White, sandy beaches have been drawing Chinese tourists to the Philippines in recent years. But beyond the resorts, the nation is stirring – furiously – and becoming ever more attractive to Chinese companies, according to global commercial real estate firm JLL.
As Chinese companies look for new growth channels outside of their home markets, overseas expansion is opening doors for nearby markets such as the Philippines, observed P. Ryan Isip, national director at JLL.
“Chinese companies not presently in Manila are now opening offices here and all over the place,” he said. “They realise that real estate is an essential dimension of corporate operations; it is important for boosting corporate image, workplace productivity, as well as attracting and retaining talent.
“Setting up an office in the Philippines makes sense, given the close proximity to China, and that opportunities for expansion in the market can serve as a gateway to Southeast Asia and more,” added Isip.
The sentiment was recently echoed by a Bloomberg report released earlier this year, which named the Philippines as the second-fastest growing market in Asia after China.“Compared to other countries in the region, the Philippines has a relatively large population, which boasts a growing middle-class and an increasingly professional workforce,” said Isip.
Low cost of doing business
He added that “the cost of doing business is low, and the country has a very business-friendly environment; this is proven by the huge presence of reputable foreign companies that already operate large back-office functions here.”
Tencent and DiDi Chu Xing who are exploring the Philippines, are among the latest Chinese companies to look into setting up operations in Manila, joining the likes of carmakers BAIC and Chery, global communications and telecommunications technology solutions provider Huawei, and China State Construction.
“Overseas growth is especially key for successful companies looking to increase their global reach and stay ahead of the competition, and this is especially true in China, where a slowing economy at home is being felt and the implications of this cannot be ignored,” said Steven McCord, head of research for North China at JLL.
“Many well-known Chinese brands have thrived in the protected environment of the mainland,” he noted. “But they are now venturing out of the country into more competitive environments backed up by revenues from the past decade.”
Diversification is in
Meanwhile, Chinese giants like Huawei and appliance manufacturer Haier have seen huge growth in China.
“Therefore, to sustain a certain level of growth, these companies are going overseas,” said McCord. “Being so close to the mainland, the Philippines is a logical place to do business, and the presence of Chinese firms is already being felt in office markets both locally and elsewhere in the region.”
Moreover, the 2015 list of the top Global Fortune 500 companies included 104 Chinese companies, 51 of which are based in Beijing, indicating that potential demand for Chinese expansion abroad appears healthy.
“Under the pressure of a slower economy, Chinese corporates are expanding in the Philippines because they have the ability to do so as part of their diversification,” said Isip. “They can only penetrate so much of their own market, while here they are presented with a new market and new opportunities.
Boots on the ground pay off
Local attitudes should also support more Chinese investment in the country.
“Take for example, Chinese goods,” said Isip. “Chinese goods are welcomed in the Philippines, and we see imported goods from China readily gobbled up. As companies set up shop in the Philippines and establish a strong local presence, they will enjoy ready acceptance by the market.”
Isip added that the local ethnic Chinese population also plays well into the equation.
“There’s already a sizeable ethnic Chinese population here, so, we have an existing population that speaks some dialects of Chinese, and this makes it easier for parts of the community to communicate with people from mainland China,” explained Isip.
“On top of that, more tourists from China are flocking to our beaches, and these visits help to introduce more Chinese people to our culture and what we have to offer as a country, which can also be applied in a larger context to the business world.”