EDITORIAL - Economic coercion

There are many countries offering concessional loans as part of official development assistance, and with better repayment terms compared to those offered by China. The previous administration ignored these ODA sources as Rodrigo Duterte pivoted toward Beijing while bickering over human rights with the United States, the European Union and other democracies.

The pivot overlooked the fact that for a long time now, Beijing has been using its economic clout to influence decision making in other countries. Governments are increasingly pushing back.

In May this year, the Group of 7 leading economies launched the Coordination Platform on Economic Coercion. This came on the heels of the passage in December last year by the United States of the National Defense Authorization Act, which mandated among others the establishment of a Countering Economic Coercion Task Force. The US is discussing with its allies multipronged responses to Chinese economic pressure.

The Philippines is just one among many smaller economies that have been subjected to Chinese economic coercive measures, with Beijing imposing restrictions on Philippine banana imports. Amid bilateral tension over the West Philippine Sea, Beijing has also sat on Manila’s requests for ODA funding for infrastructure projects.

So the Marcos administration is moving in the right direction in withdrawing Philippine requests for ODA funding from China. The first to be formally withdrawn was the pursuit of a Chinese concessional loan for the P83-billion Mindanao Railway Phase 1 Tagum-Davao-Digos segment.

Also set to be withdrawn is the request for Chinese funding for the P142-billion Philippine National Railways South Long Haul or PNR Bicol Express, which was awarded in January 2022 to contractors led by China Railway Group Ltd.

Philippine officials have said the country is looking for other funding sources for the Mindanao Railway project, noting that the rates offered by China are higher than those of other countries such as Japan. Since this is the case, why did the Philippines even bother negotiating with China?

China became the world’s second largest economy by embracing trade with the international community. Now it is using this wealth to pressure its economic partners, making a pushback inevitable. Countries including the US, Australia and Lithuania, which suffered from heavy Chinese economic coercive measures in the past, are moving to reduce their vulnerability to economic ties with China. Through the G-7 initiative, smaller economies may also find support in efforts to decouple from the Chinese economy. The Philippines should not waver in its moves to develop economic resilience.