‘Crisis will come to pass’

THE Philippines and China can still overcome the political challenges brought about by territorial disputes and attain unimpeded growth under an environment of peace characterized by brotherly cooperation among “captains of industries” from both countries, Dante A. Ang, Chairman Emeritus of The Manila Times, said.

Ang, the just concluded Manila Times Philippines-China Business Forum told that the flow of trade between the two countries should not be affected by the bickering over a few rocks and shoals in the West Philippine Sea (South China Sea).

“Together, the Philippines and China can attain unimpeded growth and prosperity for its peoples but only if peace, cooperation and understanding reign between them. More important, the region should be free from the toxic political atmosphere that could cause grave miscalculations whose outcome could further diminish trade and commerce between our two countries,” he said in his opening speech during the forum.

Ang underscored the importance of dialogues that will eventually help in patching up disputes between the two nations.

He expressed hope that businessmen from both divides can “navigate the treacherous political waters in the pursuit of their ventures either in the Philippines or China.”

“This gathering contributes to the ebbing away of the high tide of passion and emotion that characterize the flow of political events,” Dr. Ang said.

He emphasized that businessmen from both sides of the fence can reach out to their leaders to help shape up a mutually beneficial code of conduct founded on “mutual trust and respect and genuine friendship.”

“For as long as the captains of industries from both shores continue to demonstrate their abiding faith in each other, and for as long as trade and commerce between our two countries continue to flourish, we will conquer the political challenges that confront us in a peaceful fashion,” said The Times owner.

“And as in all things, this political crisis will soon come to pass,” he added.

Dr. Ang acknowledged that the Philippines can ill afford to engage China in an “expensive protracted test of political will” as shown by Beijing and Manila’s opposing views on the issue of sovereignty over the contested portions of the Spratlys in the South China Sea.

“We can dream all we want but the reality is, the Philippines, with its meager military resources, can ill afford to engage China in an expensive protracted test of political will. China, on the other hand, even with its superior military might and deep pockets, courts political isolation. Both the Philippines and China do not need this political crisis. In this David and Goliath scenario, nobody wins. Everybody loses,” he pointed out.

With its 1.2 billion population, Dr. Ang said, China is a force to reckon with, being the world’s second superpower next only to the United States.

“I am not however equating strength with size and number of population. I only mention it to bow to the truism that China is both a political and economic giant and is projected to become the biggest economy in the world edging out the United States from its number one position possibly in the next decade,” he added.

Dr. Ang maintained that business should be above politics as he subscribed to the proposition that “business is too delicate a business to be left in the hands of the politicians.”

“For business to thrive and prosper, it must be free from the clutches of the vagaries of politics,” he said.

Since the Philippines is now reputed to be among the fastest growing economy in the region with an annual growth rate of 6 percent, China becomes its necessary trade partner.

Dr. Ang also noted that the country demonstrated its sound economic foundations when it and Indonesia were the only two countries in the region that maintained a positive Gross Domestic Product growth rate when the economic turmoil buffeted the world in 2008 and 2009.

source:  Manila Times

Some realities about China discussed at the Times Forum

THE Manila Times Business Forum on China-Philippine relations was seen by most of those who attended it as a success.

They said they felt the forum activities—speeches by experts, detailed advice from business, management and even tax experts based in China, correct definitions of geopolitical realities, and deep questions and frank answers during the Q&A periods—did what the forum’s title and theme had promised: “Business as Usual in Unusual Times—Fostering prosperous relations between Philippine and Chinese entrepreneurs.”

The forum not only helped Filipino businessmen delegates planning to expand their businesses in China. It also helped affirm the decision of those who have already been getting ready to do business in China that they will be doing the right thing.

One of the most riveting discussions was the one on the concrete reality of what it is to be doing business in China by Mr. Richard Cant. He is the director for the Yangtze River Delta Region, sitting in the Shanghai office but going on visits all over China, helping some of the more than a thousand clients of Dezan Shira & Associates set up their businesses and solve problems that come up in the course of running their companies and factories. These problems could pertain to the foreign investors’ relations with their Chinese partners or with the local government units in the places where the foreign investors’ operations are located.

