China’s Competitive Advantage over the Philippines
China has the world's second largest economy by nominal GDP and by purchasing power parity after the United States and though the Philippine economy has doing surprisingly well over last year, China has long been out performing us. First reason is due to the sheer number of its’ labor force, the country's population of 1.3 billion moves China to the top ranks of economic powers. Although the cost of labor has doubled since the year 2000, the output and productivity has increased almost fourfold compared to the productivity of the Philippines which has only risen 2.3 percent the past decade. Recently, the economic expansion due to the abundant supply of its labor force is being threatened by the one-child policy and ageing residents but for now it remains to be the go to place for cheap and consistent cost labor.
Second, adding to cheap labor is frugal manufacturing, it now accounts for a fifth of global manufacturing. Its factories have made so much, so cheaply that they have curbed inflation in many of its trading partners. Chinese firms are often quite innovative in reducing costs by redesigning manufacturing processes, substituting cheaper “good enough” materials, and using simpler off-the-shelf components. Adding to that, China's supply chain is sophisticated and supple. That the right way to measure manufacturing competitiveness is not by comparing labour costs alone, but by comparing entire supply chains. Even if labour costs are a quarter of those in China to make a given product, the unreliability or unavailability of many components may make it uneconomic to make things elsewhere. In the Philippines, although the country has been experiencing some improvement in the manufacturing sector, growing 5 percent in the later part of 2012 the cost of manufacturing is still fairly high because the country does not provide subsidies to its local industries compared with China.
Third is China’s competitiveness. Chinas attractiveness as a destination for investment capital rests on its development of infrastructure, resource availability (physical and labor), and the development of the business value chain. The level of maturation of these elements makes China more attractive relative to other nations. A growing and developing economy like the Philippines requires infrastructure and resources in order to facilitate the sale of goods and services. Lower transaction costs, due to the maturation of these elements, enables investors to earn returns on their investments as their enterprises are able to generate profits. Roads, highways, bridges and other forms of physical infrastructure should be present, maintained and provide sufficient safety for the transportation of goods as well as for the commute of employee. The Philippines government has been addressing these problems well during the present administration and increasing government spending but it is still hard to compete with China who has a more mature and established manufacturing setting.

Conclusions It is obvious that the Philippine economy is well behind that of China’s but the current situations on our developing economy holds promise of continuous growth. Unlike China who has reached its peak and has neither raised its productivity level nor absorbed workers from the less productive manufacturing sector, the Philippines has the space to develop and grow. With regards to cheaper labor, the pay for Filipino labourers is generally higher than that of China’s but the service provided in return is exponentially better and has value for money. In competition for foreign investments, international companies shy away from countries with political instability that‘s why they pass up the opportunity to invest in the Philippines. Our level playing field, available infrastructure and competitive power costs has been in the best position in years but are taken for granted because of this reason.

Recommendation The Philippine economy has been doing great since the last year, to continue the momentum the Aquino administration should continue on creating government policies supporting this growth. Good governance rests on a sound moral foundation, a philosophy of transparency, and an ethic of efficient implementation. To do more with less in the delivery of public goods and services requires a performance-based and results-oriented government. The administration is committed to simple, fair, transparent, and predictable rules to reduce the cost of investing in the Philippines. Institutional reforms will heighten accountability and serve the public interest. In battling graft and corruption, procurement reforms in government are indispensable. Electoral and judicial reforms will be pursued to guarantee political stability.