Philippines - China Relations

Ferdinand Marcos Jr., will likely seek to turn the Philippines into an ally of China, despite lingering anti-Beijing sentiment. Marcos has already said he wants to pursue closer ties with China, including disregarding a 2016 ruling from The Hague invalidating China's massive territorial claims to the South China Sea. Marcos has sought to distance himself from the ruling, which has been rejected by the Chinese Communist Party (CCP) in Beijing, and said he will likely continue to develop Duterte's policy of closer ties with China. When Duterte came to power, China promised a lot of investment, but it didn't live up to expectations. That gap caused disappointment in the Philippines, whose defense and security forces have become more suspicious of China because of its unrelenting pressure regarding the South China Sea dispute. Even if Marcos himself wants a good relationship with China, he will meet with a certain amount of doubt and resistance. It could be hard for Marcos to wean his country off military and security reliance on the United States. Military cooperation between the Philippines and the United States has evolved into a long-term strategy, with many people in the Philippines military and diplomatic service cherishing that relationship. That kind of relationship with such a solid foundation was hard to shake off during Duterte's term, despite the fact that China had offered more financial resources and aid programs. Mainland Asia's relations with the Philippines long predate the arrival of Iberian influence in the 16th century. Trade with Mainland Asia, including China, was flourishing by the 10th Century, and by the time of the Ming Dynasty (1368-1644), many Chinese traders had settled in Manila and other trading centers throughout the Philippines and elsewhere in Southeast Asia. Chinese merchants later forged mutually beneficial alliances with the Hispanic elite who dominated political and religious life in the Philippines for over three centuries. Under the Spanish 'comprador system,' ethnic Chinese were allowed a monopoly on trade between the Philippines and China, a key leg in the fabulously lucrative 'galleon trade' between Manila and Europe via Acapulco, and allowed to dominate Philippine domestic businesses. However, the Hispanic elite also sought to keep the power of the Chinese in check through discriminatory laws and periodic bloody pogroms.

Ethnic Chinese still enjoy disproportionate economic and political power in the Philippines; by one estimate, they comprise only two percent of the nation's population, but control 50 percent of listed equities. Filipino-Chinese have made great strides in recent decades in overcoming the long-standing racial prejudices; nonetheless, there is still a latent sense among many Filipinos that the Chinese are amoral profiteers.

The increasing economic and political influence of China in regional affairs has reawakened this broadly held stereotype and fed a suspicion that both Chinese development assistance and business practices are rife with corruption and intended to further Chinese -- not Filipino -- ends. Unlike the World Bank, the IMF, and many bilateral providers of assistance, China does not link its aid to issues such as good governance, rule of law, or respect for human rights. Public skepticism and scrutiny have underlined shortcomings in China's soft power efforts.

Manila's relations with Beijing were hostile in the 1950s and 1960s. The unspoken threat of Chinese aid to the New People's Army was ever present but never materialized. By contrast, the Filipino-Chinese business community had many connections with relatives and partners in Taiwan. Diplomatic relations between Manila and Beijing were opened in 1973. Since that time, the relationship had been correct but not warm. In 1988 Aquino visited China, met with elder statesman Deng Xiaoping, and made a ceremonial pilgrimage to her ancestral home and temple in Fujian Province. The closer relationship fostered by that trip later dissipated because of Beijing's sensitivity to what was perceived as a Philippine bias in favor of Taiwan. A Philippine government spokesperson had inadvertently referred to a visiting delegation from Taiwan as representatives of "the Republic of China."

The disclosure of a secret visit to Taiwan, made by the Philippine secretary of foreign affairs, Raul Manglapus, in October 1989, upset Beijing even more. In 1990 Aquino reaffirmed the Philippines' one-China policy, but she reserved the right to develop trade and economic ties with Taiwan. China, for its parts, has sought with limited success to conduct an "oil diplomacy" with the Philippines, a country completely dependent on imported oil. In December 1990 Aquino welcomed the Chinese premier, Li Peng, to Manila after earlier having suspended official contacts in the wake of the June 1989 violence around Beijing's Tiananmen Square.

Philippine relations with China and Taiwan were cautious in the 1990s. In the new century, the Philippines had an improving, but still fragile, relationship with China. As reflected in President Macapagal-Arroyo’s visit to China in 2001, the Philippines is seeking closer economic cooperation with China, even as it fears China’s growing economic and military clout. A territorial dispute over control of the Spratly Islands in the South China Sea is an impediment to better relations. China also was concerned about the Philippines’ strong ties to the United States, which it views as a strategic rival in the region.

