The trilateral summit in Washington among the Philippines, the United States and Japan focused attention on security issues and tension in the South China Sea.
But in truth, security matters constituted only about a third of the discussions, Japanese officials told me. What dominated the talks was boosting economic cooperation.
While the summit participants took pains to emphasize that it was not directed against any particular country, the actions approved and agreements signed tended to be in reaction to China’s economic might and its use of this global clout for strategic purposes – what those who have felt the consequences describe as economic coercion.
Last Wednesday, Australia unveiled a National Defense Strategy that is specifically aimed at deterring China’s “coercive tactics.”
Like recent security assessments by the Japanese, who are also reworking their defense strategy to respond to hybrid warfare, the 80-page Australian document presents a dark picture of security in the Pacific. Australia is raising its defense spending to develop a deterrent force and “the most capable navy in our history.”
This involves building a fleet of stealth-capable nuclear-powered submarines along with an expanded surface combat fleet as well as tripling missile capabilities.
We’re seeing similar moves among the other military and economic powers in the Indo-Pacific, as China keeps expanding its defense capabilities and becomes increasingly aggressive in asserting its territorial claims.
Countries are responding not just by boosting their defense capabilities, but also by weaning themselves from economic dependence on the Chinese.
In line with this, countries are tightening economic and trade ties, with the Chinese out of the equation. This is what that Luzon Economic Corridor, which was launched at the trilateral summit in Washington, seems to be about.
It is part of the three countries’ Partnership for Global Infrastructure and Investment corridor in the Indo-Pacific, which aims to accelerate coordinated investments in high-impact infrastructure projects such as railways, ports modernization, clean energy and semiconductor supply chains and agribusiness. An academy will be set up, with Japan and the US providing training to Filipinos for the required skills, augmented with exchange programs.
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Japanese companies are increasingly disengaging from China and looking at other countries in Southeast Asia where they can source materials or relocate. We shouldn’t miss the opportunity to attract such investors.
The Philippines remains attractive for Japanese investors because of various reasons starting with the skilled workforce, Japanese officials have told me.
There are, of course, serious hurdles in the Philippine investment environment, such as the unpredictability and inconsistency of rules and application of laws. As even German Ambassador Andreas Michael Pfaffernoschke pointed out this week, red tape also remains a problem and deters investments.
Deng Xiaoping put China on the road to becoming the second largest economy, with annual double-digit GDP growth, by opening his country to the world and telling his compatriots that “to get rich is glorious.”
As China welcomed the world with open arms, the world loved China back. Everything seemed cheap and plentiful in China, from labor to raw materials, power and real estate. Even amid reports of exploitative labor policies, even with China becoming the world’s largest prison for journalists, Western democracies looked the other way in the name of trade and economic engagement. The US and Chinese economies became tightly intertwined.
China’s national government embarked on a massive construction and modernization campaign to provide the infrastructure for economic growth, without the red tape or litigation or human rights issues that derail similar projects in the Philippines. Chinese who dared get in the way were sent to work camps for re-education.
Local officials’ performance and contributions to the Communist Party of China were judged based on the GDP, level of investments, job generation and poverty incidence in their jurisdictions. When China promised a one-stop shop or green lane for investments, it meant business.
Accumulating wealth, it began projecting soft power, and again much of the world embraced Chinese aid. Unlike those provided by the West and Western-dominated multilateral agencies, China did not attach pesky conditionalities to its ODA, such as respect for human rights, adherence to laws against corruption and money laundering, and global fair trade practices.
There was only one condition for Chinese ODA: that Chinese companies get the contracts.
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Economic prosperity allowed China to build up its defense capabilities, which its previous leaders said should be commensurate with the country’s economic might. I actually believed this line about China’s “peaceful rise” that no one should fear, until Xi Jinping came along.
Now that the double-digit GDP growth has decelerated to single digit (5.2 percent in 2023), the property market is tanking, consumer demand remains weak and university graduates are finding it hard to land jobs, how will Xi and the Communist Party maintain stability and their hold on power?
One possible scenario is that the economic deceleration will force Beijing to scale down defense spending and reduce its belligerence.
The likelier possibility, which is heightening concern in the region, is that Xi will distract citizens from economic woes by focusing on security issues, ramping up maritime bullying and encouraging nationalistic responses to geopolitical developments.
Such a mood in Beijing will see the trilateral summit, plus the expanded Balikatan this coming week that will have 14 countries as observers, as acts of provocation instigated by China’s main rival Uncle Sam.
It could also encourage Xi to bolster the use of the other weapons in China’s arsenal – economic / trade, aid, cyber systems – to pursue its strategic objectives.
The number of countries drawing up measures against Chinese coercive tactics can only increase.