icrossculture

The Complex Interdependence of China's Belt and Road Initiative in the Philippine

Aaron Jed Rabena
Culture Specilist

The Complex Interdependence of China's Belt and Road Initiative in the Philippin

Abstract

Complex interdependence refers to the multiple channels of interaction and agenda in interstate relations, which involve domestic (public and private) stakeholders and nonmilitary issues. Since the Belt and Road Initiative (BRI) came into being, most analyses have largely focused on infrastructure development. The BRI not only has the potential to impact a host government's socioeconomic agenda but also its overall bilateral relationship with China. It is therefore imperative to measure the progress and prospects of China's Belt and Road projects in the Philippines, in line with Beijing's strategic goal to deepen complex interdependence with partner‐states, against the BRI's five major dimensions of cooperation: (a) policy coordination, (b) infrastructure development and connectivity, (c) trade and investment facilitation, (d) financial coordination and integration, and (e) peopletopeople ties and connectivity. These, together with the examination of China's BRI projects in other Asian countries as modes of comparison, are crucial in assessing probable outcomes in the Philippines. The paper includes policy recommendations based on possible pitfalls and risks that may hamper the advancement of the Belt and Road projects in the Philippines and SinoPhilippine bilateral interaction.

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1 INTRODUCTION

China's highly celebrated “Belt and Road Initiative” (BRI/) continues to draw praise and disapproval from “Sinophiles” and “Sinoskeptics” alike. Many have branded the BRI as “China's Marshall Plan,” while China, for its part, has called the Initiative the “Project of the Century” that is part of sharing the “Chinese Dream” of prosperity with other countries. 1 Sinophiles argue that the BRI heralds China's “ascendance in the global arena” through the provision of public goods in the form of capital and technical services to other countries (Yu, 2016, p. 33), which, in turn, reinforces China's position and influence in regional and global institutions (Wang, 2016, p. 455). Comparisons of China's BRI with Japan's regional leadership role through the “flying geese” model of economic development and integration during the 1980s have also been made by some scholars (see Grimes, 2016). To Sinoskeptics, China's BRI is a “neo‐imperial project” (Griffiths, 2017), a form of “empire building” (Phillips, 2017), and an effort that will “shake‐up economic order” (Huang & Perlez, 2017) or cause a “rebalancing of world order” (Kassim, 2017). Other naysayers claim that the Belt and Road only leads to a “debt trap” (Chellaney, 2017) or “debt bondage” (Corr, 2017), especially for developing countries due to the usurious rates that China aims to impose on BRI member‐states.

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For instance, an Indian scholar takes the case of Sri Lanka in agreeing to a “debt for equity” swap with China due to their inability to pay for the loans used for the development of the Hambantota Port (see Marcelo, 2017). In the Philippines, while the government has a positive perception and reception of the BRI, some sectors are concerned in that there might be a repeat of past experiences with China where projects were marred with corruption, lack of transparency, over‐pricing, and absence of competitive bidding (Cardenas, 2017). 2 Additionally, there are those who have the impression that China is using economic carrots for political returns or objectives in the South China Sea (SCS; Acosta, 2015). Presently, though, the bigger picture shows that Duterte's foreign policy strategy toward China has yielded gains in terms of shifting the bilateral dynamics from confrontation to cooperation, that is, advancing the overall Sino–Philippine relations within the BRI framework. In fact, according to the Economist Intelligence Unit in its 2017 China Going Global Investment Index Report, the Philippines has become a more attractive destination for overseas Chinese investment, ranking 29th compared with 39th in 2015 (cited in Cigaral, 2017). The Report also mentioned that the Philippines is a favourite in the areas of telecommunications, energy, and consumer goods sectors and was praised for low financial risks and favourable returns on assets.

