CHINA is “very much concerned” over the impending decision of the Permanent Court of Arbitration on the territorial case filed by the Philippines which is expected to be released this year, the Department of Foreign Affairs said Monday.
The DFA released the statement amid economic analyses that the slowdown of the Chinese economy may propel Southeast Asian nations to be drivers of growth in the region.
“In our analysis, China is very much concerned over the legal fray because [China] is discrediting the arbitration process from the start. It also boasts that many nations support its claim,” said Foreign Affairs Spokesperson Charles Jose.
Jose said that while China repeatedly insists that it will not respect the international court decision, the world’s second largest economic giant appeared to be concerned with the decision because it would affect their international standing and image.
“The Philippine government is guardedly optimistic of the forthcoming ruling which may be issued in the next few weeks,” Jose said. “We are optimistic for a favorable ruling because the nine-dash claim of China has no basis under the international law.”
Meanwhile, economic analysts in region surmised that the slowdown of the Chinese economy may have a bigger impact on Southeast Asia that the United Kingdom’s exit from the European Union because many nations in the region are reliant on trade with China for growth.
But while many are feeling the impact of that slowdown, the region’s growing middle class is helping to act as a buffer.
China’s Gross Domestic Product expanded 6.7 percent in the first quarter, the slowest reading since the global financial crisis in early 2009.
“From 2000 to 2005 and then comparing from 2006 to 2014, what we found was in the first period, the US or even the EU, was a more important driver of export growth in Asia, and in the most recent period it is actually China across the board, from a sensitivity perspective,” said Joseph Incalcaterra, an economist with HSBC.
“The slowing growth in China, even though we don’t forecast a hard landing, what we’re seeing is a gradual occurrence that is actually weighing down exports in the rest of the region,” he added.
Southeast Asia has a collective GDP of $2.6 trillion. In 2015, growth slowed in seven of 10 members of the Association of Southeast Asian Nations, or Asean. Hardest hit was Indonesia, which exports large volumes of commodities to China.
While Southeast Asia’s exports may be slowing in parallel with Chinese demand, the region’s young population and growing middle class may propel Southeast Asia to be a driver of growth in the region.
Earlier this year, the Asia Development Bank predicted economic expansion in Southeast Asia would rise 4.5 percent in 2016 and 4.8 percent next year.
That’s up from a 4.4 percent rate of expansion in 2015. Six-hundred-twenty-million people live in the region, and 25 percent of trade is with other Southeast Asian nations, providing a buffer to China’s slowdown.
Despite broad changes in political leadership and recent elections in the Philippines, Myanmar, Vietnam and Laos, investment from China, India, Russia and the U.S. is pouring into Southeast Asia.
Trade between the U.S. and Vietnam rose to $45 billion in 2015, and U.S. President Barack Obama is pushing for a Trans Pacific Partnership, a trade agreement between the U.S. and 11 Pacific Rim nations that would provide a counterbalance to China’s economic influence and continue to support growth in the region.