Chinese-funded loans to the Philippines could use natural resources as collateral, a Chinese expert claimed in a recent news report.
According to a report published by Chinese newspaper Global Times on March 4, loans from China usually include agreements with provisions that allow the Philippines to use certain natural resources as collateral.
“The interest rate on the loans China has provided to the Southeast Asian country is very low. And the Philippines has strong debt-paying ability. Besides, the loans are usually accompanied by repayment agreements, which use certain natural resources as collateral,” Zhuang Guotu was quoted as saying in the report.
Zhuang currently serves as the head of Xiamen University Southeast Asian Studies Center.
Palace denies report
Malacañang, however, described the claims made in the Global Times report as “false.”
“All I’m saying is that it’s absolutely false. We need to rely on basic documents and there isn’t any,” presidential spokesperson Harry Roque said.
Trade Secretary Ramon Lopez in 2016 said that China opened up as much as $9 billion in loans to the Philippines. At the current exchange rate of P52.000:$1, this translates to P468 billion.
The Philippines has recently increased its borrowing activities under the administration of President Rodrigo Duterte, bringing the debt-to-ratio to 36.4 percent as of end-June 2017.
Duterte earlier said China has offered to assist the Philippines in its massive infrastructure spending program, as it was keen on rail projects.
In November 2016, Finance Secretary Carlos Dominguez III said Export-Import Bank of China president Liu Liange signed a financing cooperation agreement for two flagship infrastructure projects.
Under the agreement, China would provide soft loans estimated at $234.91 million for the Kaliwa Dam-New Centennial Water Source of the Metropolitan Waterworks and Sewerage System, and $72.49 million for the Chico River Pump Irrigation Facility of the National Irrigation Administration.
“China’s infrastructure capability leads the world and as a result many countries and regions are willing to cooperate with China. Besides, China is willing to provide loans, labor and expertise to help the Philippines,” Zhuang was quoted as saying.
Relations between the Philippines and China have been warming since Duterte stepped into office, even amid tensions regarding the ownership of the West Philippine Sea.
Just last week, Duterte said it would be better to conduct joint explorations with China,likening the situation to co-ownership of the area.
“The two countries are carrying out close negotiations [over joint oil and gas exploration in the South China Sea]. It’s very likely they are making first-phase preparations while discussing it,” Zhuang said in the report.
“In fact, discussions about joint exploration started in the 1970s, but it didn’t come about for various reasons. This time, the negotiations came after the Philippines had long been troubled by energy shortages. Joint exploration is significant for the Sino-Philippine relationship as it would mark a new phase in resolving their South China Sea disputes,” he added.
In July 2016, the United Nations-backed Permanent Court of Arbitration delivered a sweeping victory to the Philippines when it declared as illegal China’s claim over nearly the entire South China Sea.
It also declared that Beijing violated the rights of Filipinos, who were blocked by Chinese Coast Guard from fishing in the disputed Scarborough Shoal off Zambales.