By Ding Heng

PRESIDENT Xi Jinping’s visit to Manila represents another positive step forward in the relationship between China and the Philippines.

At least five economic agreements are expected to be signed during his visit, according to Philippine Finance Secretary Carlos Dominguez III. It is no secret that the bilateral ties between the two countries have gone through an ebb and flow in recent years. Under the impact of former United States President Barak Obama’s “Pivot to Asia”, together with the more hawkish policy of the previous Philippine government, relations between Manila and Beijing suffered because of a dispute in the South China Sea.

But things have taken a turn for the better after President Rodrigo Roa Duterte took office. He has pursued a much more independent and pragmatic foreign policy. He set aside a controversial ruling on the South China Sea from an international tribunal and moved to repair the frayed ties. His words and deeds show that, politically, he sees China as a friend and important partner.

There’s no doubt that President Duterte has made the right choice. Disputes about the islands are, after all, just one aspect of the overall bilateral relations that are otherwise fundamentally free from conflicts of interests. So why should the relationship be hijacked by the maritime dispute? After all, there are numerous examples of countries putting aside disputes and joining hands in other fields to accumulate trust for future talks.

China has responded positively to President Duterte’s pragmatism, starting with support for and assistance to his anti-drug campaign and post-conflict reconstruction in Marawi. More than two years after President Duterte took office, China has jumped from being the fifth biggest trading partner of the Philippines to become its largest. An import expo held in Shanghai earlier this month saw Philippine companies strike deals worth 124 million U.S. dollars with buyers in China, two and a half times their original goal, according to the country’s Trade and Industry Secretary Ramon M. Lopez.

President Duterte brought home investment and loan deals worth about 24 billion U.S. dollars following a visit to Beijing in October 2016. Last year, China’s investments in the Philippines surged 67 percent from a year earlier. Facilitating the implementation of this swathe of deals is one of the reasons behind President Xi’s visit to Manila.

Some people might ask if China’s offers of investment are too good to be true. Some might even be concerned about a possible “debt trap”. The reality, however, is that Beijing and Manila are using a careful approach when it comes to crafting loan agreements. And the simple fact is that only 1 percent of the Philippines’ debt is to China, according to its official figures, and loans and other financing support granted by China’s government do not involve any of the Philippines’ natural resources as collateral.

Instead of creating a so-called debt trap, this investment is more likely to help sustain the Philippines’ growth over the long term. For almost half a century, infrastructure spending has accounted for merely 2.6 percent of the Philippines’ GDP. In China, by comparison, this ratio has stayed above 8 percent since the 1990s. Less-developed infrastructure has stoked a rise in logistics cost and the price of raw materials in the Philippines, which in turn has hindered investment in many sectors. That’s why President Duterte’s administration launched a massive program called “Build, Build, Build” last year with the aim of spending over 163 billion U.S. dollars on infrastructure by 2022. China is slated to fund eight out of 75 planned projects under this ambitious plan.

More than 73 million U.S. dollars, for example, is being pumped by the Export-Import Bank of China into an irrigation project along the Chico River in northern Luzon. The Philippine government estimates that the project, being constructed by China CAMC Engineering, will provide a stable water supply to 8,700 hectares of agricultural land. This will benefit 4,350 local farmers, and create hundreds of employment opportunities for the local community. With that in mind, the loan from China, which carries an interest rate of 2 percent a year and will mature in 20 years (with an additional seven-year grace period) doesn’t seem like a bad deal for the Philippines.

Companies in China’s non-infrastructure sectors are also starting to see the Philippines as a land rich in potential. For instance, the country is one of the fastest growing auto markets in Southeast Asia, having seen sales grow by 22 percent a year over the past five years. It’s estimated that local demand could reach 1 million units over the next decade. This is why China’s automaker GAC Motor, teaming up with a local partner, made inroads into that market earlier this month. By giving consumers more choice, this new joint venture will spur other automakers to continually improve the range of products and services offered to the country’s car buyers.

I’ve heard it argued that the Philippines is compromising its interests in the South China Sea in exchange for capital from China. But frankly, this claim is pretty farfetched. Rather than compromising its interests, Manila can actually boost the benefits it can get from the South China Sea by working in partnership with China. Beijing is aware that Manila, like itself, has its own bottom line in the dispute. Beijing has no intention of forcing or tricking Manila into accepting terms that favor its side. Instead, the policy put forward by China’s former leader Deng Xiaoping in the 1970s of “setting aside disputes and seeking joint exploration” remains the most pragmatic approach to dealing with the dispute.

Natural gas worth billions of US dollars could be buried beneath Reed Bank. Looking at the situation pragmatically, a joint exploration with China is the best option on the table. The Philippines had conducted exploratory work in the region in the past, but didn’t achieve major progress because of a lack of mature exploration technologies - something companies such as the China National Offshore Oil Corporation can help with.

The same is also true in other fields, such as fishing. Cooperation in the South China Sea, rather than confrontation, is in the best interests of both Manila and Beijing. This is why President Xi, in a meeting with President Duterte in Hainan in April, proposed “joint development of the South China Sea so as to make the region a sea of cooperation and friendship.” That is also why President Duterte has been talking about huge economic benefits to be shared by both sides.

On the security front, we saw Manila take part in a joint maritime drill proposed by China off the Chinese coast last month. Speaking on the sidelines of the exercise, Philippine naval chief Robert Empedrad suggested the Philippine navy engage more with China’s navy in the future, something that would have been unimaginable a few years ago. And Beijing and Manila are major parties in a China-ASEAN consultation over the creation of a legally binding code of conduct on the South China Sea. Last week, Premier Li Keqiang said that China is looking to finalize the agreement within three years.

China has successfully solved border disputes on land with 12 of its 14 neighbors as well as maritime disputes in the Beibu Bay with Vietnam. The key to that achievement is wisdom, patience and pragmatism. President Duterte appears willing to go that way, too. The chemistry between Beijing and Manila has doubtlessly injected a big dose of optimism into prospects for a deal on the South China Sea disagreements.

(About the author: Ding Heng is a current affairs reporter with CRI English Service, China Media Group.)