While tensions in trade between China and the United States escalated during the second quarter of 2019, notably affecting Chinese telecommunications, Beijing rolled out accomplishments and measures for the second Belt and Road Forum (BRF). Due to this increasing infrastructure cooperation and flow of Chinese investments, Chinese immigrants continue to make waves in Southeast Asia. In the Philippines, the inflow of Chinese nationals began creating security and social concerns.
Trade war defies Huawei
The US continues to raise tariffs on Chinese goods. US officials have labeled telecommunications maker Huawei a threat to national security, and thus decided to include the tech giant and some 70 other Chinese firms on its trade blacklist. This imposes restrictions that will make it difficult for Chinese telecoms to conduct business with American firms. In response to this, Chinese state media started posting the idea of banning the exports of rare-earth minerals to the US, whose oil refiners rely on these mineral imports to turn crude oil into gasoline and fuel. Tech experts were however unconvinced that Huawei can ensure a steady supply to other countries without the help of the US.
Despite US reassessment of its intelligence-sharing policies with allies that continue to work with Huawei, France stuck to its plan to roll out its commercial 5G network in 2020 without excluding the use of Huawei. According to French telecom regulator Sebastian Soriano, the trade tensions will have a limited impact on their plan to upgrade; but that France is open to alternatives should Huawei face difficulty. Meanwhile, Huawei’s Chief Representative to the EU Institutions Abraham Liu reaffirmed in a speech that the company still commits to launch a 5G mobile phone network “the European way” which means it will be customized for Europe’s needs. He recalled that Huawei’s 5G had been co-developed by Europeans, thus it is to some extent a European product as well.
Huawei has not only been challenged in the context of the trade war, but it has also been tagged as being used for surveillance activities. The Philippine Department of Foreign Affairs (DFA) denied reports that it had warned government agencies about the risks of partnering with Huawei in government projects. Online news platform Rappler claimed earlier that it had obtained an internal memorandum saying that Czech Republic and France have issued orders to limit the use of Huawei devices due to security worries. Foreign Affairs Undersecretary Ernesto Abella said the internal memorandum on foreign governments banning Huawei products is a mere routine information relayed to relevant agencies. Nonetheless, the Philippine National Police (PNP) launched an investigation into the spying allegations against the tech giant, with its spokesman subsequently saying that they had yet to receive validated information on Huawei being used to spy.
The 2nd Belt and Road Forum
China reached new milestones for its Belt and Road Initiative (BRI) when it advocated third-party market cooperation model, and transparency and sustainability measures during the 2nd Belt and Road Summit. The third party market cooperation model allows Chinese enterprises and counterparts from developed countries to jointly cooperate in projects or do business in a developing country. The so-called “triple win” optimizes global resources allocation with China’s capacity production and the partner developed country’s advance technology being matched with the third party’s needs. The model has been applied for some time. In 2015, Chinese and French companies began developing UK’s nuclear power project. Another example is the China-Japan Third Party Market Cooperation Forum last year wherein more than 50 deals were signed.
The Chinese government also emphasized a Clean Silk Road that is free from corrupt practices such as bribery, backroom deals, and inflated costs. Recently, China’s anti-corruption commission signed MOUs with counterparts in the Philippines and Thailand. But on the other hand, companies need to practice self-regulation and discipline, follow laws and proper processes, and promote honest management .
In his keynote address, Chinese President Xi Jinping called for the eradication of poverty, providing more employment, and improving people’s livelihood through the BRI. As a people-centered initiative, BRI is reportedly geared to make tangible contributions to economic and social development at the grassroots level, while at the same time providing a financial sustainability framework for participating countries similar to those of the International Monetary Fund and World Bank.
China has recently cooperated with the United Nations on green and sustainable development.The country also released an updated report on the progress, contributions, and prospects of the initiative and the list of deliverables of the second BRF.
Meanwhile, ahead of the BFR, Singapore Prime Minister Lee Hsien Long spoke to Xinhua News Agency that Singapore can make a modest contribution to the BRI, playing a constructive role in financial services, third-country investments, and human resources development. He cited the Chongqing Connectivity Initiative (CCI) between China and Singapore, intended to improve links with the former’s less developed western regions and the maritime Southeast Asia via Singapore.
