Can China and the Philippines Balance Cooperation and Sovereignty?
The South China Sea (SCS) dispute has its roots in the 1940s. Imperial Japan’s military had used the islands during World War II and assured that no other country made a claim to the islands during their occupation. Nonetheless, by 1947 the Republic of China had started to make claims to the territory and had presented an eleven-dash line, that two years later was revised and reduced to the present nine-dash line. (Pan) In 1951, during the negotiations of the Treaty of San Francisco, the now People’s Republic of China (PRC) made several claims to the territory in dispute, and in 1958 the claims were reinstated based on the new nine-dash line, which in turn was now seen as a historical legacy by the Chinese government. (Morley and Nishihara) (Ministry) The area disputed by China covers about 80% of the SCS territory, extending for about 2,000 kilometers, (SCMP) thus conflicting with the exclusive economic zones of Brunei, Malaysia, Taiwan, Vietnam, Philippines and Indonesia, although the latter does not claim sovereignty over the area.
In the case of China and the Philippines, the overlapping claimed areas are mainly the sea area west of Palawan and Luzon, the Luzon Strait, and the Sabah area. (Troubled waters in South China Sea) In recent years, the PRC and the Philippines opened dialogue regarding the competing claims. While China claims over 80% of the SCS territory, the Philippines claims sovereignty over the Spratly archipelago and the Scarborough Shoal. (SCMP)
It is key to point out the importance of the resources available in the area, as well as its geopolitical influence. A third of global shipping (3.37 trillion USD) and 80% of China’s oil imports pass through the SCS. (SCMP) According to the US Energy Information Administration, the seabed contains more than 11 billion barrels of oil and 190 trillion cubic feet of natural gas. Other less conservative estimates are as high as 22 billion barrels of oil and 290 trillion cubic feet of gas. in terms of the fishing industry, the SCS contains 10% of the world’s fisheries (SCMP).
In 2013, the Philippine government filed a case against the PRC when Chinese vessels took control of a reef that was disputed by the two nations. The US, as an ally to the Philippines, pronounced that the world would see when the court ruling came out, whether China was really the responsible leader it claimed to be (Perlez). The panel based their inquiry on determining the legality of the Chinese claim founded on historical rights regarding the nine-dash line. The Philippines accused China of being in violation of the United Nations Convention on the Law of the Sea, (UNCLOS) a treaty that both countries signed and ratified. In July of 2016, the tribunal concluded that since China had ratified UNCLOS, any historical claims were moot. (Perlez) Furthermore, they concluded that China was engaging in unlawful behavior in the Philippines’ sovereign territory when conducting economic activities in and around rocks and reefs that were too small to be taken control of. Nonetheless, China rejected the ruling, maintaining that it had “no binding force.” (Perlez)
In response to this issue, Europe and the United States have voiced their opinions in the matter of SCS sovereignty. The UK has said that it will consider deploying aircraft to the region, and France already sent a frigate to patrol the Spratly Islands last in 2018. The UK threat was answered by Major General Su Guanghui, China’s defense representative to the UK. He said that if the US and UK make a joint challenge to the areas claimed by China, the PRC would consider it a hostile action. (Varga) The US holds the SCS as a key part of its strategy to contain Chinese military expansion in the Indo-Pacific theater. In the eyes of Frans-Paul van der Putten, a senior research fellow at the Clingendael Institute, Europe is speaking out and sending warships to gain leverage in the US-China geopolitical matters. (Varga)
Even in this climate of tension and possible instability, cooperation between China and the Philippines has begun to occur. The two countries announced that they were opening up discussions on a joint oil and gas exploration in and near the disputed area. In November of 2018, President Xi Jinping made an official visit to the Philippines, which he described as a “milestone in the countries’ relations,” (Ng and Zhen) as it had been over a decade since the last Chinese executive visit to Manila. Among other deals, the two countries signed a Memorandum of Understanding that states that an Intergovernmental Joint Steering Committee and one or more Inter-Entrepreneurial Working Groups will be established. “The Committee will be co-chaired by the Foreign Ministries. (…) Each Working Group will consist of representatives from enterprises authorized by the two governments” (PRC MoFA). Thus, this agreement and the further mobilization will be simultaneously monitored and run by both governments and the relevant enterprises, which suggests a legitimate concern from both sides about the potential impacts to the industrial sector as well as national interests.
Even though China and the Philippines seem to have reached a peaceful agreement and be steering toward long lasting cooperation and support, their arrangements affect other countries in the area, such as Brunei, Malaysia, Taiwan and Vietnam. These four countries, alongside the Philippines, claim parts of the 3.5 million square kilometers of the SCS, whereas China claims over 80% as its sovereign territory. Therefore, they all want a part of what comes out of the drilling to be made by the joint exploration, and it goes without saying that those countries have not been considered in the deal.
Chinese Debt Diplomacy and Neo-colonial Expansionism
The people of the Philippines have reasonable cause for concern. China’s attempts to regain what they see as their sovereign territory has affected a number other neighboring countries, including Vietnam, whose population fear that China is pursuing expansionism. China and Vietnam in particular have already had conflicts over energy resources. In 2014, China deployed a platform that resulted in Vietnamese anti-China riots with multiple casualties. Despite these incidents, during the last weeks of September, China deployed a 10-story-high platform that can drill up to nine kilometers deep to the disputed area. (Varga) This caused a major reaction in Vietnam once again and tensions are escalating due to the agreement between China and the Philippines, as it means they both will be exploring in territories disputed by other countries.
