Despite the ongoing global economic slump, the Philippines’ largest shopping mall developer, SM Prime Holdings Inc. (SMPH), intends to continue its expansion across China and the Philippines in the coming year, SMPH President Hans Sy said.

Specifically, SM Prime plans to continue targeting second-tier cities in China instead of Beijing or Shanghai, while at the same time extending its expansion into dense population centers in outlying areas of the Philippines, Sy told The Wall Street Journal in a recent interview.

Sy said SM Prime has always considered China’s provincial cities a solid investment because they haven’t seen the same inflation in land and labor costs that have affected Shanghai and Beijing in recent years. At the same time, Sy said, cities such as Xiamen and Chongqing have growing populations and have seen a steady accumulation of wealth.

“If you want to improve your image, then build a mall in Shanghai. But it’s so expensive there that it’s all image and no business,” Sy said. “That’s why we’re going to the second-tier cities. It’s more difficult to educate the populations there about the shopping malls, but it’s worth the effort.”

This year, SM Prime, which currently operates 33 shopping malls, plans to add one more mall to the three it already has in China, Sy said. The company will also build three more malls in the Philippines in 2009, and add another five in 2010.

In 2008, SM Prime’s net profit expanded 7% from 2007 to reach P6.4 billion, or approximately 3 million.

Economists expect the Philippine economy, which is less dependent on exports than some of its neighbors, to continue growing in 2009, driven in part by the relatively resilient consumer spending that is also giving retailers such as SM Prime a lift.

Some equity analysts fear that consumer spending might slow as remittance growth from the Philippines’ large overseas workforce begins to slow down thanks to the world’s broader economic problems, but this isn’t necessarily a problem for SM Prime.

 “The thing about SM Prime is that while consumer spending in general might slow down, the company covers such a broad range of the market that they catch as many people falling into their segment as those who fall out,” said Jojo Gonzales, managing director of Manila-based Philippine Equity Partners Inc., who has a buy recommendation on the company’s stock.

Sy said he has seen little, if any impact, on SM Prime’s business as a result of the global economic slowdown. “If anything, we have expanded our market share” Sy said.

Founded by Sy’s father, Henry Sy, SM Prime is the largest shopping mall developer in the Philippines and the builder of three of the world’s 10 largest shopping malls. Its latest project in the Philippines is the Mall of Asia complex on the edge of Manila Bay – a complex featuring a shopping mall, office buildings for call centers and other outsourcing businesses, as well as plans for a 500-room hotel to be managed by the Carlson Companies’ Radisson brand, and other facilities.