A reality that seldom comes through is that China has become such a well-developed country— industrially, commercially and financially—that the Gross Domestic Product (GDP) of up to 100 or more regions, towns and cities are higher than or at least equal to the GDP of entire Western countries and the more prosperous and first world Asian countries and cities (like Singapore and cities in Japan).

This is important in viewing China as a place to invest in. Many wrongly see only the reality that because more than half of China’s 1.36-odd billion people are poor and not enjoying the wealth of the very rich coastal regions like Shanghai, Guangzhou, Xiamen (Amoy) and Hong Kong, the People’s Republic is really still an underdeveloped country.

Well, that is exactly what the Chinese government says when it wants to impress the government officials and people of poor countries the PRC has massive investments in. That’s because they don’t want these poor and weak countries to think of China as a dangerous superpower and super-rich country to have as partner.

The fact, however, is that very many provinces, cities and town of China are as prosperous, as dynamic economically and industrially, as Germany, Singapore and Milan (just for examples) and are richer than countries like France, not to mention Greece and the Philippines.

Another reality that is seldom talked about is that China has developed so much that it is critically short of oil, energy and labor. This is such a reality that some Chinese industrial giants are moving out of China and setting up operations in countries with more and cheaper labor and energy resources.

The labor shortage is because of China’s successful implementation of the one-child policy and its draconian enforcement of contraception and abortion. It is cursed with the “empty cradle” syndrome and an aging population almost as much as Western Europe is.

Can you imagine how many hundred thousands more Filipinos could be hired in China, if our and the Chinese government did not have this crazy current state of conflict?

The happy fact, however, is that on the people-to-people and business-to-business level, Philippine-Chinese relations are still very warm and productive.

But in things that the Chinese government has the power to dampen or restrain, it does act against the Philippines. One example of this is tourism. The PRC government has issued a strong advisory to Chinese travel agencies and tourists to avoid the Philippines. And sure enough tourists from China have markedly decreased.

source:  Manila Times

China sees inflow of more PH investment

China may see the inflow of more investment from Philippine companies such as Jollibee and the SM Group in the coming years as the retailers have been actively pursuing expansion plans in the world’s biggest market even as the two governments continue to try to “overcome difficulties,” China’s commercial envoy in Manila said.

Speaking to the more than 200 delegates who attended the just concluded Manila Times Business Forum, First Secretary Wang Yang of the China Embassy said China and the Philippines are not only neighbors, but also close relatives with a history of friendly exchanges for more than a millennium.

“Since the establishment of diplomatic relations between our two nations, we have witnessed significant progress in our bilateral friendship and common development, which has laid a good foundation for business and trade cooperation,” he said.

According to Chinese Customs Statistics, two-way trade between the two countries last year stood at US$38 billion, registering 4.7 percent growth.

In the first eight months of 2014, that amounted to nearly US$28 billion, increasing by 15 percent over the same period of last year, according to the data from the China Embassy.

“The two-way investments are also active. The Philippines is the fourth biggest foreign investor in China among Asean countries, and according to Philippine statistics, China is the eighth biggest foreign investor in the country since 2000.

“Chinese companies are investing in the power, agricultural and manufacturing sectors of the Philippines, while big Philippine enterprises like Oishi, SM and Jollibee have been players in the Chinese market for many years.

“I believe our countries can overcome difficulties for a brighter future together. I wish that countries involved in free trade agreements and links would be successful in attaining their respective targets,” Wang added.

‘China GDP to double in 10 years’
China is expecting its economy and per capita income to double in 10 years from the levels recorded in 2010.

“By 2020, China’s GDP [gross domestic product] and per capita income will double from the figures recorded in 2010. We need to maintain over 7 percent GDP growth every year for this to happen,” Wang said.

To back up the forecast, Wang cited “remarkable figures last year up to the present: 7.7 percent (GDP) growth for full year 2013, and 7.4 percent GDP growth in the first three quarters of 2014.”