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2 THE BRI IN CHINA'S FOREIGN POLICY

The BRI, drawn from the epic ancient Silk Road, was formally announced in 2013 and is highly regarded in both Chinese domestic and foreign policy. In the 19th Communist Party of China Congress last year, the BRI was enshrined into the Party Constitution, marking its significance as a national policy and priority for the Chinese political leadership. Under Chinese President Xi Jinping, China's principal foreign policy agenda is the achievement of a Community of Shared Future for Mankindof international collectiveness, inclusiveness, and coprosperity. 3 This diplomatic mantra is accompanied by other core diplomatic works such as Major Country Diplomacy with Chinese Characteristicsthat embodies greater international responsibility and the New Model of International Relationsthat emphasizes mutual respect, fairness, and winwin cooperation. One of the diplomatic tools being used to carry these out is the BRI. The BRI is a Chinaled regional integration project comprised of more than 60 nations that hold onefourth of the world's gross domestic product (GDP) and around 50% of the global population. There is a common misconception among many analysts that the BRI only deals with infrastructure development and is a unilateral initiative that China aims to impose on partner countries. The BRI, being a regional policy framework and strategy, aims to create a “sphere of confluence” by integrating the continents of Asia, Europe, and Africa through overall capacity building, that is, hard infrastructure (ports, airports, railways, roads, bridges, energy stations, industrial zones, oil and gas pipelines) and soft infrastructure (telecommunications, peopletopeople linkages, and financial cooperation) through loans, grants, and investments. 4

 

The interconnectivity of these physical and social structures operate based on the principles of open consultations, joint contribution, and mutual benefit. Essentially, the BRI is plausibly in consonance with the socalled Complex Interdependence theory (Keohane & Nye, 2004, p. 21) because it advances convergence in five major dimensions of cooperation involving both public and private domestic stakeholders in multiple channels of nonmilitary issues: (a) policy coordination, (b) infrastructure development and connectivity, (c) industrial investment and trade connectivity, (d) financial cooperation and integration, and (e) peopletopeople ties and connectivity. 5 Included in the five dimensions mentioned is the socalled Digital (Information) Silk Road which focuses on telecommunications and ecommerce. There are internal and external considerations in the launching of the BRI. Internally or domestically, the BRI is a development strategy, which is designed to empower China's less developed regions, promote Chinese industries through linkages (economic and trade cooperation agreements) with overseas markets, and tackle overcapacity issues amidst a New Normalof structural shift to a slower but quality (higher value) economic expansion. All these are well positioned because China is already a net exporter of capital with trillions of dollars in reserve. From an economic standpoint, therefore, it is apparent why the lead agency for the BRI is the National Development and Reform Commission. Externally, however, and from a strategic point of view, the BRI is also arguably a response to the 2011 US Pivot or Rebalance to Asia, which was perceived by Beijing as an overt containment effort through increased American military presence and security posturing around their periphery. Of all countries in the world, China is the most dependent on the SCS, as a strategic Sea Lane of Communication, for commerce (China Power Team, 2017). In fact, in 2016, over 60% of China's maritime trade (40% of total trade) passed through the SCS and almost 80% of China's total oil imports passed through Malacca Strait (China Power Team, 2017). Hence, as a countermeasure to possible American strategic pressure in East Asia (West Pacific) and vulnerability to US naval interdiction in the Malacca Strait that could lead to a possible “Malacca Dilemma,” China resorted to westward “economic power projection,” through the BRI, so as to simultaneously consolidate economic and strategic partnerships in Asia, Europe, and Africa. This type of geoeconomic countercontainment strategyof leveraging China's economic centrality enables Beijing to accelerate the shift in the locus of economic activity through new access routes, maximize the stakes of conflict, and offer great disincentive for military action or political disruption, whether as against China or other countries (areas) in the Belt and Road region. 6 In China's terms, it is called the Silk Road Spiritof peace and cooperation, openness and inclusiveness, and mutual learning and mutual benefit.” China expects that by 2025, BRI trade flows would reach $2.5 trillion, with the end goal that by 2050 BRI countries should already comprise around 80% of world GDP (see Fu, 2017). Bloomberg (2018) reports that Chinese money will increase export and imports of BRI countries by 10% and 5%, respectively, in the next decade. In terms of investments, China has been successful in signing bilateral investment treaties with 53 BRI countries (Yang, 2017a). According to the Chinese Ministry of Commerce, in the first three quarters of 2017, Chinese businesses were instrumental in creating 75 economic and trade cooperation zones in 24 Belt and Road countries, leading to the creation of 209,000 jobs (Chen, 2017). Morgan Stanley forecasts that China's investments to nations along the BRI “will grow at an annual pace of 14% between 2018 and 2020” (cited in Bloomberg, 2018).

