Inbound Chinese F.D.I. Problems and Concerns in light of Territorial Tensions
Roundtable on Philippines-China Trade & Investment Relations
Organized by APPFI and PHILEXPORT
11 June 2015
Trade Undersecretary Adrian Cristobal;
Mr. Sergio Ortiz-Luis, President & CEO of PHILEXPORT;
Dr. Aileen Baviera, President & CEO of Asia Pacific Pathways to Progress Foundation (APPFI);
Dr. Gilbert Llanto, President of PIDS;
Ladies and Gentlemen:
On behalf of the Federation of Filipino-Chinese Chambers of Commerce and Industry, Inc., I would like to thank PHILEXPORT and APPFI for inviting us to this forum.
The Philippines and China share long trade relations. Given our centuries-old ties, we have increased our cooperation and partnership in various fields.
However, political relations have been strained recently with the West Philippine Sea issue.
China’s Foreign Direct Investment
In recent years, China has emerged as one of the world’s top outbound investor. It has implemented “going out” (走出去) or “go overseas” strategy to play greater participation in the global economy.
In 2014, the China Ministry of Commerce - Department of Outward Investment and Economic Cooperation cites forecasts that over the next five years, China’s foreign direct investment will continue to maintain rapid growth of over US$500 billion with annual growth rate of more than 10%.
This led to the rapid growth of state-owned and non-state-owned enterprises. Fortune’s “Global 500” list in 2009 only included 20 China companies. But last year- 2014, it increased to 95 China companies, with China Petroleum & Chemical (Sinopec), China National Petroleum and State Grid Corporation of China among the top ten.
The main destinations of China’s outward FDI were the US, ASEAN, European Union, Australia and Russia.  In Southeast Asia, the top destinations of China’s outward FDI are Singapore, Indonesia, Thailand and Vietnam.
China has also launched the China-ASEAN Investment Cooperation Fund (CAF) in 2010 to fund investment opportunities in infrastructure, energy and natural resources in ASEAN countries.
Chinese FDI to Philippines
In 2014, Chinese FDI to Philippines reached $41.38 million, a considerable increase from the previous years of $6 million in 2013 and $60,000 in 2012. So far, despite the territorial issues, FDI from China has been growing.
A number of Chinese investments in the Philippines included energy, mining, automotive assembly, among others. We note however that we trail behind our Southeast Asian neighbors in terms of Chinese FDI.
Though political, the territorial dispute issue has effects also on investments. Chinese state companies will think thrice before investing, while Chinese private companies will clear first with the Ministry of Commerce of China before deciding to invest. With the current issues, they would consider investing in other Southeast Asian countries first before us.
Other problems include enforcing stricter regulations on trade and other areas, such as visa applications.
For example, in 2012, China imposed stringent food standards and requirements that led to the ban on banana imports from the Philippines.
In another instance, technicians of China State Grid Corp. encountered difficulty in processing their working papers. The project has been approved but they were not issued visas when they wanted to conduct technical inspection here.
We can say that business relations between the Philippines and China would continue despite ongoing territorial issues. However, it would be difficult to see a significant increase of Chinese FDI in the near future.
In the meantime, we should emphasize that the territorial issue is not the entirety of our multifaceted partnership with China. Other ways can be explored to continue our collaboration.
One way is to hold more trade missions – both initiated by government and private sector. Our Federation has been very active in promoting Filipino products, agriculture based or processed in various trade expos and business matchings in China.
And as what we have been doing, our Federation is working to promote our country’s tourism, mining, and other competitive industries to prospective Chinese investors.
We should also continue participating in regional economic events like the annual China-ASEAN Expo held in Guangxi, China. Likewise, cultural and educational exchanges can also be pursued to continue people‐to‐people interactions.
Cognizant of national interest, diplomacy must be pursued. Let us look at long-term solutions and not escalate the tension. Channels for communication must remain open for both countries.
An old adage in international politics goes, “One can choose one’s friends but one cannot choose one’s neighbors.”
Being neighbors having centuries-old ties, both the Philippines and China can take the initiative to continually improve cooperation despite the differences.
 “Riding the Silk Road: China sees outbound investment boom” http://www.ey.com/Publication/vwLUAssets/ey-china-outbound-investment-report-en/$FILE/ey-china-outbound-investment-report-en.pdf
 “Net Foreign Direct Investment Flows (BPM6) By Country of Origin, Bangko Sentral ng Pilipinas, http://www.bsp.gov.ph/statistics/spei_new/tab10_fdc.htm