by Rommel C. Banlaoi, PhD
10 June 2020
Original version of this piece was commissioned by China Report ASEAN.
China and the Philippines have reached 45 years of relationship. Like many other relationships, the Philippines and China have their own stories of ups and downs. Yet, they remain friends as permanent neighbors as they were many centuries ago.
Since 1975, the Philippines has been pursuing a policy of maintaining friendly ties with China, a policy wisely established by then President Ferdinand Marcos (1975-1986). Marcos saw the importance of cooperating with China as matter of national survival during the cold war while at the same time getting along with the United States as a security ally.
When Marcos visited Chairman Mao Tse Tung in June 1975 to formalize their ties, Mao exclaimed, “it takes two hands to clap” and that their two nations “are one family now”. Thereafter, they enjoyed the normalization period where they entered into various bilateral cooperation agreements covering broad areas of trade, investment, tourism, air services, cultural exchanges, scientific cooperation, technical collaboration, agricultural development, avoidance of double taxation, postal and parcel agreements, educational partnerships, and even military-to-military ties. They also became important trade partners in Asia. From a trade volume with China of US$20 million in 1974, the figure spiked to US$300 million in 1984 making China the Philippines’ 6th largest trading partner in 1985 historically surpassing Taiwan.
Improved economic ties were products of better political ties. China supported the Philippine government in its campaign against the New People’s Army (NPA) by not interfering in each other’s domestic affairs. During the oil crisis in the 1970s, the Philippines received friendly price of oil from China to ameliorate Philippine economic crisis. Though Marcos became assertive of Philippine territorial claim in the South China Sea by creating in 1978 the Municipality of the Kalayaan Island Group (KIG) in the Spratlys, China’s military attention was the Vietnamese invasion of Cambodia, which led to the Sino-Vietnamese War or the Third Indo-China War of 1979.
Under Chairman Deng Xiaoping, China began economic reforms by opening up to the world in 1979. The Philippines has benefited from this opening up policy through greater improvements in trade, investment, and tourism relations.
President Corazon Aquino (1986-1992) sustained this level of friendship with China despite the preference of her administration to strongly embrace the Philippines’ long-standing security alliance with the United States. China was even one of the first few countries in the world that recognized the legitimacy of the Aquino government.
But during the Aquino administration, Philippines-China relationship was in the state of uncertainties arising from the arduous process of democratic restoration in the Philippines and bothering democratic challenges in China, especially in 1989 during the Tiananmen incident and the breakdown of the Berlin Wall. This was a difficult period in Philippines-China relations as both needed to confront their respective security challenges in the post-cold war. The difficulty was exacerbated by the fact that Aquino gave more accommodations to Taiwan, which became the Philippines’ 4th trading partner during her term relegating Mainland China behind.
Yet, they committed to remain friendly not only at the government-to-government level but more so at the people-to-people level. The Aquino government intensified economic, cultural and educational exchanges with China and opened up closer relationships among their non-governmental organizations. When Aquino visited China in April 1988, she acknowledged her roots to Fuijian province where her ancestors originated. Aquino even stressed the ancient origin of Philippines-China relations where they shared unbroken friendship.
Philippines-China relations became troublesome during the administration of President Fidel V. Ramos (1992-1998) arising from the lingering territorial disputes in the South China Sea. In 1992, China passed the Law on Territorial Sea and Contiguous Zone. This created security anxieties not only in the Philippines but also in the Asia Pacific region.
Given this situation, President Ramos visited China in 1993 with the intention to expand economic relations and to manage territorial disputes with China. Ramos wanted to improve economic ties with China in order to overcome their political differences on the South China Sea. Ramos even established personal ties with President Jiang Zemin who assured the Philippines that China would settle their disputes with neighbors peacefully in order promote mutual economic prosperity.
In 1995, however, China established its control of the Mischief Reef. This aggravated the growing security concern of the Philippines. To surmount this trouble, the Philippines signed with China in August 1995 the Joint Statement on Philippines-China Consultations on the South China Sea and other Areas of Cooperation to emphasize the need for bilateral consultations and cooperation to peacefully manage their conflicts in the South China Sea. Ramos believed that bilateral cooperation could undermine bilateral conflicts.
Despite their troubled relations in the South China Se, their over-all trade and investment relations interestingly improved. From a trade volume of US$457 million in 1994, it increased to US$1,306 million at the end of 1995. This was a 65% increase in just one year despite the Mischief Reef incident. Even Filipino-Chinese businessmen were encouraged to invest in China despite the two countries’ political problems in the South China Sea. This demonstrated that troubled political relations in the South China Sea did not affect good economic relations between the two countries. Although the territorial disputes encouraged the Ramos government to sign the Visiting Forces Agreement (VFA) with the United States in February 1998 at the tail end of his presidential term, it was business as usual between the two countries in the area of trade, investment, and tourism.