 

With greater economic and social interface, China intends to achieve a harmonious external environment and facilitate the accumulation of Chinese soft power by demonstrating leadership—through Xi Jinping's foreign policy precept of “striving for achievements”—in addressing economic insecurity problems and nontariff barriers that frustrate the creation of a seamless regional (and interregional) supply chain. Apart from these, the BRI gives China a platform for promoting the multilateral trading system, Asian regionalism, and globalization—albeit with Chinese characteristics. Similarly, it has long been China's desire to democratize and decentralize the existing international order. The Vision and Action on Jointly Building Silk Road Economic Road and 21st Century Maritime Silk Road issued in 2015 expressly affirms that there is a “trend towards a multipolar world” (National Development and Reform Commission, 2015). The BRI should not be interpreted as an initiative that only involves the Chinese government or its stateowned enterprises. One should also take note of the role that Chinese private companies play in the BRI. Notably, from 2014 to 2016, companies listed on the Shanghai and Shenzhen stock markets, which includes electronics giant TCL and bus maker Yutong, mentioned the BRI gains in their annual reports, while 86 others have made preliminary achievements (China Daily, 2017a). In the 2017 Belt and Road Big Data Report published by the State Information Center, among the top 50 of the most involved and influential Chinese enterprises, 42% are private, 56% are stateowned enterprises, and 2% are joint ventures (Yang, 2017b; Yang, 2017c). Most of these companies are not only in the areas of manufacturing and construction but also in financing and IT (e.g., Alibaba, Huawei, Lenovo, Tencent, and JD). The Report also mentioned that the “participation (of private enterprises) into the Initiative enhances the reputation and influence of the Chinese brands and products.” In fact, when China announced the BRI, Jack Ma, the popular Chinese ecommerce mogul, was quick to follow and expand in the BRI states and was even called a shadow diplomatwho travels and meets with state and highlevel leaders (Cheng, 2017). In other words, the Chinese government is helping Chinese companies expand their business and set up supportive new global rules” (Senmao & Yu, 2017). Since 2013, the BRI has had both records of successes and breakdowns. The latter involve the cancellations and delays in the conduct of executing signed BRI cooperation agreements such as the JakartaBandung highspeed rail in Indonesia (Negara & Suryadinata, 2018). In terms of positive outcomes, Pakistan makes a good case because the $62 billion 3,218km ChinaPakistan Economic Corridor (CPEC), known to be the “showroom” of the BRI, has started to show upbeat signs. The CPEC, according to a data used by Deloitte, is expected to generate 700,000 jobs from 2015 to 2030 and spur Pakistan's growth rate by 2.5% (see Deloitte). Of the 67 projects in the CPEC, more than 50 have already been negotiated and initiated as of late last year (see CPEC). In Malaysia, with which China has territorial disputes, Beijing has committed to finance the EastCoast Rail Link ($13 billion), which would link the Eastern and Western peninsulas of Malaysia. The project is estimated to generate 86,000 jobs during the construction phase and actual operation (Feng, 2017). Other projects in Malaysia include the China–Malaysia Kuantan Industrial Park, Melaka Gateway ($7.2 billion), and Xiamen University in Malaysia. 7 Moreover, Malaysian goods can already be shipped to China via Alibaba's Alipay due to a regional ecommerce hub that was launched by the Malaysian government and the Alibaba Group last year (Nan, 2017).

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Another SCSclaimant, Vietnam, had its policy of Two Corridors, One Economic Circleformally coordinated with the BRI while the Cat LinhHa Dong metro line in Hanoi has been classified by both Socialist countries as a BRI project (Hiep, 2018, pp. 35). In Myanmar, the 771km ChinaMyanmar oil and gas pipeline project with modernized port and facilities in the island of Made in the Bay of Bengal has been completed early last year (Xinhua, 2017a). Also, in the latter part of last year, both countries agreed to proceed with the ChinaMyanmar Economic Corridor, which involves the construction of a deepsea port and industrial park in the coastal city of Kyaukpyu, which sits on the Indian Ocean. Additional Belt and Road projects that have made progress include the China–Laos Railway Project ($6 billion), the industrial expansion of the Sihanoukville Special Economic Zone (100 factories opened and more than 16,000 people employed), Sino–Singapore Suzhou Industrial Park, and the Sino–Singapore Chongqing Industrial Zone (Xinhua, 2017a). Comparably, the Thai–Chinese Rayong Industrial Zone, which has drawn dozens of Chinese enterprises with investments worth $2.5 billion and an industrial output value of $8 billion, has led to the production of around 20,000 jobs (Xinhua, 2017a). 8 Not to be left unsaid, the construction of the ChinaThailand highspeed rail was officially launched in December last year. Even American enterprises such as GE and Honeywell have decided to partner with Chinese companies to capitalize on the business opportunities along the BRI (Xin, 2017). Wanting to join the bandwagon, Japan had also expressed interest in the BRI through the provision of financial assistance to SinoJapanese privatesector partnerships working on projects in thirdparty BRI nations (Reuters, 2017). Noticeably, the BRI is an “open regime” because of its inclusiveness and continuous evolution through the occasional announcement of new measures such as China's “Vision for Maritime Cooperation Under the BRI,” proposal to integrate the BRI with the Association of Southeast Asian Nations (ASEAN) Master Plan on Connectivity 2025, and the launching of the Polar Silk Roadand the Space Silk Road. It is mainly because of these that the BRI has somewhat gained a multilateral character.”

