Much has been made of the Pews Research paper projecting China overtaking the US in terms of economic output as early as 2019. China allies have been heartened while those with conflicting interests are looking for assurance. Where exactly does the Philippines stand and what does it stand to lose or gain from China’s ascent?
Roque Sorioso Jr. shared his inputs in every category.
As China becomes ever more assertive of its economic and political ambitions, its client states like Cambodia, Laos and Kazakhstan will strengthen while non-Chinese client states like Japan, Vietnam and the Philippines will seek closer ties with each other and the US both in economic and political terms. For the Philippines, past frictions with the US, Japan and Vietnam will be marginalized in the attempt to “contain” Chinese expansion.
There will also be a soft power reaction among Chinese client and non-client states. There will be attempts to sew together coalitions based on historical social and cultural ties between states, depending on which side of the fence they are positioning themselves in.
A lot depends on whether China becomes aggressive in its pursuit of national interests. Fence-sitting states like Singapore and Thailand may become friendly, neutral or hostile depending on how the Chinese posture will affect their regional interests.
It is also possible that China can employ soft-power tactics such as spreading Chinese culture via movies, television shows, music and other cultural exports for smoothing relations and achieving political gains.
Small countries like South Korea have used this approach to successfully increase market penetration of Samsung and Hyundai products in the Philippines. In the big three Philippine universities for example, China has the largest budget for promoting the mandarin language compared to Japan, which barely invests in language courses in Philippine schools.
Local Politics and Culture
A strong China will be able to exert substantial political pressure by mobilizing lobby groups in the Philippine political arena such as chambers of commerce with large investments in China. Expect also mercenary politicians or “traditional politicians” to be bought by Chinese interests for the purpose of leveraging for the exploitation of natural resources, territorial interests and other economic interests. In other words, expect ambitious “trapos” to become Chinese puppets in exchange for economic resources for use in running for office.
As friction with China increases, local Chinese Filipinos, or “Chinoys,” will likely experience public relations difficulties with economic effects as the Filipino masses experience various stages of sino-phobia. Historically, the Philippines has been spared anti-Chinese pogroms in modern times, unlike Malaysia and Indonesia where racial riots occurred as late as the 1990s. Still, “Chinoys” despite being born in the Philippines and having no experience with mainland Chinese culture may well be exposed to racism if tensions with China escalate. In a shooting war, ethnic polarization might ensue, with certain political parties and interest groups leading initiatives to suppress Filipinos with Chinese ancestry for various vested, possibly economic interests.
Despite conflicts with China, tourist arrivals from China have actually increased and the country has even recently-won an award for top destination for Chinese tourists. This seems to suggest that Chinese citizens are able to differentiate between Filipinos, the Filipino government, and the Philippines as a country. This augurs well since, for so long as there is no shooting war or shedding of blood, tourism will boom and-using the same thinking-Chinese investments from other fields will likely continue to grow.
The Philippines is also seen by Chinese middle class and businessmen as a safer haven for capital investments. Political and economic fortunes in China can change on the whim of the Chinese communist party and Chinese have been purchasing properties in Binondo and other upscale areas with large concentrations of Chinese as a hedge against mainland political risk. This was a clear trend in the mid-2000s before the Chinese economy softened from 2009 to mid-2012. Chinese property investments may well increase once more, now that the Chinese economy seems to have turned a corner. The same dynamics also apply to the Philippine equities market, one reason why the PSE have been breeching all-time high records in the last three consecutive weeks.
But it is not only the mainland Chinese that have been looking for investments in the Philippines. Japanese, Korean and European firms have been scouting the country for business opportunities and relocation sites since the last quarter of 2012. The reason for this activity is twofold: first, labor in the Eastern Chinese seaboard, where 80% of Chinese manufacturing is located, has become three times more expensive than Filipino labor. Second, Japanese and Korean companies are at risk from mass actions when the Chinese government stirs up patriotic fervour among rioters whenever territorial issues arise and tensions escalate. In short, there are substantial market and political risks in China that foreigners are averse to and the Philippines, with its improving economic and political climate is seen as a safer alternative.
Finally, all these foreigners wishing to invest in the Philippines will naturally want to open up the country to foreign investor interests. That is to say: potentially higher return industries such as mining and real estate. Consequently, there will be higher pressure from lobby groups representing foreign interests to liberalize mining and allow foreigners to own all types of real assets. There will also be heavy lobbying for increasing the proportion of foreign ownership of companies in strategic fields such as energy. As a result, national elections in 2016 will be heavily contested by both local and foreign interests.
Rationale for Chinese-Philippine Conflict
While China is expected to surpass the US in terms of total economic output in 2019, it still has a ways to go before it can achieve qualitative parity with the US. The typical US citizen still has a higher living standard compared to the average Chinese. According to the World Bank the average, nominal per capita GDP in China from 2008-2011 is around US$5,445 while for the US during the same period it was US$48,112! China needs vast amounts of energy to reach first world standards of living. But its energy reserves are inadequate for its huge population. While the US has effectively cornered most of the Middle East petroleum supply in Saudi Arabia and its UAE satellites, Iraq and Libya; China has to bid for limited supplies from Russia, Iran and Kazakhstan. And because of the new hydraulic technology of fracking, used to extract oil and natural gas lodged in layers of shale deep in the earth’s crust, the US is actually poised to become a net exporter of energy by 2017!
This energy scarcity trap explains why China has been very aggressive in pursuing territory with potentially large, game-changing energy deposits such as the Senkaku, Scarborough Shoal, and the Spratlys island group –or the whole of the West Philippine Sea. Chinese geopolitical strategists understand that, without energy, China cannot continue to grow and risk collapse.
Chinese Political Collapse?
George Friedman, in his book, The Next 100 Years, predicts a political disintegration of China within the next five years if the Chinese communist party is unable to consistently raise the living standards of the typical Han Chinese. In addition, China is composed of hundreds of smaller ethnic groups that do not identify themselves as Chinese. These groups, like the Tibetans, Uighurs and smaller ethnic groups, are constantly demanding political rights, autonomy, if not outright independence. If the Han center is weakened by political in-fighting, the non-Han periphery will likely revolt and result in China splintering into smaller, weaker states.
Chinese nationalists understand the immediacy of their problems. And because the centralized, dictatorial nature of the Chinese leadership is spread over the huge area which is mainland China, there is a risk that nationalist-militarists might instigate a military incident that could spiral out of control. Recent encounters between Japanese and Chinese aircraft point to this possibility.
Risk of War
In a recent report by Rourke (2012) to the US Congress regarding the impact of Chinese military modernization on US military capability, it was mentioned that military conflict will likely remain limited to exchanges between naval and air combatants. The use of land forces is highly unlikely, given the configuration of US allies in the area. In addition, China has nothing to gain from holding homeland territories of the Philippines. The real interest is energy resources beneath Asia’s seas.
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