This fear is mirrored in the Philippine population and opposition, not to mention other parts of the world. China has consistently been making deals with countries beyond the South China Sea, such as Bangladesh and Ecuador, as well as launching its Belt and Road Initiative. Bangladesh has seen an inflow of around 3.6 billion dollars of Foreign Direct Investment (FDI), a third of which comes from Chinese investment. The country has set lofty goals of development and infrastructure and is increasingly relying on China to achieve these goals. While this seems beneficial to the country, it is important to remember that “(…) the infrastructure projects are mostly carried out through debt financing.” (Ahmed) Critics in Bangladesh are wary of the situation, as it is similar to the deal made with Sri Lanka, in which they had to cede the port of Hambantota to China for 99 years to repay its debts. (Ahmed)As for Ecuador, it borrowed 6.5 billion dollars from China to achieve its development goals faster, and committed to pay the loan partially by selling them 90% of all crude oil that is destined be exported until 2024. Furthermore, as is common with China, “[it] made the naming of a Chinese company as general contractor a condition of granting the financing,” (Kraul) but it has been found that this could cost the country even more than they expected. The projects and materials used for the construction are overpriced and lack quality, so the reparation -if possible- would cost several extra hundreds of millions of dollars. In the case of the Belt and Road Initiative, it comprises the commitment that China has made to support 138 countries (as of this past October) to improve their plans of economic development, coordination, infrastructure, regulatory standards, and so on. (China Power Team) If this initiative is followed through, a large part of the international economy would be oriented toward China, and it would result in a tremendous increase of their political and economic influence. Critics echo the fear of the Philippine and Vietnamese populations, warning that such a huge plan can only be a strategic move to set the foundations of Chinese dominance. (Torres and Thayer)
Despite this, in August 2019, the Terms of Reference (the implementing guidelines to the Memorandum of Understanding) were signed by the Philippine Foreign Secretary Teodoro Locsin, Jr., and Chinese Foreign Minister Wang Yi. Under the terms agreed upon, both the committee and the working groups will convene every three months, where the latter will have full power and authority to start discussions and negotiations on the agreements made by the former. (Tordesillas) According to the memorandum, all negotiations and agreements are to be made without any form of prejudice to each other’s legal positions, referring to their sovereignty and claims over the SCS. Because of this, the joint exploration for oil and gas will be conducted only in the disputed areas of both countries. (CNN Philippines) Even though the Philippines had already suggested an area in the Recto Bank, (Reed Bank) Palawan for exploration, it had to be put in hold due to a presidential order from 2012 issued by the then President Benigno Aquino III, which froze the search for oil and gas in the area as it was disputed by China. (CNN Philippines) Even though the Hague ruled the area in favor of the Philippines, it is still disputed, as China has decided to ignore said ruling. As for Duterte, he has declared that he will also ignore the ruling, because China has promised a 60-40 deal in favor of the Philippines, which is backed with the Presidential Decree number 87, that mandates such arrangement. (CNN Philippines)
Even though the declaration is positioned as a fully settled issue by PRC and Philippine government officials, it is important to consider potential after effects of domestic opposition. Whereas Duterte sounds confident about the decision, the discontent of the people, the fact that if he is considered to have jeopardized the country’s sovereignty, and the possibility that he could get impeached should not be ignored. Duterte ignoring the Hague’s ruling, plus apparently looking to circumvent the moratorium of 2012 puts him in a difficult position between joint economic activities and his own people. He refers to the 60-40 settlement as a win, and it is, in terms of revenue. But, Chinese foreign ministry spokeswoman Hwa Chunying avoided to make any comment on President Xi Jinping personally telling Duterte that “[China] would be gracious enough to give [the Philippines] 60-40” (Regan) Furthermore, China’s state-run news agency Xinhua reported that President Xi had declared that if both sides handle the issue properly, bilateral ties would not be harmed, thus the foundation of the relationship will be stable and guarantee peace in the region.
This declaration implies that bilateral ties, stability and overall peace in the region depend on both sides handling the situation with care. However, considering how China almost immediately decided to ignore the Hague’s ruling and look for different routes to achieve its interests, it is possible to argue that China could blame any “mishandling” on the Philippines, as the deal is apparently more beneficial to the latter and China has not proved that it will accept responsibility beyond what it considers good or appropriate for its interests. China would indeed get just 40% of anything and everything that gets produced by the project, as well as some control in Recto Bank once Duterte overturns the 2012 moratorium. This in itself is already a win. Getting revenue and joint control of a disputed area is a step forward toward Chinese interests in a legal way, which is much more than what it could obtain in the past. The Philippines would get an implied recognition of sovereignty over the area, while China is waiting for the overturning to happen to finally start the project.
All of these complications and fear of a neo-imperialist state are a clear sign to China to rethink its approach to international cooperation and development. If China wants to continue this expansion and further engagement with the international community, especially with developing countries, it definitely needs to address the concerns of its many critics and find a way to give a breathing space to its debtors in order to appease the doubts of several analysts before heads of state back out of possible deals in fear of the response and political cost in their own countries.
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