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3 BRI IN THE PHILIPPINES

The BRI projects in and with the countries mentioned above, and the emerging Chinese initiatives in the Philippines, are demonstrative of the successful projects in the five dimensions of cooperation that China published in its 2017 Belt and Road Big Data Report in terms of the following: signed cooperation agreements, established direct air routes, number of trains put into service, investments of Chinese enterprises in BRI countries (viceversa), economic and trade zones setup, signed bilateral currency swap deals, availability of the China Unionpay, sistercities forged, increase in tourist exchanges, implemented visafree policies toward China, and the rise in number of foreign students in China (see Belt and Road Portal, n.d.). China's economic diplomacy on steroids” or the BRI has promising prospects in Philippine development agenda. Foremost, however, that should be noted about the BRI is that it has a feature that is “silent,” meaning that there are cases where China has not signed a specific Belt and Road Memorandum of Understanding (MOU) with a certain country but the nature of cooperation agreements signed are well within the BRI framework as stated in the Vision and Action on Jointly Building Silk Road Economic Road and 21st Century Maritime Silk Road and have been listed as deliverables in the Belt and Road for International Cooperation and the annual Belt and Road Big Data Report (see China Daily, 2017b). In the case of the Philippines, there has been both explicit mentioning and silent attribution. Regardless of the latter, Philippine President Rodrigo Duterte's attendance to the historic Belt and Road Forum for International Cooperation, together with 28 other heads of state in May last year, is an open recognition from Beijing that the Philippines is part of the BRI. This puts an end to widespread suspicions in Manila as to whether it is a member of the BRI given that earlier maps published by China did not include routes passing through or covering the Philippines. 9 With Duterte's green light of comprehensive partnership with China and lowkey approach on the SCS, positive outcomes are apparent in that bilateral mechanisms have been established (e.g., Bilateral Consultation Mechanism and Joint Coast Guard Committee) and reinstated (e.g., Foreign Ministry Consultations, Joint Commission on Economic and Trade Cooperation, Annual Defense Security Talks, among others). Highlevel visits have also resumed, with Duterte having made two trips to China within his first 7 months in office and the Chinese side making three highlevel visits (VicePremier Wang Yang, Foreign Minister Wang Yi, and Premier Li Keqiang) to the Philippines within the same time period. Moreover, the Philippine public's perception of China has also changed, with more Filipinos starting to believe China is already the world's leading economy (Bishop & Poushter, 2017). For the Philippines, BRI membership translates into greater access to the “Red Market” and positions Manila on the radar of Chinese investors and creditors (expanded source of financial channels). The BRI comes at an appropriate time because the Philippines had long suffered from acute infrastructure problems that have become a major setback in promoting industrial and national development. The World Economic Forum's Global Competitiveness Index ranked Philippine infrastructure (roads, railroads, ports, air transport, electricity, and telecommunications) seventh out of nine ASEAN countries (Dela Paz, 2017). In fact, in Manila alone, $70 billion are being wasted every year due to inefficiencies caused by the lack of proper infrastructure, according to a 2017 report by the Japan International Cooperation Agency (cited in De Vera, 2018a). From a security standpoint, the Philippine Defense establishment believes that the BRI could be helpful in addressing insurgency problems and political instability in Mindanao as infrastructure development results in the proliferation of economic opportunities (GMA News, 2017). Given the Philippines' continued robust economic performance, growing at 6.7% last year, experts are in agreement that the country can sustain high economic growth rates and achieve inclusiveness through more infrastructure investment. Since Duterte's visit to China in 2016, more than 20 bilateral agreements have been signed, which is reflective of how China is advancing cooperation in the BRI's five major dimensions of cooperation.