Philippine officials have identified northern Luzon as the ideal site for investors and tourists from the PRC. With its close proximity to the PRC, its mineral resources, agricultural potential, gambling facilities, and beautiful beaches, northern Luzon could in theory be a magnet for PRC wealth. The northwesternmost province of Ilocos Norte figured prominently in these expectations. Philippine President Arroyo once remarked that "there are 400 million Chinese who can afford to travel and are curious about the world around them," highlighting that capital city "Laoag is only about an hour and a half away from Canton and two hours from Shanghai." In a media interview, President Arroyo observed that "the Chinese are very, very interested in coming to Ilocos Norte because it is very near China."

PRC tourism and investment in the province was hindered by a lack of hotel capacity, a view shared by other local officials. According to one, by 2007 only the Fort Ilocandia Resort and Casino (289 rooms) effectively courts PRC tourists. At that time there were only about 1000 hotel rooms in all of Ilocos Norte, and most of these are not up to international standards.

Another persistent problem appears to be poor power supply, in part due to the demise of a local development project -- the Laoag-Luzon Industrial Estate -- which never left the drawing board. Managers of the Fort Ilocandia Resort also cited frequent brown-outs as a problem. Other local officials pointed to the lack of bridges, a deep-water port, and farm-to-market roads as further hindering economic progress, if not necessarily tourism.

Another major hindrance to foreign investment was the difficulty in purchasing or renting property. One time the incoming PRC Consul to Laoag City offered to bring a PRC agribusiness investment if officials could identify 20 hectares of land for a greenhouse. Officials decided that in order to rent 20 contiguous hectares of land they would have to deal with "thousands" of separate owners, and concluded it would be "an impossible task." Additionally, there is a constitutional prohibition on foreigners owning land.

Since reciprocal state visits by Philippine President Gloria Macapagal-Arroyo and PRC President Hu Jintao in late 2004 and early 2005, the Philippines signed dozens of agreements with China on a wide range of economic, political, cultural, and military issues. In January 2008, the PRC Embassy in the Philippines announced that the trade volume between the Philippines and the Chinese mainland had surged to a record high of $30.62 billion, an almost 10-fold increase from the $3.14 billion in 2000.

Some questioned these figures. PRC Customs statistics showed its trade with the Philippines at USD30.6 billion in 2007. However, according to the Philippine National Statistics Office, bilateral trade with mainland China was only USD9.76 billion (ranking third among the Philippines' trading partners), while bilateral trade with the United States was USD16.5 billion (ranking first). The most significant adjustment that can be made to the statistics is for transshipment of goods through Hong Kong. Goods that are exported from the Philippines to Hong Kong are often ultimately destined for China, yet are recorded in the Philippine trade statistics as an export to Hong Kong. The PRC Customs authorities, however, record the goods as Philippine exports to China. This still leaves an unexplained discrepancy of around USD13 billion in 2007.

The statistical discrepancy probably lies in electronics exports, which account for over 80% of Philippine exports to China and which are primarily semiconductors. Semiconductors valued at around USD3.5 billion when exported from the Philippines were assigned a much higher value (as much as USD14 billion) when they arrived in China.

During a 15-16 January 2007 official visit to Manila, Chinese Premier Wen Jiabao and his delegation signed about 30 bilateral agreements with a value of over US$6 billion, focusing on agriculture, ethanol production, development assistance, and on economic and technical cooperation. Premier Wen met with President Arroyo, Senate President Manuel Villar, and House Speaker Jose de Venecia Jr., who praised him as "one of the world's great leaders." Chinese Premier Wen Jiabao's 19 hour official visit to Manila followed his participation in the East Asia Summit and related Association of Southeast Asian Nations summits in Cebu January 14-15. In a joint statement, President Arroyo and Premier Wen "reaffirmed that China-Philippine relations are at a golden age of partnership."

Defense cooperation between China and the Philippines expanded significantly during President Arroyo's state visit to China, as she and Premier Wen Jiabao identified key areas of cooperation, such as sea rescue, disaster mitigation, and training exchanges. Setting aside their competing territorial claims to the Spratlys, the two countries espoused the joint development of the disputed area. In November 2004, the Philippine Defense Secretary and his PRC counterpart signed a memorandum of understanding on defense cooperation in Beijing.

