.

Due to the tremendous potential of seeing cooperation deals with Southeast Asia, a group of Guangxi agricultural capital enterprises have seized business opportunities and have a large number of businesses in the Philippines, Vietnam, Thailand, Malaysia, and other countries, and have become very trusting companies in Southeast Asian countries. At present, some Filipino companies that are cooperating with Chinese agricultural enterprises are more worried that the deterioration of the situation on Huangyan Island will affect the cooperation between the two sides and ultimately affect the agricultural development in the Philippines.

Guangxi Luzhai Fertilizer Co., Ltd. is a state-owned large-scale chemical fertilizer production enterprise, and it is also the company with the largest physical and chemical sales of phosphate fertilizer and compound fertilizer in Guangxi. Its monoammonium phosphate, diammonium phosphate, compound fertilizer and other products not only supply the domestic market, but also exported to many countries in ASEAN, enjoying a certain reputation in the ASEAN market.

According to the Minister of Marketing of the Luhua Company, since the occurrence of the Huangyan Island crisis, Luhua’s overall market in ASEAN remained stable, because many businesses in ASEAN believe that the dispute between China and the Philippines should not affect economic exchanges. In addition, Luhua’s current market in the Philippines is relatively small compared to other ASEAN countries, and therefore there is no fear that ASEAN’s market will be affected too much by the Sino-Philippine Huangyan Island crisis.

It is understood that the bilateral trade between Guangxi and the Philippines has grown rapidly in recent years, from US$ 0.1016 billion in 1996 to US$ 1.48171 billion in 2011. From January to April 2012, the bilateral trade volume between Guangxi and the Philippines was 0.4782 billion U.S. dollars, an increase of 44.43% year-on-year. Guangxi's exports to the Philippines and other ASEAN markets, such as chemical and chemical machinery, also maintained rapid growth in the first four months of this year. Among them, the export to the Philippines was 18.74 million US dollars, an increase of 132.9% year-on-year. The main export products were diesel trucks, LCD monitors and other chemical machinery products.

According to Shi Xia, an expert on China-ASEAN economic issues and Guangxi University of Finance and Economics, in the short term, the impact of the Huangyan Island crisis on the economic exchanges between China and the Philippines is certain. First of all, the most direct impact is the phenomenon of trade diversion, that is, bilateral trade has shifted to other partners due to the tense situation. As such, the trade volume between China and the Philippines may be reduced. Second, due to the unstable situation, it may also affect the investment of other countries in the Guangxi region.

Some industry analysts have analyzed that the Philippine government has also recently noticed the pressure of domestic related industries and began to take some measures step by step, hoping to ease the tension between China and the Philippines. Because if the situation continues, the chemical, agricultural and other industries in the Philippines will suffer huge losses.

Xu Ningning, the Chinese deputy secretary-general of the China-ASEAN Business Council, pointed out that the biggest concern of ASEAN is the completion of the ASEAN Economic Community in 2015, and that ASEAN needs the support of China to realize the community. Although China and the Philippines have disputes over the sovereignty of some of the islands and reefs in the South China Sea, cooperation and win-win results have always been the common goal of China and ASEAN countries.

Former President Ramos of the Philippines believes that the process of economic integration in Asia is constantly developing. To further achieve sustainable economic development, closer cooperation must be strengthened among countries. Under the framework of the China-ASEAN Free Trade Area and the Pan-Beibu Gulf Economic Cooperation Forum, countries can tap more development opportunities. Ramos believes that China and the Philippines have many opportunities for cooperation in the areas of oil and gas, bio-energy, and chemical raw materials.

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