There have been indications the rising cost of labor and production has started prompting some investors to consider other areas of investment outside of China.

Aside from labor costs, the Chinese economy also faces other challenges that could drive away investment, such as a talent crunch and an aging workforce; rising production costs; protectionism; increased competition; and environmental issues relevant to urbanization.

Despite such concerns, Wang said the government is optimistic that investment will remain high.

He pointed to data showing foreign direct investments (FDI) in China last year totaled $118 billion, up 5.3 percent over a year earlier.

Local companies alone accounted for more than $19 billion of the total, up 17 percent from the year-ago FDI level, he said.

China’s rising labor cost
Richard Cant, the Shanghai-based director of the Yangtze River Delta region of business management consultancy services Dezan Shira & Associates, said the government looks confident that investment in the country will continue to grow in the years ahead despite worries about the rising cost of production in China.

“There is 15 percent year-on-year growth in labor costs. The consequences of that are the Chinese and European companies looking at other markets [than China]. Western companies are looking at countries in the Asean [Association of Southeast Asian Nations],” Cant said in the same forum.

“Investors are looking at these countries, but no one in the Southeast Asian region delivers like China does, especially in infrastructure,” he said.

Describing the Yangtze River Delta region as “the powerhouse of China,” Cant said investment in the region contributes the bulk of the total investments in China.

source:  Manila Times

Romulo: PH actions fuel Chinese nationalism

THE Philippine government’s tacks of filing an arbitration case against China and openly seeking international support for Manila’s claim to disputed shoals and islets in the West Philippine Sea (South China Sea) may only be fanning nationalism among the Chinese who believe that the contested parts of the sea are theirs.

According to former Ambassador Roberto Romulo, Beijing’s assertion of the nine-dash line principle in proving its ownership of the disputed territories are among the “long-held beliefs” of the Chinese people that the area was theirs dating back to the Chin Dynasty.

Speaking during the Business Forum organized by The Manila Times, the former envoy also criticized the government for “not being good at restraint.” He said the Aquino administration’s moves to prove eignty over these islands naturally come as “provocative” to the Chinese.

“Aligning ourselves with the US and Japan and seeking world opinion should not be done in a public and provocative manner. It will fuel nationalism from the Chinese,” Romulo explained.

Earlier this year, the government through the Department of Foreign Affairs (DFA) filed a “memorial” with the International Tribunal on the Laws of the Sea contesting China’s claims to the disputed areas in the West Philippine Sea based on its nine-dash line rule.

In September, Aquino sought the backing of the European Union in Manila’s move against Beijing, invoking the United Nations Convention on the Laws of the Sea where China is a signatory.

But these tactics, Romulo noted, do not sit well with China.

He said it is impossible for the Chinese government to strike a compromise because it will be perceived as an act of treason.

“If you look at the interior of China, aside from these substantive issues, [we have to know] China’s current political dynamics.

Realizing this help to calibrate [PH] response,” Romulo noted, adding that there’s “universal public support” in the mainland for its government toward its policies in the contested seas.

“Public support has devolved… Chinese [ownership] extends back to the Chin Dynasty. It is impossible for any Chinese government to compromise [because] compromise will be perceived as betrayal of the nation’s sovereignty,” he pointed out.

The former Foreign Affairs official maintained that it will be “difficult to imagine a major shift in China’s position until [there is a] new eldership bold enough to run counter along that long-held belief [of ownership over the territories].”

He said while there is no quick fix or “magic solution” to the problem, “subtlety” and “restraint” on the part of the Philippine government may do the trick in the long haul.

“There is no magic solution here other than the virtues of patience, perseverance and it is important to have that level of restraint, where we are not very good at, and subtlety,” Romulo added.

He said China and the Philippines should seriously consider joint use and exploration of the disputed areas and set aside the issue of sovereignty since none of the claimants are inclined to give up such.

“[Many] Chinese have all proposed shelving sovereignty and [resort to] joint use. Claimants should work together for maritime cooperation and joint development, maintain peace and stability, reduce tensions,” Romulo added.