In May 2007, high-ranking People's Liberation Army (PLA) and Philippine defense department officials held their third bilateral defense and security dialogue in Manila, during which they discussed counter-terrorism, the situation in Northeast Asia, and mutual concerns and interests related to maritime security, national defense, and military construction. At the end of the dialogue, the PRC delegation promised more security assistance to intensify defense relations between the PLA and the Armed Forces of the Philippines. On the Philippine side, defense officials reaffirmed Manila's adherence to the one-China policy and acknowledged China's important contribution to international and regional peace.

Philippine Foreign Affairs Spokesman Charles Jose said in Septe,ber 2014 that an agreement in 2011 between President Benigno Aquino and then President Hu Jintao is what guides Manila’s relations with Beijing. “Both countries should not let the territorial dispute affect the overall relationship. So on the part of the Philippines, we are willing to extract and isolate our territorial dispute and deal with this separately, but at the same time we try to promote and strengthen the other areas of our cooperation with China,” said Jose.

China has a policy of the Maritime Silk Road, which aims to intensify China-Southeast Asia economic relationships through increased investment and through enhanced trade and commercial relationships. The Philippines is not part of that. Neighboring Singapore, Indonesia, Malaysia and other countries in the region are participating.

In 2012, China effectively took control of Scarborough Reef after a tense months-long standoff between vessels of the two countries in waters within the Philippines' exclusive economic zone. A year later, Manila filed an arbitration case questioning China’s sweeping claims in the resource-rich sea. Beijing rejects arbitration and has not responded to the case. Tourism arrivals from China increased, with a 70 percent jump from 2012 to 2013, when 426,000 of the country’s 4.6 million tourists came from China. Philippine exports to China were slightly higher than imports from China in 2011 and 2013. But the Philippines took a hit in 2012 after China imposed requirements on its bananas entering the country, linked to the Scarborough Reef standoff.

Rodrigo Duterte and China

Rodrigo Duterte came to office in 2016 talking about negotiating a solution of the Philippines’ dispute with China in the South China Sea despite a ruling against Beijing by an international tribunal in a case brought by Manila. Duterte favored a “soft landing” for the issue. He said it would be counterproductive for militarily weak Philippines, which hosts small units of US forces, to confront China or undertake actions that could lead to armed conflict. He said: “I assured everybody that there are only two options there: We go to fight, which we cannot afford at all, or talk.” Duterte sent a special envoy, former President Fidel Ramos, to Hong Kong to meet with Chinese representatives to initiate talks with China on the maritime dispute between the two countries.

Duterte disclosed in March 2016 that “a Chinese” had partly funded his political ads. Raissa Robles askied in May 2016 "... is Duterte getting funding from a foreign Chinese corporation or the Chinese government? What I find really puzzling is that the tough-talking Mayor of Davao City, who has repeatedly warned that “blood would flow” if he ever gets elected President because he would be tough on criminals, seems all but ready to lie down and give up sovereignty over the Kalayaan Island Group (KIG) claimed by the Philippines in the South China Sea."

Duterte said 14 September 2016 that the Philippines will not join joint expeditions and patrols with the United States and other countries to avoid getting into conflict with other nations, including those with maritime territorial disputes. He said he would rather limit sea patrols to Philippine territorial waters. “We will not join any expedition of patrolling the seas. I will not allow it because I do not want my country to be involved in a hostile act... when you patrol not on the high seas but some other else’s territory, whether it is really owned by us... the point is I do not want to ride gung-ho style there with China or with America... We do not go into a patrol or join any other army from now because I do not want trouble,” Duterte said.

"What he said was that in order to avoid any tension or risk of miscalculations, our patrols will be limited to our 12-mile territorial waters,” said DND public affairs service director Arsenio Andolong. In April 2015 during a visit to Manila, US Defense Secretary Ashton Carter announced the US and Philippines had began the conduct of joint patrols “as we continue to explore going beyond towards training -- beyond training towards Philippines-US joint operations."

The Chinese Foreign Ministry spokesman says his country supports the Philippines' crackdown on illicit drugs and will cooperate with the Southeast Asian country in the war against narcotics. "We understand and support the Philippine government's policy under President [Rodrigo] Duterte of prioritizing the fight against drug crime," Chinese Foreign Ministry spokesman Geng Shuang told a daily news briefing on 14 October 2016.

The Filipino president planned to pay an official visit to Beijing on October 18-21 and meet with his Chinese counterpart Xi Jinping. "As I understand it, during President Duterte's visit to China, he will participate in relevant anti-drugs related activities. At present both countries are in close communication about this," Geng said. "Both countries anti-narcotics departments have already begun to explore cooperation. I believe that the results will be seen very soon," the Chinese spokesperson added.

