Duterte pivot to China may result in more investments

MANILA, Philippines – The Duterte administration’s pivot to China, which has resulted in better relations between Manila and Beijing, is expected to attract more Chinese investments to the Philippines, HSBC Philippines said.

“The Duterte administration’s foreign policy pivot toward China gives a big push to its own Philippine Development Plan as it puts together plans, reforms, policies, and targets to build a more sustainable economy. This sends strong signals to businesses in both nations that the Philippines is now a promising participant in China’s grant, trade and infrastructure plan,” said HSBC Philippines president and CEO Wick Veloso in a paper on normalizing relations between the Philippines and China.

The Philippines’ chairmanship of the Association of Southeast Asian Nations (ASEAN) this year would also allow the country to normalize relations with China faster with economic relations between the ASEAN and the world’s second largest economy growing stronger.

The two-way investment between China and the ASEAN had exceeded $160 billion as of May 2016, with ASEAN remaining a major destination for Chinese companies.

“ASEAN and China are seeking to double their trade value, setting a target of $1 trillion by the end of 2020,” Veloso said.

China’s Belt and Road initiative – an initiative to increase China’s trade and infrastructure investments to the Southeast Asian region – will bring the two closer together, the study said.

For ASEAN member countries, this initiative will offer further integration by developing physical infrastructure and a robust trade regime. The region will be ideally positioned to sit at the center of global value chains. For China, it will provide an ideal platform to develop ties with neighboring Asian countries while fostering the development of its own extensive high-speed rail network as a means to export high-end technology and services, Veloso said.

Veloso said for the Philippines, China’s Belt and Road initiative presents opportunities for government-backed funds looking for investments in big infrastructure projects and private equity funds looking for better returns abroad.