Economic network

Strategic Reset: Marcos Jr. and China

August 24, 2022

MANILA – The eminent Chinese scholar Yan Xuetong once described his country’s economic policy as “[ing] these little ones [neighboring] countries to benefit economically from their relations with China… We let them benefit economically, and in return, we get good political relations. The strategic logic for him is simple: “We [China] should “buy” relationships. »

Over the past decade, China has signed “cooperation documents” with no less than 149 countries and 32 international organizations on several continents for 3,000 infrastructure development projects. The country is said to have allocated nearly $1 trillion under its much-vaunted Belt and Road Initiative (BRI), an ambitious project that could potentially create a new world order.

China’s public investment has often gone hand in hand with an influx of private capital, which has transformed many small nations beyond recognition. Cambodia is a good example, where Chinese-owned factories have spurred the creation of a massive $10 billion garment industry. Thanks to China, small poor countries have access to high-speed railways and modern highways. In terms of speed and scale, China’s infrastructure development record has won many admirers in the post-colonial world.

But as Sophocles warned, “nothing vast enters the lives of mortals without a curse.” Chinese investment projects have been criticized for a variety of reasons, primarily claims of a “debt trap”. According to AidData, a research lab based at the College of William & Mary in Virginia, BRI projects have had undisclosed liabilities, called “hidden debts,” of up to $385 billion in recent years. Rhodium Group, a New York-based economic research group, reported that between 2020 and 2021, China had to renegotiate various projects of up to $52 billion due to concerns over debt payments and the sustainability of projects.

Chinese BRI projects, which rely heavily on Chinese labor, engineering and technology, have also failed to provide significant employment benefits for recipient countries. Meanwhile, from Gwadar (in Pakistan) to Sihanoukville (in Cambodia) and Hambantota (in Sri Lanka), residents have complained of shady investments and white elephant projects.

To be fair, the BRI is not a grand conspiracy but rather a fluid megaproject, which serves a plethora of strategic goals, including the development of China’s western peripheries, access to valuable resources and strategic locations, and infrastructure footprint and industry standards overseas. .

In the Philippines, however, China’s infrastructure footprint can best be described as a “promise trap” rather than a “debt trap”: the Asian superpower has built very few, if any, big infrastructure projects. infrastructure in the country after decades of big promises and strategic flirting with controversial Filipino presidents.

By all indications, President Marcos Jr. seems determined to pursue a more results-oriented China policy that denies both the Sino-philia of his immediate predecessor (Rodrigo Duterte), as well as the Sino-skepticism of older presidents. reformers of the past. .

China’s record of infrastructure investment in the Philippines has been a mixed bag at best, if not a complete failure. Under the Gloria Macapagal Arroyo administration (2001-2010), China’s landmark projects were mired in corruption scandals and anomalies, catapulting the late Benigno Aquino III, who ran on a good governance platform, to power .

As for Duterte, a novice in geopolitics during his rise to power, he seems to have been taken for a ride. Six years into his presidency, barely a single expensive Chinese infrastructure project – except for the controversial Chico River pump irrigation project – has come to fruition, despite Beijing’s commitment to $24 billion in investments in October 2016. In return for illusory promises, the former Philippine president has consistently downplayed the significance of China’s intrusion into Philippine waters.

As Benjamin Diokno, a former technocrat and current finance secretary, recently admitted, “There were a lot of promises but [not] a lot has been delivered. Even China’s Ambassador to the Philippines, Huang Xilian, admitted that the bilateral relationship needed “tangible fruits”.

It remains to be seen, however, how Mr. Marcos’ strategic reset will create a better outcome than his Sinophile and China-skeptical predecessors.