In his departure speech at the Davao International Airport on 16 October 2016 before leaving, first to Brunei Darussalam and then to China, Mr. Duterte said: “I look forward to renewing the ties of friendship between the Philippines and China and to reaffirm the commitment to work closer to achieve shared goals for our countries and peoples.” Duterte saw China as a necessary partner in his war in drugs because it is where illegal drugs entering the Philippines mostly come from.

In a 12-minute China Central Television interview broadcast on 19 October 2016, Duterte cast the two countries as bound as brothers by the South China Sea and mentioned his own Chinese ancestry - his grandfather was an immigrant from Xiamen province - which, he said, explains his personal sincerity. Developing his country's economy was more important than exacerbating tensions with China over the South China Sea, as other U.S.-backed Southeast Asian neighbors would have him do, he said. "They say that all the nations would weigh in by my side, (but) I said it is close to a third world war," he told CCTV. "What would be my point in insisting on the ownership of that body of water when the world is exploding?"

In a speech in front of Chinese businessmen and government officials on 20 October 2016, Duterte commended China for its “sincerity” and support. “China has the character of an Oriental. it does not go around insulting people, insulting on policies to follow them,” he said. Duterte joked that he prefers Chinese loans to American ones since the Chinese “are not eager to collect [debt] and sometimes they forget because of our friendship.... Duterte of the Philippines is veering towards China because China has the character of an Oriental. It does not go around insulting people”. At one point, he referred to President Xi Jinping as "Ji Xinping." But towards the end of his speech, he asked for China’s help in earnest. “I am not asking [something] for free but if China would find in its heart to help us in our needs then we will remember it for all time,” said Duterte, again to applause. “So, please, you have another problem of economics in my country. I am separated from them so I will be dependent on you for a long time,” Duterte said, before chuckling.

China also pledged support for Duterte’s controversial and deadly war against drugs that left more than 3,000 murdered. Manila’s Treasury Secretary Ramon Lopez said the two countries will sign $13.5 billion in deals before the visit wraps. China would also end a travel advisory that discouraged tourists from traveling to the Philippines.

Senator Antonio Trillanes IV disparaged the president's Beijing visit, describing it as further proof that Duterte "MUST be a communist." Social movements have also warned that the present Filipino leadership, in its zeal to abandon the United States, should not abandon its right to sovereignty in a bid to secure an alliance with a rising China.

The Third Quarter 2016 Social Weather Survey was conducted 24-27 September 2016 via face-to-face interviews with 1,200 adults nationwide and with a ±3 percentage-point sampling error margin -- found 55% of Filipinos having “little trust,” 19% undecided, and 22% having “much trust” in China. That yielded a “bad” -33 net trust in the Philippines’ giant northern neighbor. the US has been in positive territory since it first surveyed the superpower in December 1994. Its score has ranged since then from a “moderate” +18 in May 2005 to an “excellent” +82 in December 2013, and has been above +60 since June 2010. Duterte’s pivot was questioned by some analysts who noted that the Philippine economy cannot afford to decouple drastically from its traditional ally and former colonial power.

Foreign Minister Wang Yi met the press 08 March 2017. "Since President Duterte came into office, he has appropriately handled the South China Sea issue and actively improved relations with China. This not only serves the interests of the Philippines, but also meets the expectation of the region. The Philippines has extended a hand of friendship, so of course, China has embraced it with open arms. The turnaround of China-Philippines relations lifts our friendship and benefits our two peoples and the wider region. None of this has happened by accident; it merely reflects what the relationship is supposed to be like.

"At present, the two countries are tapping the full potential of our bilateral cooperation to make up for lost time. In the less than six months since President Duterte's visit to China, nearly 1,000 Chinese tourist groups have visited the Philippines and China has imported over 200,000 tons of tropical fruits from the Philippines. The two sides are having intensive discussions on a range of infrastructural projects, including railways, bridges and dams, and some of them may begin construction within this year. The new Commerce Minister of China is visiting the Philippines even as we speak. This shows China's desire to strengthen friendship and cooperation with the Philippines. The two sides have agreed to establish a bilateral consultation on the South China Sea issue and set up a cooperation mechanism between our coast guards. In short, the China-Philippines relationship has returned to the right path, one that serves the interests of both peoples. Together, the two sides should march forward with unity of purpose."