Earlier, the former ambassador claimed that China’s rise as an economic superpower is inevitable, making it imperative for the Philippines to rekindle and even strengthen its ties with Beijing.
The chairman of AIG Philippine Insurance Inc., he said Philippine leaders must face the future and accept China’s “preeminence.”

“Why should we care to bring our relations to normalcy? Because [China’s rise] is a reality that we have to accept. [Thus it follows that] engagement and mutual accommodation [are] unavoidable,” Romulo added.

source:  Manila Times

China absorbing disputed areas

CHINA can slowly acquire more territory through its expansionist stance in the West Philippine Sea (South China Sea) and later “absorb the region,” a geopolitics experts said.

Rodger Baker, vice president for East Asia and the Pacific of Stratfor, said Beijing’s expansionism is “political, not military,” since none of the countries claiming ownership of small islands in the region will risk military action.

“So China can slowly absorb the region,” Baker said during the Business Forum organized by The Manila Times.

“Certainly, building structure on the islands prevents others from doing the same, and in time of relative peace may give China slightly easier and more robust capabilities for maritime surveillance,” the Stratfor analyst explained.

“But the main purpose of occupying the islands is not military. It is political,” he said.

Beijing’s “ownership” of the islands is further bolstered by the fact that it faces no concrete challenge.

“This strengthens the reality of Chinese possession,” Baker pointed out.

China’s highly dynamic movements in the disputed territories, he further explained, changes the political reality there by easily redirecting attention when tensions arise.

“When tensions rise too high with a particular country, China can ease off, shift attention to a different country, or just use the perception of heightened tensions to drive a desire for an easing of stress,” Baker said.

While the United States and other “extra-regional allies” have expressed the desire for a legal settlement of the maritime disputes, these countries “are not going to intervene on behalf of Southeast Asian nations,” he added.

“In China’s perspective, [it] will lead to a realignment of political relations where the Southeast Asian nations will find accommodation with China more beneficial than attempts to oppose Chinese expansion,” Baker said.

He observed that while China’s unprecedented growth has pushed it to become a world economic superpower, it lags behind in terms of “soft power expansion.”

“The disconnect between China’s economic strength and the security role assumed by others—namely the United States—highlights the imbalance of power in the region. In some ways, it has benefited Asean [Association of Southeast Asian Nations] countries, giving Asean states the ability to play off the big power competition for their own benefit,” the Stratfor official said.

Baker asserted that China will not “dominate” its smaller neighbors as colonial powers did in the past.

“China is hoping to simply draw in their cooperation and concessions, a recreation of the ages-old Chinese system of regional political management,” he said.

Also, according to Baker, Beijing cannot afford to have a confrontation with the Philippines because it would run counter to its maritime interests in the region.

“The Philippines is a US treaty ally, and thus seen as part of a US containment strategy to hold China in. There is plenty of room for expanded economic cooperation with China, despite the political speed bumps.”

source:  Manila Times

‘China’s goal is maritime silk road’

Given China’s goal of establishing the maritime silk road, its growing presence in the resource-rich South China Sea is unlikely to trigger full military action in the region, a leading analyst from US think tank Stratfor said on Monday.

China’s assertiveness could at worst trigger “short sharpshooting exchange” with countries that have overlapping claims over the disputed waters but military and diplomatic strategies will avert any likelihood of a full-blown war, Rodger Baker, vice president for East Asia and Pacific Analysis at the strategic forecasting company, told The Manila Times in an interview.

“The likelihood of a full-blown war is low. The likelihood of short sharpshooting exchange is, I wouldn’t go all the way to high, but it’s up there,” he said.

The probability will particularly “peak” during the fishing season because “maritime protein” is, in essence, what the current regional dispute is all about.

Much more than gas and oil deposits that can be found in the region, control of fishing resources is the primary issue at the root of all the rhetorics in the dispute, Baker said.

Baker is a featured speaker at the Manila Times-sponsored conference on Philippines-China Business Relations dubbed ‘Business as Usual in Unusual Times,’ set for October 29, 2014 at the Dusit Thani Hotel in Makati City.