 

In the first dimension of cooperation (policy coordination), China's goal is to make its policy aligned, complementary, and more interdependent with BRI partner countries because coordinating policies mean plotting the longterm trajectory of bilateral ties. In this dimension, apart from bilateral cooperation agreements on infrastructure development, financial cooperation, and trade and investment facilitation, both China and the Philippines have signed a SixYear Development Program for Trade and Economic Cooperation in March last year, which aims to gradually harmonize mutual development goals and interests within the BRI framework. This move is also indicative that China would increase its meager investments (one of the least in ASEAN) in the Philippines (see Habito, 2017). In 2016, investments from China was only 0.39% visàvis the United States' 30% and Japan's 11% (Habito, 2017). Complementing the SixYear Development Program is the agreement of the Bureau of Investments and the Bank of China on the 20172019 Investment Priorities Plan for Chinese Companies, which is meant to facilitate businessmatching activities and industrial linkages. With respect to implicit policy coordination, Duterte himself has said that the BRI is in line with his Golden Age of Infrastructure” (Xinhua, 2017b). The Golden Age of Infrastructure or the “Build Build Build Program” is the Duterte administration's development and economic growth strategy of massive spending by allocating $170 billion or 7.4% of GDP for infrastructure construction and modernization by 2022. 10 The Build Build Build Program, which is incorporated in the Philippine Development Plan (20172022), is part of the Ambisyon Natin 2040 (longterm vision) and the Dutertenomicsgoal of social inclusiveness and decentralization of growth centers in the Philippines. The Philippine government expects that infrastructure investment would drive GDP growth to 7%–8% from 2018 to 2022 (from the 6.2% in the past 6 years) and bring down unemployment rate to 3%–5% (from 5.5% in 2016) and poverty rates to 14.6% (from 21.6% in 2015; Tubayan, 2017). With the BRI and its support for free trade, the Philippines would develop new (enlarge) markets and deepen regional linkages (Dominguez cited in Padin, 2017). And with more ports and airports, transportation (transaction) costs to regional areas would be significantly reduced and the Philippines' manufacturing industry, particularly the electronics producers (manufactured goods) and the food exports sector would be the top gainers (Dominguez cited in Padin, 2017). Domestically, more ports also align with the country's plan to modernize the interisland connectivity project called the RollOn/RollOff Terminal System (RRTS) or the Philippine Nautical Highway System. In the second dimension of cooperation (infrastructure development and connectivity), China has pledged $7.34 billion in soft loans or official development assistance and grants for largescale Philippine infrastructure projects and flagship programs. This amount forms part of the $24 billion worth of agreements Beijing committed to Duterte in his first visit to China in 2016. Interestingly, from 2016 to 2017, Bloomberg accounts that loans and grants from China registered an astronomical 5,862% increase (cited in Calonzo, 2018). According to the Department of Trade and Industry (DTI), the $24 billion in commercial and governmenttogovernment agreements with China are estimated to create two million jobs in the Philippines (cited in Ranada, 2016). In the $7.34 billion, which is divided into two baskets, plans include 10 bigticket projects, two bridges in Metro Manila, two drug rehabilitation centers in Mindanao, and the reconstruction efforts for the Islamic State of Iraq and Syria (ISIS)sieged city of Marawi in Southern Philippines.

 

