‘Philippines vulnerable to China export shock’

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June 1, 2026 | 12:00am

MANILA, Philippines — The Philippines is among the Asian economies most vulnerable to a new wave of Chinese export competition, as Beijing’s rising dominance in key manufacturing sectors threatens lower-value and labor-intensive industries, according to Nomura Global Markets Research.

In a report, Nomura said Asia is undergoing a major shift as geopolitical realignments, China’s rise, artificial intelligence and higher global interest rates reshape the region’s growth model.

“Asia stands at a critical juncture,” Nomura said, noting that these shifts are creating a “world of winners and losers.”

For the Philippines, the clearest risk comes from what Nomura called “China shock 2.0,” or the surge in high-tech and high-value Chinese exports that could have a broader impact than the first China shock in the early 2000s.

Nomura said China’s global export share inched up by 1.5 percent from 2019 to 2024, eating into the shares of industrial economies such as Germany, Japan, France and the United States. Its expansion has covered both high-tech and low-value-added goods, allowing China to move up the value chain while keeping its strength in cheaper manufactured products.

The firm identified five sectors where China’s export share is likely to rise further: electric vehicles, lithium-ion batteries, solar panels, construction machinery and shipbuilding.

“The results suggest that Indonesia, Thailand and Philippines are most vulnerable,” Nomura said, citing these economies’ high shares of relatively low-value-added and labor-intensive manufacturing sectors.

Based on Nomura’s vulnerability scorecard, the Philippines ranked third among selected Asian economies with a score of 100.2, just behind Indonesia’s 100.7 and Thailand’s 100.6. The scorecard measured the extent of the China shock, the importance of exposed non-electronics sectors, manufacturing competitiveness and fiscal space.

Nomura said more vulnerable economies have so far imposed only limited trade restrictions against China, likely due to the broader goal of maintaining good economic ties with Beijing and attracting foreign direct investment (FDI).

The report also flagged risks from shifting FDI flows, as investment decisions are increasingly influenced by geopolitical alignment, industrial policy and market access instead of just efficiency and lower costs.

Nomura ranked India, Singapore, Vietnam and Malaysia as the top potential beneficiaries of the changing FDI landscape. The Philippines, meanwhile, was grouped with India and Indonesia as economies vulnerable to balance of payments pressures because they run current account deficits and rely on FDI inflows as a counterbalance.

The Philippines also faces challenges in the artificial intelligence transition. Nomura placed the country under the “long-term optionality” group, alongside India, Indonesia and Thailand, meaning these economies have some AI relevance but are not yet clear winners.

The Philippines ranked eighth out of 10 economies in Nomura’s AI production score with 31.9 points and last in AI adoption with 30.7 points. Nomura said countries in this group need to build infrastructure, skills and enterprise readiness to turn AI into a productivity driver instead of a competitive threat.

On currencies, Nomura said negative balance of payments flows could weaken the Philippine peso, Indonesian rupiah, Indian rupee and Korean won, although fading US exceptionalism and de-dollarization efforts may temper the extent of depreciation against the dollar.

Overall, Nomura said China, Malaysia, South Korea, Australia and Singapore are likely to benefit the most from Asia’s transformation, while lower-income economies face greater challenges as the region rewires itself for a new era.