China: Our Winning Strategic Partner

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                In the November 2018 state visit of President Xi Jinping to the Philippines, the Chinese president in his speech said:”The President (Duterte) and I both agreed to elevate our relationship into one of comprehensive, strategic cooperation… This vision charts a clear course for China PHL relations and sends a strong message to the world that our two countries are partners in seeking common development.”

The import of words and speeches do not impact much on the Filipino public and media that often prefer to drum up items as the “Baretto sisters’ spat”, but to the Chinese who are by nature long term planners and the few Filipino strategic thinkers such words are crucial pathways to the future.

What then is in store for the Philippines in this strategic cooperation with China?

The Philippines literally “struck oil” recently in the signing of the 60/40 deal with China, in favor of the PHL, in the joint oil and gas development off the Reed Bank. The U.S. Geological Survey estimates the area contains up to 5.4 billion barrels of oil and up to 55.1 tcf (trillion cubic feet) of natural gas to be  tapped.

National Security Adviser Hermogenes Esperon Jr. said China is giving a very fair deal as it will also be spending for the construction and other requirements.

In the last major oil-gas deal of the PHL with Royal Dutch Shell and Chevron-Texaco that PHL got only 10% equity and obtained the constitutionally mandated share only on the royalties.

The Reed Bank oil-gas deal with China is a very sanguine portend of great things to come from the China-PHL strategic cooperation. But how much more positive can it be given the strategic picture on the global plane, i.e. the strategic competition between the U.S. and China. This competition gives the Philippines the option to choose its own strategic future.

In the latest Asean Summit in Bangkok, he did say that Asean members should not side with one of the other, but realistically and in the final analysis one cannot avoid making a choice as one of the superpowers in forcing every country is saying, “It’s either us or bust” backing it up with sanctions.

The “ancient” strategic partner (or satellite some would rather say) of the Philippines is the U.S. with which it still has strategic military ties in the Mutual Defense Treaty and its derivative EDCA (Enhanced Defense Cooperation Agreement) allowing the Americans to preposition troops and equipment inside select PHL military bases.

President Duterte has in the past indicated his desire to start removing U.S. forces out of the Philippines. In 2016 in reaction to perceived rude interference of U.S. diplomats demanding through the international media that he tone down his anti-American rhetoric Duterte said:

“I do not want to see any military man of any other nation except the Filipino soldiers. That’s the only thing That’s the long and short of it. I want an independent policy that will not make me subservient to anyone…”

Over three years have passed but President Duterte has restrained himself from kicking out the American troops and abrogating the Mutual Defense Treaty with the U.S..

The usual rationale for PHL strategic relation with the U.S. strategic is in terms of security. But it has instead become nettlesome more frequently than not as U.S. legal demands on human rights compliance has caused arms purchases to be blocked and bad publicity to plague the PHL.

Any way one looks at it, the strategic partnership with China is today delivering much more concrete positives to the Philippines that the U.S.

China has delivered the “goodies” so to speak not only in the usual economic metrics such a becoming now the top trading partner, top buyer of many PHL products, top growth in tourist count, but I dare argue even in security terms.

How does China help in the matter of security? Peace and productivity in the South China Sea as it is China that has guarantee the tranquility of Philippine access to the Scarborough and all other parts of the disputed areas contrary to the rants and disinformation of U.S. monitoring unit AMTI and U.S. proxies in the PHL crying wolf over concocted yarns of “swarms”, “maritime militias” etc.

But the real strategic question is, between the U.S. and China which of the two major powers can guarantee the future prosperity and peace of the Philippines and its environs?

Today the U.S. and China are without doubt in the early stages of a “new Cold War”, i.e. “a state of political hostility between countries characterized by threats, propaganda, and other measures short of open warfare” starting with the 400 U.S. military bases surrounding China, the sham human rights issues U.S. raise on Xinjiang and HK, U.S. initiated Trade War and “creeping Decoupling”.

The Decoupling refers to the idea of completely separating the American economy and its allies (or what will remain of them) from the Chinese economy. The author of “Tech Titans of China” Rebecca Fanin prefers to call it “Splinternet” from the merging of “splinter” and “Internet”.

The “new Cold War” (small “n” as it is not as full blown yet the U.S.-USSR Cold War) will be hitting its climax in the Decoupling that the U.S. has launched with halting but ascending steps as in the ZTE and Huawei supply boycott, the escalating tariffs that has been on and off, among other things.

In short, I am asking which of the two is the ultimate winner, that the Philippines can rely on through the rest of the 21st Century to provide the growth and security for its development and prosperity?

Any way I look at the question, I cannot see any other outcome except the strategic victory of China. All the evidence of the eventual outcome we can already see today.

Let’s look at the Trade War. Trump has said the trade war is easy to win. China said it does not want a trade war but will not back down. On March 22, 2018 Trump signed a memo to impose the first related tariffs on Chinese products. It’s been a year and half, and its Trump who blinked hurrying to sign the Phase I deal by this November.

The U.S. had Canada arrest Huawei Chief Financial Officer on December 2018 followed months later by the U.S. ban on American companies from supplying essential hardware to Huawei clouding the future of the world’s No. 2 smartphone maker. A few months later Huawei more than offsets losses in the global market by snaring 42% of its home market with Apple slips 7% of its share in the China market.

Napoleon is quoted very frequently these days, “China is a sleeping lion. Let her sleep, for when she wakes she will shake the world.”

I paraphrase Napoleon and say, “China was a sleeping market, now awake she shakes the World economy.” In the past two years this insight had hit me: “Everything else being more or less equal, the Bigger Market Wins”.

In technology, a key economic driver, China is equal and even ahead in various key areas as can be seen in 5G, AI, robotics, drones, digital payments, digital retail and even in the emerging “blockchain” technologies. The U.S. is ahead in some but now clearly behind in these cutting edge technologies. China is now also the bigger economy in Purchasing Power Parity terms.

The Chinese market is now at least four times bigger than the U.S. market, and China is linked closer by land and sea the global markets through natural geography and the Belt and Road Initiative links and the 100 countries membership of the Asian Infrastructure Investment Bank (AIIB). In the Trade War and in the attempts at “Decoupling” the market is the key factor, and if the U.S. will Decouple it will only succeed in isolating itself in trying to isolate China.

Thanks to Duterte the Philippines is connected to China, the 21stCentury winner. ###

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