The first basket of loans through official development assistance ($3.21 billion) include the following: the New Centennial WaterSource Kaliwa Dam Project in Quezon province ($234.92 million), the Chico River Pump Irrigation Project in Cagayan province ($72.49 million); and the NorthSouth Railway Project (South Line) in Southern Luzon ($2.91 billion). 11 The second basket of loans ($3.98 billion), which is still being finalized, consist of the 70km SubicClark Railway ($947.64 million), Davao City Expressway ($424.81 million), and the PanayGuimarasNegros InterIsland Bridge. 12 The SubicClark cargo railway project is expected to facilitate the movement of goods and services between major economic hubs in Central Luzon such as the New Clark City, Subic Bay Freeport Zone, and Tarlac Industrial Park, and the Clark Freeport and Special Economic Zone. The remaining $148.22 million in grants would cover the Binondo–Intramuros and the Estrella–Pantaleon bridges ($99.27 million) across the Pasig River, two drug rehabilitation centers ($22.95), and war rehabilitation efforts in Marawi ($23 million). 13 Another project, said to be a crown jewel in the BRI project in the Philippines is the New Manila Bay City of Pearl,a 407hectare central business district and smart city, which is to be built on reclaimed land adjacent to Manila through a publicprivate partnership. Chinese capital is also being eyed in the possible construction of bridges that would strengthen interisland trade and linkage (i.e., one connecting the cities of Matnog, Bicol, and Allen, Samar; another connecting San Ricardo, Southern Leyte, and Surigao City; ABSCBN News, 2017). Other projects in the pipeline include the longest coastal bridge (BataanCorregidorCavite; Supnad, 2017), Mindanao Railway Project (Talavera, 2018), and the new airport in Manila worth $10 billion (De Vera, 2018c). With adequate infrastructure, the country's outlying regions will be connected to the mainstream economy (Gatpolintan, 2018). In the third dimension of cooperation (trade and investment), China has become the Philippines' largest trading partner in early 2017, marking an increase of $15.04 billion (16%) from 2016 (Mercurio, 2017). 14 In February this year, China was the top source of Philippine imports (19.9% share or $1.54 billion) and Manila's fourth largest export market (11.2% or $521.04 million; Philippine Statistics Authority cited in Xinhua, 2018a). Furthermore, investments approved by the Philippine Economic Zone Authority and the Board of Investments more than tripled for the first three quarters of 2017 to around $40 million (from $10.9 million in 2016; Philippine Statistics Authority cited in Xinhua, 2018a). 15 In Duterte's first visit to China, of the $24 billion of deals signed, $15 billion were business agreements involving renewables, real estate, steel plants, coastal development, ports, manufacturing, agriculture, transportation, flood control project, and bridges. China is eyeing five locations in the Philippines for the possible construction of industrial parks (Canivel, 2017), which can help boost the Philippines' industrial structure and supplement the Philippine Manufacturing Resurgence Program.

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Remarkably, the Chinese are also making headways in penetrating the Philippine consumer market through private mobile firms such as Huawei, Xiaomi, Oppo, and Vivo—enterprises that last year ranked among the top 10 selling brands in the world, according to the World Intellectual Property Organization. 16 Other Chinese enterprises benefitting from the encouraging business environment under the Duterte administration include the stateowned automobile company JAC Motors (see Menor, 2018). Even Jack Ma's firm, Alibaba Group, is making its presence felt in promoting financial inclusion and digital payment services through strategic partnerships with local firms (e.g., Globe Fintech Innovations Inc. or Mint). Besides this, Alibaba's Alipay and Tencent's WeChat Pay have also signed licensing agreements with the Asia United Bank, which favorably capacitates Chinese tourists to drive the growth of cashless payment systems in the Philippines (Ong, 2018). It may be recalled that during the G20 Summit in 2016, Jack Ma unveiled his plan to create an electronic world trade platform that would network bilateral and multilateral trade agreements and bring down barriers and tariffs for ecommerce (Macaraeg & Subido, 2017). In the area of telecommunications, Philippine company PLDTSmart Communications has partnered with Huawei on a $28million deal to improve the former's wireless service delivery platforms. Also in this area, Duterte had endorsed the participation of the Chinese to be the third telecom carrier in the country in order to break the longstanding duopoly and improve the quality of Internet service in the Philippines. 17 In the fourth dimension of cooperation (financial integration and connectivity), the Philippine Central Bank in October of last year officially added the renminbi as part of its currency of international reserves, joining more than half of BRI countries that have already done so. In March this year, the Philippine Central Bank had additionally approved the Peso–Yuan spot market, which would lower the transaction costs for Philippine and Chinese banks and businesses by reducing reliance on the dollar as the intermediate peg (Lucas, 2018). In the same month, the Philippines began to issue its first panda bondsor renminbidenominated bonds worth $200 million, paving the way for more opportunities for Chinese assistance in Philippine financial requirements. Along these lines, the Philippine Metropolitan Bank and Trust Company had signed a Strategic Cooperation Framework Agreement regarding Lines of Credit and began to conduct financing and bond underwriting cooperation with the China Development Bank (China Daily, 2017b). For the Philippine government, it has announced plans of partnering with the Alibaba Group for two particular reasons: to build a more inclusive financial system to help rural communities and SMEs, and to cut transaction costs for Overseas Filipino Workers in remitting money to the Philippines through online banking services (De Vera, 2018d). In the fifth and last dimension of cooperation (peopletopeople exchanges and connectivity), China is already the Philippines' second largest tourist market after South Korea. 18 As of November 2017, 14 new flights have been arranged between China and the Philippines and the Philippine Bureau of Immigration had initiated a Visa Upon Arrival scheme for Chinese tourists. In media and communications, the China Central Television was able to secure an MOU with the Presidential Communications Operations Office for the rebroadcasting of China Global Television Network programs, which is part of the “Belt and Road News Alliance” of the China Central Television as stated in the List of Deliverables of the Belt and Road Forum for International Cooperation.

