Learning to live with China

P-Noy traces his ancestral roots in Hongqian in Fujian province, somewhere in Southern China. Tita Cory took the time to visit the village during a visit to China while she was president and P-Noy visited it during his last state visit in 2011. Yet, it seems that our ties with China had never been lower than during the last four years of P-Noy’s watch.

It was so bad that depending on whose version one hears, P-Noy was either disinvited or had no intention of attending an Asean trade expo in Nanning at a time when the Philippines was the featured country. Our ties with China had been strained by maritime territorial disputes so seriouas that an accidental shooting incident cannot be ruled out.

It didn’t help that our own foreign affairs secretary chose to conduct a long running public argument with China on the maritime issues. While it was laudable for him to stand up for our country’s rights, conducting diplomacy via press releases seems like an odd way of conducting our foreign relations.

It also didn’t help that we openly rushed to hide behind the might of US military forces in the region as a means of countering the Chinese military threat. It irritated China even more, but got us nothing. P-Noy signed EDCA, an agreement with the US that promises us little by way of a commitment to come to our defense should we get into trouble with China in the West Philippine Sea.

The territorial problem aside, it is clear P-Noy and his foreign secretary mismanaged our China relations from the start. P-Noy’s insistence on a seemingly unqualified ambassador to China meant we had no ambassador in Beijing for a long time.

P-Noy’s nominee was eventually rejected by the Commission on Appointments. The one who assumed the position was recovering from a stroke and her frail health forced her to relinquish the job soon after. It was obvious our foreign service didn’t have a deep bench of seasoned China experts with the knowledge and connections to present our case in Beijing.

Now it seems P-Noy is realizing that our ties with China has to improve, even as the territorial dispute remains as the big issue looming in the background. P-Noy said in Beijing during the APEC Summit meeting this week that indeed, we need to have harmonious relationship with everybody and observers took that to mean specially with China, the regional superpower.

Indeed, P-Noy recalled that he and then Chinese President Hu Jintao agreed that the “be-all and end-all of our relationships do not have to be with just one particular issue” because there were many other aspects that must be considered. He didn’t specifically mention the territorial dispute, but what else could he be referring to?

This is also the position of our foreign affairs department: “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.”

As expected, the cabinet members in charge of economic affairs would want nothing better than isolating the territorial dispute from normal economic ties. Finance Secretary Purisima said the same thing during the World Economic Forum held in Manila last May and DTI Secretary Greg Domingo too.

That way of thinking makes sense. P-Noy said it was in the interest of the Philippines to achieve harmony with all of its neighbors because there were many practices that each country could benefit from when faced with common challenges. He must be thinking of economic ties because since the dispute escalated, we have been getting the shorter end of the stick in our economic relations with China.

The PhilStar reporter covering APEC reported that P-Noy said Philippine companies invested about $2.5 billion in the Chinese economy and in turn, China gave about $600 million in investments. “We send something like 800,000 tourists into China’s way and China sent us 200,000 tourists.” China even banned Chinese tourists from coming here, citing peace and order problems threatened their personal security as its excuse.

Former Foreign Secretary Roberto Romulo confirmed the lop sided nature of our economic ties with China in a recent speech. “In terms of investments, in 2013 the Philippines only captured less than two percent of Chinese investments in Asean, the second lowest after Brunei.

“Indeed, the last major investment by a Chinese company in the Philippines was the $1.6-billion stake by the State Grid of China in the National Grid Corp. of the Philippines which won the bid to operate power distribution in the country in 2007. Since then there has been sporadic participation by Chinese firms in various infrastructure projects though not of the same magnitude.

“Interest in investments has from time to time surfaced, but so far nothing of significant scale has been realized. On tourism, we may boast of the growth of Chinese tourists from virtually zero 10 years ago to more than 400,000 in 2013. But this pales in comparison to the two to three million average of Chinese tourists to Malaysia and Thailand. Now they are down to a trickle. On scientific and technical cooperation and on agricultural technology transfer arrangements, new projects have virtually ceased.”

Former Sec. Romulo rightly pointed out that on the ground, business to business dealings will be as normal as possibly can… but the quality of official ties is always a big factor. “While careful not to harm people-to-people relations and allow Chinese business to go where they can make profits, they take the cue from government and will also be constrained from being more aggressive in investing in the Philippines.”

Sec. Romulo continues: “Imports and exports volumes may indeed expand – but a closer look at the composition of that trade shows that much of that momentum is generated by the global value chain – intermediate inputs from various countries assembled into final product in one country.

“More than half of our exports to China are made up of electronic components where trade is governed by multinationals. Where the Chinese government has a say – such as in the imports of bananas – it will have no hesitation to place sanctions when it sees an excuse to do so, never mind if it is flimsy…

“But even in the best of times, the Philippines still lagged behind its Asean partners in the volume of two way trade, ranking last among the Asean-5 with only a third of Malaysia’s total trade with China.”

From the perspective of Sec. Romulo, “The poor performance of Philippine economic relations with China relative to our Asean neighbors in the past can be attributed to a combination of hesitancy in trusting our economic future in China and our own anemic economic growth. But it does point out the huge potential for us.

“Unfortunately, now that we are in a position to take advantage of China’s potential, our diplomatic relations are at a historic low.  Achieving the level of engagement of the other Asean economies with China will just have to wait until another day.”

Why should we care to bring our relations to normalcy? Sec. Romulo points out that “China’s inexorable rise as the preeminent power in East Asia is a reality that we have to accept and hence engagement and mutual-accommodation is unavoidable. With China becoming a global economic superpower, it will have enormous influence on our economic well-being – as a market for our products, as a crucial source of investments, and of technology.

“And so while it is correct to evoke principles of international law to condemn China’s perceived ‘bullying’ behavior, it must not be forgotten that the goal of diplomacy is not about gaining moral victory, but rather achieving an outcome that promotes the national interest. Given the importance of China to us means following a course that allows us to manage tensions, re-build ties, and envision a future marked by cooperation rather than conflict.”

The unfortunate thing about our current ties with China is how people on both sides of the pond have taken on the territorial dispute as a matter of national honor with little allowance for compromises. That is largely the fault of both governments who whipped up nationalist sentiment among their people to the point that their ability to maneuver has become limited.

This week of high level diplomacy among the leaders of APEC and later of Asean will hopefully generate enough reasons to think that some peaceful means of co-existence can be achieved among the nations sharing a common pond, South China Sea or to us, the West Philippine Sea.

Peace is the only acceptable outcome for all the people in the region. Prosperity and economic growth, as P-Noy rightfully pointed out, is possible only with peace and the stability it brings.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco