When former President Rodrigo Duterte took office in the Philippines, he made a significant shift in the country’s foreign policy, moving away from its traditional close ties with the United States and forging a new alliance with China. This change sparked controversy both within the Philippines and in the international community. A major concern was China’s growing influence in the Philippine economy. During his presidency, Duterte visited China several times, meeting with top business leaders and politicians, including President Xi Jinping. Xi and China promised a massive $23 billion in investments for the Philippines, pledging to support infrastructure projects like railways, bridges, dams, roads, and schools. They also vowed to open factories and boost industrialization across the country. However, by the end of Duterte’s six-year term, many Filipinos were left wondering if these investments had truly materialized. Did China’s promises bring real economic benefits, or were they just empty words?
During Duterte’s administration, China pledged up to $24 billion, but after six years, only a fraction of that amount was realized. Most of what did come through was in the form of loans rather than outright aid. For instance, between July and September 2016, the Philippines secured $2.2 billion in loans for two power projects in Dinginin and Kauswagan. While the number of projects funded by China increased from 14 in 2016 to 44 in 2021, the actual amount of new development finance from Beijing decreased over time. Moreover, despite the closer relations, China did not offer the Philippines more favorable loan terms. For every dollar of aid, China issued $167 in debt in 2016, and by 2019, the ratio had worsened to $1 of aid for every $211 of debt.
But is this debt necessarily a bad thing? For example, the Bank of China partnered with Banco de Oro and Philippine National Bank to provide a $265 million syndicated loan for a project in Clark Global City. The loan came with interest rates of 7.61% to 8.98% over ten years. In comparison, loans from Japan usually have much lower interest rates, around 1%, with longer repayment periods of up to 40 years.
So, with fewer high-interest loans, the Philippines has less debt to repay at steep rates. According to the latest data from the Central Bank of the Philippines (BSP) as of March 2024, the country still owes China over $3.8 billion, with an additional $3.3 billion owed to Hong Kong. Combined, China and Hong Kong are the second-largest lenders to the Philippines, following Japan, which has loaned over $15.2 billion. This figure excludes loans from multilateral institutions like the Asian Infrastructure Investment Bank (AIIB), which is based in China and has lent over $2.2 billion to the Philippines.
Now, let’s look at some specific cases where Chinese investments did come to fruition.
One of the most well-known and controversial Chinese companies involved in Philippine infrastructure is the China Road and Bridge Corporation (CRBC). This state-owned enterprise was embroiled in a major scandal in 2009 when the World Bank debarred them, along with three other Chinese firms, for inflating prices and fixing bids during the first phase of the Philippine National Roads Improvement and Management Program. This corruption case raised serious concerns about the transparency and integrity of Chinese investments in the Philippines.
Despite this scandal, CRBC has remained active in the country. They were involved in significant projects like the Central Luzon Link Expressway and the Estrella-Pantaleon and Binondo-Intramuros bridges. Even after Duterte left office, CRBC continued to play a role in the Philippine economy. For instance, in November 2023, CRBC signed a new agreement with the Philippine Department of Public Works and Highways (DPWH) to build the Davao River (Bucana) Bridge and link road by 2025, a project estimated to be worth 3.1 billion pesos.
Another major project, the North Luzon Railway, was set to be implemented by the China National Machinery and Equipment Group (CNMEG). However, CNMEG, like CRBC, was debarred by the World Bank in 2018 for fraudulent financial practices. The Northrail project, which began during former President Arroyo’s administration, was plagued with controversy and was suspended in 2008 due to various issues, including doubts about CNMEG’s experience for such a large-scale project.
One of the most publicized and debated projects financed by China under Duterte’s “Build, Build, Build” program is the Kaliwa Dam. This project, led by China Energy Engineering Group (CEEC) in partnership with the Philippine Metropolitan Waterworks and Sewerage System (MWSS), was promoted as a solution to Metro Manila’s water shortage. However, the project has been criticized for its lack of a genuinely competitive bidding process. An investigation suggested that the contract may have been negotiated from the start, raising concerns about either incompetence or collusion. Despite these issues, the MWSS insists that the bidding process was lawful. The dam is expected to be completed by 2026 and operational by 2027.
Finally, the largest Chinese investment commitments are in the steel industry. The state-owned Panhua Group Co. Ltd. pledged $3.5 billion to build a new steel mill and port facility, while a $4.4 billion joint venture between Hesteel Group and SteelAsia Manufacturing Corp. aimed to boost steel production in Misamis Oriental Province. However, progress on these projects has been slow, with few updates since 2023.
So, what happened to the Chinese investments promised under Duterte? Some projects were built, and a few were completed, but many of the investments came in the form of loans or debts, which are not always the best way to support infrastructure development. China’s high interest rates make these loans expensive, especially compared to Japan’s more favorable terms. Since President Marcos took office, relations between the Philippines and China have soured, leading to the cancellation of several Chinese-funded projects.
As of November 2023, the Philippines withdrew from three Belt and Road Initiative (BRI) railway projects. Tensions escalated in March 2024 when the Chinese Coast Guard used water cannons on a Philippine patrol boat near the Second Thomas Shoal, amid ongoing maritime disputes. Meanwhile, President Marcos Jr. has been seeking infrastructure financing from the United States.