Top Philippine economic officials have expressed a desire to separate our economic relations from our political dispute with China lest we shall suffer more—and be left behind by our Southeast Asian neighbors.

Separating our economic relations from the political dispute with China involves pursuing pragmatic economic engagement while addressing political and territorial issues through diplomacy and law, recognizing that the economic interdependence is strong despite the ongoing political tension.

This can be achieved by focusing on economic cooperation in matters like trade and investment, and simultaneously managing political disagreements through negotiations on regional cooperation without allowing the disputes to derail economic goals.

The key is to create a pragmatic approach, often described as “hot economics, cold politics,” where business and trade continue even when political ties are strained.

The Philippines is losing so much due to our strained relations with our neighbor and longtime partner on practically every aspect of our economic life.

By how much? Almost a trillion pesos in less than four years.

The precise amount the Philippines is losing economically due to our country’s assertive stance toward China is difficult to quantify, as the impacts are often in the form of unrealized investments and potential trade disruptions. Analysts and data, however, point to significant negative effects on tourism and a shortfall in expected Chinese investments.

Key economic considerations and impacts include:


Tourism Decline: Chinese tourist arrivals have plummeted since its peak during the previous administration. In 2019, 1.74-million Chinese tourists visited the Philippines spending around $2 billion. By 2024, arrivals had dropped by approximately 80 percent to just over 300,000.


2. Unfulfilled Investment Pledges: PBBM’s administration has struggled to convert China’s investment pledges into actual projects. During President Marcos Jr.’s state visit to Beijing in January 2023, he reportedly secured $22.8 billion in investment pledges. A 2024 report noted, however, no new Chinese investments or construction projects had materialized, in contrast to other Southeast Asian nations.

3. Cancelled Infrastructure Projects: The Philippine government withdrew from loan agreements for three major railway projects worth approximately $4.9 billion, citing a lack of progress and funding issues. The government is now seeking alternative financing from countries like Japan, which has become a top source of official development assistance (ODA) and net foreign direct investment (FDI).

4. Potential Trade Sanctions and Disruptions: While China remains the Philippines’ largest source of imports and a major export market, increased tensions carry risks. One analysis suggested that targeted Chinese sanctions on Philippine electronics and agricultural goods could result in an estimated $6-billion loss to the local economy and put 250,000 jobs at risk.

5. Missed Supply Chain Opportunities: The Philippines may be losing out on regional production and supply chain investment. As Chinese firms expand manufacturing into Southeast Asia (e.g., EV factories in Thailand, Indonesia, and Vietnam), the Philippines has attracted less of this new investment flow.

Despite the geopolitical friction, top Philippine economic officials have expressed a desire to separate economic relations from political disputes, continuing engagement in trade agreements like the ASEAN-China Free Trade Area (ACFTA) Upgrade. The administration is also actively diversifying its economic partnerships, particularly with the United States and Japan, to mitigate the risks associated with an over-reliance on China.

Email: arturobesana2@gmail.com