China's Hu boosts Manila ties with investments

China's Hu boosts Manila ties with investments

Stuart Grudgings, Reuters/Manila

Chinese President Hu Jintao reaffirmed burgeoning ties with the Philippines on Wednesday by agreeing investments and loans worth US$1.7 billion to fund infrastructure and mining projects in the Southeast Asian nation.

The Philippines also edged toward closer security ties with China, despite concerns by some senior Philippine military officers that this could irritate the United States, Manila's traditional ally.

In a speech to a joint session of Congress after meeting President Gloria Macapagal Arroyo, Hu extolled the benefits for Southeast Asia from China's powerhouse economy while seeking to ease fears that it is becoming too dominant.

"The booming Chinese economy has provided a most powerful engine for East Asia and the fastest growing export market for neighboring countries," Hu said.

But he added that China would "always respect" the consensus of the 10-member Association of Southeast Asian Nations (ASEAN) and was committed to peaceful cooperation in the disputed Spratly Islands in the South China Sea.

China's trade and investment ties with the Philippines and other Southeast Asian countries are growing rapidly along with its diplomatic clout.

Trade with ASEAN is expected to double to $200 billion by 2010, when a free trade deal between the two takes full effect.

China now ranks as the Philippines' fourth-biggest trade partner with volume of $13.3 billion in 2004 from 12th biggest in 2001.

But it also represents a threat.

Overall Philippine export growth has lagged that of its neighbors in recent years, and economists say it has suffered from competition with China in key industries such as semiconductors and textiles.

The Chinese delegation signed 14 investment agreements worth a total $1.1 billion, the biggest a $950 million investment by Baosteel group and Jinchuan Nonferrous Metals Corp to rehabilitate a nickel plant in the southern Philippines.

China, hungry for resources to feed its economy, also agreed to jointly hunt for oil in the Calamian area off the coast of Palawan island in the western Philippines and to provide $500 million in cheap loans for a railway project north of Manila.

Manila said the total amount signed was $1.7 billion.

"I think as President Arroyo said this is the start of the golden age of partnership with China," Philippine Defense Secretary Avelino Cruz told reporters.

Cruz said the government wanted to expand security ties with China during Hu's visit, building on a pledge by Beijing last year to give the Philippines $1.2 million in military assistance.

The one major irritant in relations remains the Spratly Islands in the South China Sea, which are claimed by in whole or part by six countries, including China and the Philippines.

But even here there are signs of a thaw.

State oil firms in China, the Philippines and Vietnam signed a deal in March for a three-year joint marine study in the South China Sea, including the Spratly Islands.

Hu said in his speech to Congress that the agreement marked "a valuable step forward in turning the South China Sea into a sea of friendship and cooperation."