The Philippines and four other countries—Vietnam, Malaysia, Brunei and Taiwan—have competing claims over some clusters of islands and reefs in the South China Sea. China claims all the islands as part of its territory.

The country’s long-standing but largely dormant maritime conflict with China came to a boil in 2012 after local authorities apprehended Chinese vessels which they said intruded into Philippine waters near Panatag or Scarborough shoal near Zambales province.

The standoff was resolved peacefully but the incident and a few others that followed strengthened Manila’s hand in seeking international arbitration over the dispute, which China insists should be solved bilaterally.

On March 30 this year, the Philippines filed a memorandum with the International Tribunal on the Law of the Sea to defend its case against China, further increasing tensions. But Baker noted a “moment of pause” in the dispute between the two neighbors.

The control of airspace, next to fishing grounds or maritime lanes, is another concern in the region, Baker said.

Earlier, China announced an Air Defense Identification Zone (ADIZ) in the East China Sea, where it has engaged Japan in a territorial squabble over the Senkaku or Diaoyu Islands.

Baker said that whatever armed conflict may arise in the disputed China-Philippine Sea will depend on how far China sees the US getting involved in a regional dispute. He said Washington will increase its presence in the region once it sees China controlling virtually both aerial space and maritime lanes.

This is not because the US is willing to put itself in a precarious position of waging conflict with China for the Philippines, Baker said, but because it does not want to see Beijing being dominant and challenging Washington’s position as a legitimate global power.

The moment that the US, or even Japan, adds to its presence in the region, China would counter this by also sending more of its aerial and naval vessels to the contested waters.

“The number of aircraft and ships [will increase]. The South China Sea is not tiny, but it is not huge. The more [there are] operational [vessels there], the more likely there will be accidents,” Baker said.

The South China/West Philippine Sea is 3.5 million square kilometers in size.

“But to be fairly blunt, it’s very unlikely that the US is going to get involved with the Chinese over an atoll in the South China Sea,” Baker said. “So the idea that the US would encourage or accept the Philippines provoking China into some sort of confrontation to force US to that state . . . [The Philippines] is going too far with what [it thinks] the US is willing to do,” he added.

Although Washington has been very vocal about its support for the Philippines in the event of an armed confrontation with China, “it never said the way in which it will do that.”

Baker added: “It is very unlikely that there’s a confrontation in one of the small islands and the US [will engage] in a military manner. They may call for dialogue and increase their air flights and presence in the region.”

Aside from the US, China will also be looking at how Japan will react to any conflict in the West Philippine Sea.

Baker said that although Japan has shed its military image after World War II, it still has the “most capable military” in the region and will further develop that capability because of its recent decision to loosen the shackles on its pacifist Constitution that only allowed for self-defense forces.

The US, the analyst added, is “perfectly happy” with Japan’s decision to move away from a pacifist military because Washington wants Tokyo to be a balancing factor to Beijing’s rise.

“The US has been engaged in nonstop war for almost a decade. The US is going into a different mode where it’s not going to push itself as obviously. Instead, it is shifting to a traditional balance of power wherein it utilizes other powers in the region to check itself,” Baker said.

He added that China would have been “much happier” if it had cordial relations with the Philippines and if there was reduced US presence here because it would pave the way for Beijing to put its Maritime Silk Road (MSR) in place.

The MSR will open maritime trade routes between China, the South Asia and all the way up to Venice, connecting the traditional land-based Silk Road used by the Chinese in ancient times.

“It’s somewhat of a challenge to China. But at the same time, the Philippines feels a much greater physical risk of China with the expansion of Chinese compared with other Southeast Asian states,” Baker said.

“In the end, the Philippines still has defense relations with the US that shapes some of its strategic thinking in regards with its relations with China,” he added.

The Philippines is Washington’s oldest treaty ally in the region. The two countries have the 1951 Mutual Defense Treaty that covers the controversial 1999 Visiting Forces Agreement and the 2014 Enhanced Defense Cooperation Agreement that re-allowed American access to old military bases in the country.

source:  Manila Times