September 21, 2019
PRESIDENT Rodrigo Duterte is expected to maintain close ties with China despite its refusal to budge on its disputed claims to the South China (West Philippine) Sea, according to a Fitch Group unit.
In a report released on Friday, Fitch Solutions said Duterte’s August 28 visit to China signaled his intent to maintain warm relations. It also said that although he faced political pressure in June after a Chinese vessel rammed into a Philippine fishing boat in the Reed Bank and caused the latter to sink, the President argued that he had a deal with Beijing that allowed the Chinese to fish in the country’s exclusive economic zone (EEZ).
“Duterte will continue to view the benefits of Chinese economic cooperation as worthwhile enough to forgo taking a more hostile stance in the maritime dispute,” it added.
Potential energy reserves in the Reed Bank, which is expected to ease the Philippines’ dependence on fuel imports; and China’s Belt and Road Initiative (BRI) and the
Duterte administration’s massive “Build, Build, Build” infrastructure program might be the reason behind the former Davao City mayor’s soft approach toward Beijing.
“With the US-China trade war increasing the number of companies seeking to relocate away from China, BRI integration could boost Philippines’ attractiveness,” Fitch Solution said.
“China accounted for around 13 percent of [the] Philippines’ exports in 2018, although it sh ould be noted 15 percent went to Hong Kong, which raises the prospect of a greater reliance on Chinese demand,” it added.
“Chinese investment has also been growing as a share of total approved foreign investment into the Philippines, rising to 10.3 percent during Duterte’s presidency, compared to 6.1 percent and 4.7 percent over the five and 10-year periods until [the second quarter of 2019].”
While Duterte seeks strengthened ties with China, the Fitch unit said he would not completely align Manila’ policies with Beijing’s, as seen with his decision not to shut down Philippine online gaming operators, or POGOs.
“Duterte cited economic reasons for the decision and we believe Duterte will align policy in areas which he believes can benefit the Philippine economy,” it said.
“Additionally, strong domestic opposition to Chinese influence and continued military cooperation with the US in the [South China Sea] may limit the extent to which Philippine-China ties improve,” Fitch Solutions added.
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