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Duterte seeks China business agreements

Posted on October 18, 2016

MANILA/HONG KONG -- Before he was elected President, Philippine leader Rodrigo R. Duterte promised to use a jet ski to reclaim a disputed reef seized by China.

Since taking office in June, he has extended the hand of friendship.

The tough-talking Mr. Duterte will bring up to 400 business leaders including some of the Philippines’s wealthiest tycoons on a four-day visit to Beijing starting on Tuesday.

In doing so, he’ll become the first Philippine leader invited to the capital by Chinese President Xi Jinping for one-on-one talks.

“Duterte’s visit is the strongest signal so far that tensions between China and the Philippines have eased off,” said Li Jinming, professor of international relations at Xiamen University’s Research School of Southeast Asian Studies.

“He’s right now distancing the country from the US, but some of that is just rhetoric. We don’t think he will or can cut the US off,” Mr. Li added.

“We’d be curious to know how long these icy ties can last. It might just be a temporary thing.”

Mr. Duterte’s visit will provide an opportunity for a reset of relations with the Philippines’s biggest trading partner, which have been strained by territorial disputes in the South China Sea where as many as six claimants are vying for fish, oil and gas.

In a speech Sunday, Mr. Duterte said he looked forward to exchanging views with Chinese leaders on how to further improve relations, and pledged not to give up on his nation’s claims in the waters.

Even though Filipinos of Chinese descent make up some of the Philippines’s most powerful families, China’s relationship with the Southeast Asian nation nosedived in 2012 after Beijing effectively took control of the Scarborough Shoal, a triangle of reefs and rocks located just 340 kilometers from Manila.

The move prompted then-president Benigno S.C. Aquino III to take a firm stance against China while moving closer to the US, its top military ally.

Mr. Duterte has sought to shift that stance since taking office, threatening to downgrade military ties and using foul language to repudiate concerns of human-rights abuses in his war on drugs that has seen more than 3,000 people killed.

In terms of relations with China, Mr. Duterte’s policies are closer to the days when Philippine leader Gloria Macapagal-Arroyo ran the country from 2001 to 2010. Ms. Arroyo had cut a deal for China’s Export-Import Bank to finance a $500 million rail project linking Manila to fast-growing provinces to the north, which was eventually scrapped under Mr. Aquino. She also approved a 2004 agreement on joint seismic surveys in the South China between China National Offshore Oil Corp. and the Philippine National Oil Company that has since lapsed.

Mr. Aquino made two visits to China, once in 2011 to meet with then-president Hu Jintao, and in 2014 to attend an Asia-Pacific Economic Cooperation Summit. A planned visit by Mr. Aquino to China in 2013 was canceled due to tensions over the South China Sea.

Ms. Arroyo made one state visit to China in 2004.

Mr. Duterte’s business delegation includes San Miguel Corp. President Ramon S. Ang; JG Summit Holdings, Inc. President Lance Y. Gokongwei; Enrique K. Razon, Jr., chairman of gaming company Bloomberry Resorts Corp. and global port operator International Container Terminal Services Inc.; Hans T. Sy, son of the Philippines’ richest man Henry S. Sy Sr. who controls SM Investments Corp.; as well as liquor and tobacco magnate Lucio C. Tan, who also owns Philippine Airlines, Inc.

“Both will try to avoid the mention of the South China Sea ruling, as that’s a non-starter if two countries want to bring the bilateral ties forward,” Mr. Li said of the two leaders.

“Mr. Duterte will throw the word out there that he wants the Philippine fishermen’s fishing rights to be protected in the waters around the Scarborough Shoal, on which China may say joint-fishing can be arranged,” he added.

In return for not raising the South China Sea ruling in his talks with Mr. Xi, Mr. Duterte will be hoping he can persuade China to bring much-needed investment to lagging infrastructure projects in the Philippines.

Voters have grown increasingly frustrated with worsening traffic jams, outdated public transport services and patchy electricity supply.

China’s Foreign Ministry said on Oct. 12 that it hopes Mr. Duterte’s visit will help increase political mutual trust and strengthen pragmatic cooperation. At least a dozen agreements have been finalized for the visit, according to Zhao Jianhua, China’s ambassador to the Philippines.

“The Chinese side attaches importance to developing relations with the Philippines and stands ready to work with them to advance the bilateral relations in a sound and steady manner and create more benefits for both the two countries and peoples,” foreign ministry spokesman Geng Shuang said at a briefing last week.

China said on Friday that it wanted to strengthen its cooperation with the Philippines on combating drug use, with authorities planning for Mr. Duterte to attend several activities related to the fight against drugs during his stay in Beijing. Drug control agencies in both countries have initiated talks that are soon expected to deliver outcomes, the foreign ministry said.

References to the South China Sea in the joint statement will likely be vague, said Kang Lin, a deputy director of the National Institute for South China Sea Studies, China’s only state-backed research institution dedicated to research in the disputed waters.

“The statement may pledge to boost dialogue and communication on mutually concerned matters in order to control disagreements,” Mr. Kang said.

“They may say they’ve reached consensus on jointly exploring the resources in the South China Sea. In one word: Soft ball approach is the way to go.”

Loans for railway or power grid projects in the Philippines could be facilitated through institutions such as the China-led Asian Infrastructure Investment Bank (AIIB), said Mr. Kang, adding that China may also may roll out measures to boost agricultural imports such as bananas and pineapples from the Philippines.

“The AIIB for us is the number one priority,” Finance Secretary Carlos G. Dominguez III told reporters.

“We will discuss with them our whole plan and we will match it with theirs. We’re just new, and I don’t know exactly what they want to do. We have to go to them and see what their priorities are also so we can match our priorities with them.” -- Bloomberg