By means of John Victor D. Ordoñez, Reporter
MANILA is unlikely to cut trade and business ties with China over tensions in the South China Sea, but they could make it harder for Chinese investors to expand their businesses in the country, according to a Virginia-based research group .
“At least [tensions] complicate things and slow down the process somewhat for Chinese investors,” Samantha Custer, director of policy analysis at Virginia-based AidData, told a news briefing at the U.S. Embassy in Manila on Wednesday.
“I don’t think the government – I don’t understand that much at this point – will completely sever ties with China,” she added.
Despite possible “economic arm-twisting” by China amid maritime tensions, the government of President Ferdinand R. Marcos Jr. is likely to continue seeking trade and economic ties with other countries without cutting ties with Beijing.
“What we have observed is that the Marcos administration seems quite interested and willing to do new deals with Australia, Japan and the US, presumably as a hedging strategy,” Ms Custer said.
Tensions between the Philippines and China have worsened over the past year as Beijing continues to block resupply missions at Second Thomas Shoal, where Manila has stationed a handful of soldiers on a World War II ship it grounded in 1999 to stake its claim to the sea to strengthen. .
Manila, Washington, Ottawa and Canberra held their first joint military exercises in the South China Sea on August 7 and 8, amid Beijing’s increased military buildup in the waterway.
A Philippine task force handling maritime disputes with Beijing has accused a Chinese ship of deliberately ramming the Philippines’ largest coast guard ship, named BRP Teresa Magbanua three times near Sabina Shoal.
The Chinese side made a similar claim, with coast guard spokesman Liu Dejun saying the smaller PCG ship had deliberately collided with their vessel.
“AidData is right to say that trade and economic ties with Beijing should not suffer due to the ongoing tensions in the West Philippine Sea,” Terry L. Ridon, public investment analyst and chairman of think tank InfraWatch PH, said in a statement Facebook Messenger chat. , referring to areas of the South China Sea within the country’s exclusive economic zone.
“Beijing and Manila depend on each other for the exchange of various goods and access to each other’s markets must continue despite territorial concerns,” he added.
Bryan Burgess, senior policy specialist at AidData, said China could impose sanctions and restrict Philippine access to Chinese markets if tensions worsen. He called Beijing’s ban on Norwegian salmon an example of “economic arm-twisting.”
“We haven’t seen many examples of that in the Philippines, but there is significant potential there,” he told the same briefing.
Ms. Custer said it is not in the Philippines’ interest to sever trade ties with China, adding that Manila should boost negotiations with Beijing and its other partners.
According to a 2024 study by AidData, Beijing financed about 233 projects in the Philippines worth US$9.1 billion between 2000 and 2022.
The Marcos administration has halted loan negotiations with China for the P142 billion South Long-Haul project in the Bicol region, the P50 billion Subic-Clark railway project and the first phase of the Mindanao railway project to worth P36 billion.
The National Economic Development Authority previously said it would rely on the Asian Development Bank’s technical know-how to finance the South Long-Haul project after Chinese loans failed to materialise.
In March, Chinese Ambassador to the Philippines Huang Xilian told a business forum in Manila that countries that “talk down to China” would miss their ambitious economic expansion target of about 5% this year.
China has been the Philippines’ largest trading partner and one of the largest sources of foreign investment for eight years in a row, he said.
Mr. Marcos said in May that countries should view tensions in the South China Sea as a major problem for their economies, citing the waterway’s importance to global trade.
In his third speech to Congress in July, he said the Philippines will continue to find ways to de-escalate tensions in the waterway without compromising its position or principles. “The Philippines cannot give in. The Philippines cannot opt out,” he said.
More than $3 trillion worth of trade passes through the sea every year, almost all of which China claims. A United Nations-backed tribunal in 2016 invalidated his claim of illegality.
“I think your negotiating hand is stronger when you can have more people around the table,” Ms. Custer said. “The smart play is probably hedging, especially for the Philippines.”