During the administration of President Joseph Estrada (1998-2001), political troubles in the South China Sea did not disappear. The political problem became more complicated in 1999 when China fortified its structures in the Mischief Reef. This encouraged the Philippine Senate to ratify the VFA in to play the American card with China. At the same time, the Estrada government pursued greater bilateral cooperation with China when he visited the country in May 2000. There he met President Jiang Zemin to sign the “Framework of Bilateral Cooperation in the Twenty-First Century”. This framework elevated the status of Philippines-China relations to the higher plane.
Golden Age of Bilateral Relations
But the Estrada government was short live. It was during the administration of President Gloria Macapagal Arroyo (2001-2010) when the Philippines and China enjoyed the “golden age” of their relations.
At the regional level, China improved its relations with the members of the Association of Southeast Asian Nations (ASEAN) when they signed in 2002 the Declaration on the Conduct (DOC) of Parties in the South China Sea. The DOC aims to pursue cooperation and avoid conflicts in the South China Sea. In 2005, then Chinese President Hu Jintao visited the Philippines where both countries decided to set-aside territorial dispute in order to pursue economic cooperation and joint development. This led to the adoption in 2005 of the Joint Seismic Marine Undertaking (JMSU) by China, the Philippines and Vietnam. However, the Philippines stopped the implementation of JMSU because of domestic controversies.
Nonetheless, President Arroyo pursued the policy of comprehensive engagement with China ushering in the golden years of their bilateral ties. In 2007, the Philippines and China reached the highest level of their trade relation when it reached US$30.6 billion. By the end of Arroyo term in 2010, China became the Philippines’ third largest trading partner and the greatest provider of Official Development Assistance (ODA) to the Philippines. From 2001 to 2010, China committed a loan of US$1.3 billion to the Philippines and signed 65 agreements covering broad areas of cooperation.
Lowest Moment of Bilateral Ties
Sadly, Philippines-China relations severely deteriorated under President Benigno Simeon Aquino III (2010-2016). The Scarborough Shoal standoff in 2012 and the subsequent filing of an arbitration case by the Philippines against China in 2013 led to the worsening of their bilateral ties under the Aquino III administration.
This was the lowest moment of Philippines-China relations. The Philippines received no ODA from China. Investment and trade relations severely declined. Official channels of communication practically cut. President Aquino III even pursued the military balancing policy against China when Manila solidified its security alliance with the United States through the signing of Enhanced Defense Cooperation Agreement (EDCA) in 2014. It was the dark of period of their bilateral ties. It was a very stormy relationship.
Comprehensive Strategic Cooperation: Greatest Heights in Bilateral Friendship
But there is a rainbow after the rain. When President Rodrigo Roa Duterte (PRRD) assumed office in 2016, the Philippines and China have started to enjoy a new era of closer friendship like the blooming of a big and beautiful flower. PRRD’s policy of paradigm shift to China ushered in the new age of cooperation between the two countries. When President XI Jingping visited the Philippines in 2018, the two countries declared their comprehensive strategic cooperation to have an all around relationship, which is a rapid turn-around in their bilateral ties. As Xi aspires the China Dream for the great rejuvenation of the Chinese nation, he also aspires for the rejuvenation of centuries-old friendship between the Philippines and China.
Under Xi and PRRD, the Philippines and China are enjoying the highest moment of their bilateral relations, so far. It is another golden age of their bilateral ties.
At present, China has become the Philippines’ top trading partner and the largest source of imports with a trade volume reaching close to US$56 billion in 2018 alone. China has become the Philippines’ largest foreign investment origin reaching at least US$ 67 million in 2018 and the largest source of net equity capital allocation of around US$100 million in 2019. China has become the largest source of foreign tourists reaching 1.5 million in 2019. China has become the Philippines’ largest source of foreign assistance to support infrastructure projects of PRRD under its Build Build Build (3B) Plan. At least 75 projects are earmarked for China funding under the 3B Plan with at least US$24 billion investments and credit line pledges from China. Under PRRD, China is now the Philippines’ third largest export destination and the largest export market for Philippine bananas.
Politically, PRRD made a landmark decision in 2018 when he entered an agreement with China for joint development of oil and natural gas resources in the South China Sea. Xi and PRRD also initiated in 2017 the Bilateral Consultative Mechanism in the South China Sea (BCM) to manage peacefully their territorial disputes. Both countries held their 5th BCM meeting at the end of 2019. Their five meetings resulted in bilateral commitments to pursue joint marine environmental protections, joint search and rescue operations, and joint fishery managements in the South China Sea.
After 45 years, China and the Philippines have gone a long way in their bilateral ties. Despite their ups and downs, the two countries have committed to remain friends not only now but in many years to come.
Deepening this friendship towards comprehensive strategic cooperation is the current and future direction of Philippines-China relations.
Dr. Rommel C. Banlaoi is the President of the Philippine Association for Chinese Studies and the Chairman of the Philippine Institute for Peace, Violence and Terrorism Research.
Photo Credit: CGTN.