In US lockstep, Philippines ‘de-risking’ from China

MANILA – The Philippines and China have capped their tensions in the South China Sea after a series of incidents brought the two rival claimants dangerously close to armed conflict. But the fragile sea truce masks a more fundamental shift in Philippine-China relations.

The Ferdinand Marcos Jr administration is quietly yet proactively “de-risking” relations with China in line with US-led decoupling and in apparent anticipation of a future conflict with the Asian superpower.

On one hand, Philippine intelligence services are tracking and countering China’s alleged espionage and malign influence operations in the country. On another, Manila is seeking to reduce its dependence on Chinese mining investments and present itself as an alternative supplier of precious metals to the West, including for the EV battery sector.

Efforts at countering malign Chinese influence went into hyperdrive mode following the expose of former Bamban mayor Alice Guo, a Chinese national who infiltrated the Philippine political elite and established a thriving business relationship with suspected Chinese criminal groups.

In the latest attempt to track down the controversial former mayor, who is now at large, the Bureau of Internal Revenue (BIR) has filed a tax evasion complaint against her and several key accomplices, including Jack Uy, a businessman who purchased Guo’s Baofu Land Development Incorporated shares, and Rachelle Joan Malonzo Carreon, Baofu’s corporate secretary.  

Philippine officials are also investigating whether the fugitive ex-mayor was involved in espionage activities since a Chinese online casino under her supervision was allegedly behind the cyber-sabotage of government websites in addition to alleged torture and kidnapping of foreign nationals.

Meanwhile, Filipino intelligence services have been tracking less known but more high-value targets who have allegedly been directly involved in malign influence operations in the Southeast Asian nation.

At the center of new investigations is Zhang “Steve” Song, Manila’s bureau chief of the Shanghai Wenhui Daily, who previously served in a similar capacity in Washington DC.

The Wenhui Daily or Wenhui Bao is owned by the Shanghai United Media Group, a company overseen by the Chinese Communist Party’s (CCP’s) committee in the mega-city.

The US has classified the newspaper’s sister paper, the Shanghai United Media Group’s Jiefang Daily, as a “foreign mission”, namely an extension of Beijing’s overseas influence operation.

In tandem with key allies, Philippine authorities have identified Zhang as an agent of China’s Ministry of State Security (MSS). According to Philippine authorities, the alleged journalist-cum-spy quietly “established a significant network in various strategic institutions” over the past three years.

While posing as a regular journalist – although not registered with the Philippines’ International Press Center and with negligible journalistic output in recent years – Zhang reportedly had regular meetings with top Chinese diplomats in Manila as well as key figures in the Philippine government and media, especially before and after every major incident in the South China Sea.

The curious case of Zhang has prompted legislators to consider new counter-influence operations laws and also review whether the Chinese-owned social media app TikTok poses any national security concerns.

Meanwhile, Philippine authorities are also grappling with allegedly China-backed disinformation activities, including ‘deep fakes’ targeting top officials, including Marcos Jr, who has taken a tougher stance in the South China Sea and doubled down on defense ties with Western allies, including the US and Japan.

Earlier this year, authorities flagged a deepfake audio portraying Marcos Jr as warmongering against China amid rising tensions in the South China Sea. Meanwhile, China-friendly vloggers aligned with the Duterte dynasty have also sought to spread deep fakes to reinforce allegations of drug abuse by the incumbent.  

A special report by the Australian Strategic Policy Institute (ASPI) recently reported that “a network of coordinated inauthentic accounts across X and YouTube” amplified deepfake videos targeting the Filipino leader were “very likely linked to the Chinese government.”

While this isn’t the first time China has been implicated in disinformation activities in the Philippines, most notably backing the pro-Beijing Dutertes ahead of the 2022 elections, ASPI argues that  the new strategy “promotes the dissemination of content created by domestic actors, demonstrating a novel sophistication and insight into the Philippines’ information environment.”

The Philippines’ more assertive stance against China has unnerved domestic businessmen, most notably the powerful Chinese-Filipino business community.

Last year, Teresita Sy-Coson, the matriarch of the country’s biggest conglomerate, publicly warned of dire economic consequences if ongoing tensions spill over into bilateral trade and investment ties.

“China is very close to us, we cannot be too antagonistic,” SM Investments Corp vice chairperson Teresita Sy-Coson told reporters during a major public event last year.

“Even though we know what is happening, I guess we have to do it through a more peaceful negotiation,” she added, reflecting growing anxiety among the country’s biggest business groups, which are deeply dependent on cheap imports from mainland China.

Her misgivings, which other Chinese-Filipino business groups echoed, largely fell on deaf ears. If anything, the Marcos Jr administration has sought to reduce the country’s economic dependence on China, in line with Western decoupling moves.

For instance, Manila has pulled out of Beijing’s Belt and Road Initiative (BRI) amid disagreements over a number of stalled big-ticket infrastructure projects pledged but not delivered by Chinese companies.

Marcos Jr’s government hopes strategic allies will help fill the investment gap. Earlier this year, Marcos Jr attended the first-ever Japan-Philippine-US (JAPHUS) summit at the White House, where the three allies vowed to enhance strategic economic cooperation.

Accordingly, Japan and the US are expected to assist in establishing a new US$100 billion investment corridor in industrialized regions of the Philippines, with a focus on high-end and strategically important manufacturing.

In particular, Manila seems keen on joining the “chip wars” against China by positioning itself as a new semiconductor production hub, leveraging its proximity to neighboring Taiwan, a semiconductor-producing superpower.

The resource-rich Philippines is also positioning itself as a key supplier of strategic minerals, most notably nickel. With Chinese companies dominating EV battery supply chains from Africa to Indonesia, the Philippines is actively courting Western and Japanese investments in its own thriving nickel mining sector.

As the world’s second-largest producer, the Philippines is seeking to address uncompetitive production costs and forge more investment tie-ups with the US and other likeminded nations in resource processing.

Ultimately, the Southeast Asian nation wants to become a major EV battery production hub and help the West reduce Chinese dominance in the vital next-generation sector.

“There is room now for the Philippines to be a significant player for batteries,” Ceferino S Rodolfo, under-secretary of the Department of Trade and Industry, told the Financial Times, underscoring growing interest from American, European, South Korean and Japanese companies.

“It’s a race between China and the [West]..[and we have] a really strong argument to go for a non-Chinese investor so that we can be the supplier of non-Indonesian, non-Chinese nickel,” he added.

Follow Richard Javad Heydarian on X at @Richeydarian