At the sidelines of the BRF, Philippine President Rodrigo Duterte met with Xi Jinping, during which a final loan agreement on the Chico Dam project was signed. According to the Department of Trade and Industry, nineteen business deals were also inked—one contract agreement, three cooperation agreements, two purchase framework agreements, and thirteen memoranda of agreement or understanding.
National Security Adviser Hermogenes Esperon described the Duterte-Xi meeting as “frank, substantive, and productive”—claiming it is the best bilateral Duterte has had with Xi. The arbitral ruling was mentioned. He said that ‘I will bring up the arbitral ruling in another two years, but by saying so, what message was he putting across,” Esperon said.
To recall, the Boao Forum for Asia (BFA) conference kicked off in Manila in April by the invitation of former Philippine President Gloria Arroyo. It was held between the BFA Annual Conference during the first quarter and the second BRF from April 25 to 27. The forum in Manila aimed to build consensus on further cooperation in the BRI and regional connectivity, especially for the Philippines’ participation. According to Henry Lim Bon Liong, president of the Federation of Filipino Chinese Chambers of Commerce and Industry Inc., the meeting focused on business matching for the 300 businesses that participated.
ASEAN pushes for a signed RCEP sooner
During a two-day discussion among the ASEAN economic ministers in April, officials said the regional block no longer expects an Asia-wide free trade Regional Comprehensive Economic Partnership (RCEP) involving 16 countries to be signed by the time they hold their annual summit in November, but still hope that negotiations can be concluded by then. Thai Deputy Commerce Minister Chutima Bunyapraphasara told the press that the signing might have to wait further until next year due to political changes (i.e., elections) in some participating countries like Indonesia, Thailand, India, Australia, and the Philippines. In May, senior officials of RCEP member-states had an inter-sessional meeting in Bangkok to iron out issues on the goods and services sector.
Chinese businesses popped up in Boracay, Manila
Local officials confirmed that more or less 100 Chinese-run businesses are now operating in Boracay since the re-opening of the island in October 2018. Several of these partnered with Filipinos, and some employed workers from China, said to number 200-300. In May, however, the Boracay Interagency Task Force, through the Malay local government, padlocked at least ten Chinese- or Korean-owned establishments for operating without the necessary permits.
According to the Boracay Tourism Regulatory Enforcement Unit, Chinese nationals were found to be the top violators of local ordinances in Boracay with a total of 739 violations from January to April 2019.
Korean nationals were second, with 277 violations in the same period.
In Paranaque, the local government closed 18 Chinese-owned or -managed restaurants and business establishments for the same reasons. Most are located just 100 meters away from hotels and casinos at the Entertainment City on Coastal Road.
The Department of Trade and Industry (DTI) ordered the city government of Las Pinas to suspend the operations of a Chinese food park due to not having a business permit and other necessary documents. Only one food stall out of 30 had acquired a business license and permit. Trade chief Ramon Lopez belied reports of discrimination against Filipino customers in Chinese-owned restaurants.
Lopez said the Philippines wants to promote more exports to China not only of agricultural products, but also higher-value products such as furniture, automotive parts, and electronics. DTI is preparing for the upcoming second China International Import Expo (CIIE) in November this year. It is aiming to increase exhibitors to 100 from only 36 during the first CIIE.
Observations
The second quarter showed that despite trade conflicts with the US, China managed its multilateral cooperation through the BRI and RCEP, both of which are also undergoing a lot of obstacles and criticisms about the need to improve. China has foundit difficult to develop projects in some countries because of political changes and social challenges with respect to the environment, norms, and the role of civil society, which may be different from the situation within its own country.
Last year, conflicts arising from Chinese businesses and immigrants in Cambodia and Vietnam were already seen and can serve as a warning to others. In addition to earlier concerns about illegal Chinese workers and online gambling, the Philippines is now worrying about the rapid increase in the numbers of Chinese enterprises. The Philippine government has much to learn from its ASEAN neighbors that experienced such massive growth in Chinese presence earlier but unfortunately, government responses tend to be reactive instead of preventive. The government is partly at fault for allowing the Chinese influx to happen without preparing ahead for its consequences. The Chinese, on the other hand, are very quick to grab opportunities once they opened.