 

4 CONCLUSION

This study has four major findings. First, constructive developments in Sino–Philippine relations reveal that improved political interaction is a crucial factor in the advancement of diplomatic, economic, and sociocultural ties. New dialogue mechanisms, increased highlevel engagements, investment pledges, offers of loan, development assistance, commercial activity, and tourist arrivals from China, under the Duterte administration, are the prime indicators. Second, the BRI is considered by both Beijing and Manila as a vital cooperative framework in Philippine development strategy and in maintaining practical bilateral cooperation. Third, the significant progress in the BRI's five dimensions of cooperation (i.e., policy coordination, infrastructure development, trade and investment, financial integration, and peopletopeople connectivity) in the Philippines underscores the rising stakes in and deepening complex interdependence of PhilippinesChina relations. 19 In fact, the BRI has the potential to become a framework for an eventual Sino–Philippine “strategic partnership.” 20 At present, it is only the Philippines with which China has not yet established a strategic partnership in ASEAN. Fourth, China's Belt and Road efforts in the Philippines is a clear manifestation that the BRI is not only a government venture but a wholeofcountryapproach, which includes the active participation of China's private sector. With the intensification of the BRI's five dimensions of cooperation in the Philippines, it can be said that China's soft power is also on the move, which may considerably change prevailing mindsets in the Philippines about the quality of Chinamade goods, services and infrastructure. The Philippines not only stands to benefit from the BRI in the form of grants, loans, and investments, but even in terms of the opportunity to learn from China's development and antipoverty strategy. The BRI can likewise help facilitate the Philippines' readiness to multilateral initiatives such as the ASEAN Community and Regional Comprehensive and Economic Partnership (see Tubayan, 2017), taking into account the BRI's potential to reshape regional economic power structures. Yet, for both countries, uncertainties and anxieties remain. For the Philippine side, the SCS (external risks) will continue to be a source of concern and suspicion, mainly on how it will be managed and what future measures China will undertake on it. But as long as the SCS problem can be contained, restraint exercised, and domestic politics (internal risks) in relation to the BRI avoided, more functional cooperation can advance and lead to the appreciation of Duterte's political capital and China's image.

 

While it is true that the success of China's BRI would depend on the political environment in each country, China may err on the side of caution by seeing to it that proposed projects go through transparent dealings and endorse companies of good standing. Should Chinese projects flounder, legal actions might arise, a critical mass might surface, and China, the BRI, and Duterte, will accrue reputational costs. In addition to these, the outlook toward Chinese projects would also depend on Duterte's economic performance and political legitimacy. The latter is highly linked to issues such as his war on drugs and political scandals that he or his administration might face, and government neglect or ineptitude in managing issues of public interest. For the Chinese side, worries on the stability of Philippine political situation persists, particularly the continuity of Duterte's China policy and the bureaucratic bottlenecks that impede the swift implementation of the Belt and Road projects. 21 But for both sides to avoid the infamous “debt trap”, BRI projects ought to be commercially viable. 22 And since the BRI is an open and evolving regime, future possibilities may include the integration of the BRI with subregional mechanisms such as the Brunei–Indonesia–MalaysiaPhilippines East Asian Growth Area. The Philippines can even be designated as the BRI's “West Pacific Corridor” or the maritime transshipment hub in between China, Southeast Asia, and the South Pacific. Finally, for the BRI in the Philippines to be institutionalized, similar to China's cooperation agreements with other countries, an MOU on Belt and Road Cooperation may be signed for coherence and formality. A joint BRI committee or BRI action plan may also be formed so that planned projects can outlive brief 6year stints of Philippine presidencies.