Chinese President Xi Jinping (L) and Philippine President Rodrigo Duterte (R) toast during a state banquet at the Malacanang Presidential Palace in Manila, November 20, 2018. Photo: AFP/ / Mark R Cristino

Against the backdrop of rising tensions in the South China Sea, Philippine President Rodrigo Duterte embarked on his fifth visit to Beijing to meet top Chinese leaders, including President Xi Jinping, Premier Li Keqiang, and Vice-President Wang Qishan.

The high-profile visit, from August 28 to September 1, comes at a crucial juncture in bilateral relations as the Filipino leader faces rising domestic pressure to take a tougher line against Beijing’s expansionist designs in maritime territories claimed by Manila.

Preliminary reports of his meeting with Xi, however, indicate Duterte maintained a conciliatory stance, with no sign that he raises the 2016 arbitration award Manila won at The Hague vis-a-vis China’s sweeping claims to the South China Sea.

Beijing has consistently rejected the legitimacy of the tribunal award, which Duterte put aside soon after winning office in mid-2016 but in recent weeks vowed to resurrect during his meeting with the Chinese leader.

Instead, the two sides focused on finalizing controversial resource-sharing deals in the disputed waters, which Duterte’s opposition critics have claimed could violate local laws on sovereignty depending on how they are brokered. Officials said a final deal could be agreed as early as November.

As he passes the mid-way point of his six-year term, Duterte has doubled down on his rapprochement with the Asian powerhouse, potentially setting the trajectory of bilateral relations and the maritime disputes well beyond his presidency, which legally ends after one term in 2022.

Still, Sino-Philippine relations suffered a major blow in June after a suspected Chinese militia vessel sunk a Filipino fishing boat in the Reed Bank, followed in recent weeks by growing incursions by Chinese surveillance vessels and warships into Philippine waters.

The incident sparked wider recriminations. Philippine National Security Advisor Hermogenes Esperon and Defense Secretary Delfin Lorenzana, have also openly warned in statements that an influx of illegal Chinese workers to the Philippines represents a security “threat.”

Philippine Defense Secretary Delfin Lorenzana at military headquarters in Quezon city, metro Manila, February 9, 2017. Photo: AFP

Lorenzana had openly called on Duterte to raise the intrusion of Chinese warships in Philippine territorial waters in his meeting with Chinese leaders. The defense chief also recently raised concerns that Chinese-run gambling enclaves in Manila might be leveraged by Beijing to spy on local military installations.

Instead of ratcheting up tensions and jeopardizing relations with his hosts, Duterte leveraged his presidential record 8th meeting with his Chinese counterpart to push forward proposed joint resource-sharing deals in the South China Sea.

Ahead of Duterte’s visit, China sought to ease bilateral tensions by issuing a formal apology for the Reed Bank incident, when 22 Filipino fishermen reportedly nearly drowned to death after being rammed by a Chinese vessel. They were rescued by a passing Vietnamese boat.

The culprit, through the Guangdong Fishery Mutual Insurance Association, expressed “deep regret that this accident had to happen and I would like to express my deep sympathy to the Filipino fishermen” while offering potential civil compensation for damages caused by the incident.

Philippine Ambassador to China Chito Sta Romana warmly welcomed the apology, stating: “It was clear to us that, not only from the president but also from the secretary of foreign affairs, he made it clear that what we want is a public formal apology — written not verbal. ”

The Filipino envoy suggested that the two sides are now on the “cusp of closure” with the apology letter. Presidential spokesman Salavador Panelo added: “President Duterte and President Xi agreed on the importance of self-restraint and respect for freedom of navigation in – and overflight above – the South China Sea.”

Accompanied by 11 Cabinet members, including his defense and finance secretaries, Duterte lauded the “fresh impetus” and “stronger momentum to work together” in order to develop “a strong and special relationship that is mutually, respectfully, collectively beneficial, and [decidedly] reciprocal.”

Welcoming “expanding” bilateral cooperation, including defense and strategic realms, Duterte admitted that “there had been challenges” in bilateral relations while welcoming a shared “commitment to define our ties as a comprehensive strategic cooperation.”

Philippine President Rodrigo Duterte is running much of his China diplomacy through his hometown of Davao. Image: Facebook

He also made it clear that despite rising maritime tensions “channels for dialogue [remain] fully opened” to ensure ongoing agreements and bilateral projects remain on course.

In turn, Xi said that China is “willing to work” closely with his Filipino counterpart “to continue leading the development of the China-Philippines relationship with a strategic and long-term perspective.”

In that direction, the two sides signed six agreements focused on enhancing cooperation in higher education, infrastructure development, border patrols and customs. Those included a loan agreement for a rail project designed to cross the Philippines’ main island of Luzon.

Sta Romana, making it clear that the Filipino president’s visit was meant “to build bridges, not to burn bridges with China,” announced that the two countries agreed on the terms of reference (TOR) for joint exploration deals in the sea.

“In the past two months, last June, the Philippine side submitted its proposed terms of reference to the Chinese side, and the Chinese side agreed to it and submitted their letters, their notes of agreement last July. So that has already been agreed upon,” he added.

The ongoing negotiations have been hounded by controversy, since many in the Philippines and around the region fear that any agreement will legitimize China’s expansive claims in the disputed areas.

The two sides are currently exploring a two-track approach, exploring first a non-controversial deal in “undisputed” areas as a confidence-building measure towards a brokering a more contentious deal in areas of overlapping claims, particularly the energy-rich Reed Bank.

The Philippine National Oil Company-Exploration Corporation is currently exploring a service contract (SC) deal with the China National Offshore Oil Corporation (CNOOC) to develop energy resources in the 720,000-hectare area in the sea’s Calamian Islands, which unlike other contested features are not lassoed within China’s expansive nine-dash line map.

Under a service contract, the Philippines would retain sovereignty to the maritime area and reap 60% of the project’s profits. The two sides also hope eventually to finalize a joint exploration deal in the more hotly contested Reed Bank.

The problem is that any contractual deal will have to reconcile the two sides’ competing claims over the energy-rich area. In May, Duterte signed Executive Order No 80, which paves the way for another service contract in the area.

To secure a final deal, likely before the end of the year, the two sides have formed a “joint steering committee” composed of top officials from both nations, and “joint entrepreneurial working committees,” consisting of energy company business executives who could potentially be involved in the proposed projects.

If finalized, Sino-Philippine resource-sharing agreements could set the tone for a broader Code of Conduct (CoC) in the South China Sea currently being negotiated between China and the Association of Southeast Asian Nations (ASEAN).

As the ASEAN-China country coordinator until 2021, the Philippines is playing a crucial role in determining the multilateral future of the disputes, one that clearly prefers commercial-led conciliation to strategic conflict.

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