Chinese President Xi Jinping met Philippines President Duterte, forging bilateral ties that resulted in the signing of 29 bilateral agreements. After President Rodrigo Duterte formally assumed the office on June 30, 2016, the US-Philippine relations began to sour. The drift between the Duterte and Obama relationship…
Chinese President Xi Jinping met Philippines President Duterte, forging bilateral ties that resulted in the signing of 29 bilateral agreements.
Background
After President Rodrigo Duterte formally assumed the office on June 30, 2016, the US-Philippine relations began to sour. The drift between the Duterte and Obama relationship began when the U.S. President expressed his concern over human rights issues on President Duterte’s “War on Criminality and Drugs”.
As of October 2016, Duterte shifted foreign policy to China from the US.
Analysis
China and the Philippines have inked 29 deals including a joint oil and gas exploration pact when Chinese President Xi Jinping was in Manila for a state visit. Despite an existing territorial dispute over the South China Sea, President Xi visited Manila upon the invitation of President Rodrigo Duterte. This marks the first state visit of a Chinese president in 13 years.
Among the agreements signed was the memorandum of understanding on cooperation on the Belt and Road Initiative. Xi, in his press statement, personally invited Duterte to attend the 2nd Belt and Road Forum in China in April 2019. “The two sides will seek greater complementarity between China’s Belt and Road initiative and the Philippines development strategy and make our cooperation more comprehensive and balanced,” he said.
The Philippines’ Department of Finance (DOF) signed a memorandum of understanding (MOU) with the Bank of China that aims to enhance Philippine-Chinese economic relations and bring more renminbi-denominated funding to the Philippines. More Renminbi funding will make foreign investments more convenient and cost-efficient. The DOF reported that the Philippines and China exchanged documents on three economic agreements in implementing key infrastructure projects in Mindanao under the “Build, Build, Build” (BBB) program. The DOF said the MOU also provides assistance from the Bank of China in line with the country’s future issuances of ‘Panda bonds’ in the Chinese debt-capital market. The Bank of China had served as one of the lead underwriters for the Philippines’s first Panda bond float of RMB 1.46 billion in March 2018.
In October, the Bank of China along with 13 partner local banks signed a memorandum of agreement (MOA) forming the Philippine RMB Trading Community, which provides a local platform for direct RMB-peso foreign exchange. The platform and the new RMB funding are both in line with the government’s plan to diversify its currency basket and attract greater cross-border trade and investment.
Dominguez and Commerce Minister Zhong Shan of China signed an MOU on “Jointly Promoting the Cooperation in Key Infrastructure Projects in the Davao Region.” The finance chief also exchanged an MOU with Wang Xiaotao, the chairman of the China International Development Cooperation Agency (Cidca), that provides the framework for China’s support for the feasibility study of the Duterte administration’s major projects. Cidca also exchanged with the DOF the document that provides financing for new projects covered by the Philippines-China Agreement on Economic and Technical Cooperation. These new projects covered by the 500 million RMB includes financing for the Davao River Bridge (Bucana) Project and the donation of x-ray machines and scanning technologies to the Bureau of Customs and other projects to be mutually agreed upon by the two governments.
Zhong signed a handover certificate that served as the Philippines’s acknowledgement of the receipt of China’s $1-million humanitarian cash assistance for the victims of Typhoon Mangkhut, locally known as Typhoon Ompong. The leaders also discussed mutual concerns on maritime cooperation, as well as defence, security, law enforcement, transnational crime, and strengthening their partnership in combating the trafficking of illegal drugs.
Counterpoint
Meanwhile, Philippines government ministers met with a top adviser of Japan’s prime minister in an effort to move forward major infrastructure projects, just hours after a visit by the Chinese president pledging to do the same. Japan will finance 156.4 billion yen ($1.39 billion) for the construction of a subway in the capital Manila, rehabilitation of one of its troubled elevated rail lines, a new Manila bypass road and a new airport on Bohol, a tourist island & flood control. The loans are part of a 1 trillion yen aid and investment package offered in 2017 by Japanese Prime Minister Shinzo Abe.
Assessment
Our assessment is that the Philippines requires funding for Duterte’s infrastructure program ‘Build Build Build’, which is the centrepiece of his economic strategy. It is ‘the golden age of infrastructure’ in the Philippines which is an age-old traditional ally of the US. China and Japan have a great track record and capability in infrastructural developments. We believe that infrastructure development will remain the prime driver for growth in emerging countries and China is able to leverage this by bridging finances in a cost-efficient and transparent manner.
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