A United States-based research center has warned of the risks that China's investment financing in the Philippines poses, citing its high interest rates and lack of transparency in its implementation and policies.
But AidData, the research laboratory based in Virginia that conducted a study on Chinese investments in the country, did not encourage nor discourage the Philippines to receive financing from China.
For Samantha Custer, its director of policy analysis, it actually "depends on the terms, it depends on the context, it depends on accountability."
Custer's suggestion came after presenting to the Philippine media the center's study, which was partly funded by the US government, on Beijing's two decades of engagements with Manila.
In the report, it said that the two decades under the leadership of four Philippine presidents had held "dramatically different stances" towards China, with former presidents Arroyo and Duterte having the most favorable stances towards Beijing, consequently receiving large amounts of financing.
"The PRC (People's Republic of China) backed the Arroyo and Duterte administrations' priorities with gusto—ramping up financing by 950 percent under Arroyo and fast-tracking new projects at an unprecedented rate under Duterte," the center said.
Between 2000 and 2022, China bankrolled 233 projects worth roughly $9.1 billion. But 91 percent of this financing was debt or those with high-interest loans, instead of aid.
"You have to be careful. One can say, 'well, there's collusion there.' But it is also important to recognize that China will often put additional sweeteners on these deals, so it's the promise of export market for bananas, it's the prospect of being on the right list to get Chinese tourism groups," Custer said.
"And these things increase the perceived overall value of the deal," she added.
The center also said that Beijing bankrolled "a few costly projects in infrastructure-adjacent sectors—from economic and information infrastructure to physical connectivity, utilities, food and power—that account for most of its financing."
While China's big-ticket projects can boost productivity, it also has "risky propositions," according to AidData.
"Beijing's investments in three sectors had elevated environmental, social and governance (ESG) risks: agriculture, forestry and fishing; energy; and transport and storage," it said.
"Roughly 55 percent of its projects relied on Chinese firms, often state-owned enterprises, associated with elevated exposure to ESG risk or questionable business practices [that are] directly or indirectly sanctioned by the World Bank or Asian Development Bank," it added.
There is also evidence that China is looking to invest in critical and sensitive sectors in the Philippines, according to AidData, as proven by the move of a "private Chinese firm with massive stake in the Philippines."
It is a telecommunication market that "will necessarily give them sway over a substantial share potentially of Philippines communications," it said.
So what did AidData mean by "it depends" is that: "If you can use your investment strategy to your advantage, to crowd in multiple offers to work with you on development projects such that it increases the transparency of these terms, the competitiveness of the firms that are implementing these terms, and higher levels of accountability, and China is actually willing to do it, by all means go for that deal," Custer said.
But the challenge, according to Custer, is China "often doesn't have" such.
"In the first situation, if you can get China to offer more generous terms with higher accountability and transparency, that can be advantageous. But if you can't get that, that is risky... and can create cascading effects," she added.