China-Philippines Ties: Economics vs Security

Bilateral ties between China and the Philippines remain complex, shaped by growing economic links alongside persistent security tensions. The South China Sea disputes continue to overshadow diplomatic efforts and mutual interests. This examination draws on recent developments to assess the core barriers to stronger relations.

China-Philippines Ties: Economics vs Security

Beijing, China — Article continues.

In the CGTN video titled "What's really holding back China-Philippines ties?" (video ID: 9-ScOQhJKOA), reporter Chen Yuan examines why bilateral relations remain strained despite diplomatic and economic progress, with security frictions in the South China Sea continuing to undermine ties.

An Uneasy Partnership: The China-Philippines Paradox

Economic interdependence and security divergence define the current state of China-Philippines relations. Trade volumes have grown substantially, yet territorial concerns limit deeper strategic alignment. Since the transition from the Duterte administration to the Marcos Jr. government, Manila has maintained engagement with Beijing on economic matters while adopting a firmer stance on maritime issues. This shift reflects domestic political considerations and external alliance pressures, creating a pattern where cooperation in one domain coexists with friction in another.

Former President Rodrigo Duterte's pivot toward Beijing from 2016 to 2022 marked a decisive break from Manila's traditional alignment with Washington, yielding infrastructure pledges under the Belt and Road Initiative that reached $15 billion in commitments by 2021. President Ferdinand Marcos Jr.'s subsequent recalibration since 2022 has reasserted Philippine sovereignty claims while preserving select economic channels, reflecting shifts in domestic politics where the Philippine Congress has passed resolutions bolstering maritime defense funding and the Armed Forces of the Philippines have prioritized modernization programs exceeding $2 billion. This environment has fostered a dual-track diplomacy of economic engagement paired with security deterrence, allowing limited trade growth amid heightened patrols.

Recent surveys by the Social Weather Stations indicate that unfavorable views of China among Filipinos stand at 63 percent as of late 2024, driven by territorial disputes yet tempered by recognition of potential investment benefits in agriculture and energy sectors. Military leaders, including Armed Forces Chief Gen. Romeo Brawner, have publicly advocated for diversified partnerships without full rupture, underscoring how congressional oversight committees now scrutinize any new accords with Beijing for national security implications.

Beijing's strategic objective centers on sustaining economic linkages as a foundation for stable ties. Chinese officials emphasize that mutual benefit through trade and investment serves both nations, even as differences over maritime boundaries persist. The result is a relationship marked by parallel tracks rather than unified progress.

South China Sea: The Irreconcilable Core

Disputes at Scarborough Shoal and Second Thomas Shoal remain central obstacles. China's position, articulated through the Ministry of Foreign Affairs, holds that bilateral consultations offer the most practical route to managing differences. Manila, however, continues to reference the 2016 South China Sea arbitration award in its policy statements, viewing it as a basis for its claims under the United Nations Convention on the Law of the Sea.

Confrontations at Second Thomas Shoal have intensified through 2025 and into 2026, with Chinese vessels employing water cannons against Philippine resupply missions on at least eight documented occasions, including a March 2025 incident that damaged a civilian boat. Implementation of China's Coast Guard Law has enabled more assertive boarding and blocking tactics, directly challenging Manila's efforts to sustain its outpost on the BRP Sierra Madre. These episodes highlight the operational friction arising from routine Philippine missions to deliver food and construction materials to stationed marines.

The Philippines' 2016 UNCLOS arbitral victory invalidated China's nine-dash line claims within its exclusive economic zone, yet Beijing continues to assert historical rights predating the convention, rejecting the ruling as non-binding. This legal divergence sustains an impasse where Manila invokes international law to rally support while Chinese officials emphasize bilateral negotiations, prolonging tensions without resolution mechanisms.

The nine-dash line framework maintained by China contrasts with the Philippines' emphasis on exclusive economic zones. These competing legal interpretations have produced repeated incidents at sea, raising the risk of escalation. Beijing calculates that direct negotiations can prevent third-party involvement from complicating outcomes, while Manila seeks to preserve its legal position alongside diplomatic engagement.

The US Factor: EDCA and the Alliance Dilemma

The Enhanced Defense Cooperation Agreement has expanded United States access to Philippine bases, strengthening Manila's security arrangements with Washington. This development affects the Philippines' negotiating leverage with Beijing by introducing an additional actor into regional calculations. Chinese analysts note that such arrangements can constrain Manila's flexibility in bilateral talks.

Expanded Defense Cooperation Agreement sites now include Camp Aquino in Tarlac, Fort Magsaysay in Nueva Ecija, Basa Air Base in Pampanga, and Cesar Basa Air Base in Floridablanca, granting U.S. forces rotational access for prepositioned equipment and joint training. These locations enhance rapid response capabilities near the South China Sea, complementing Australia's AUKUS framework that indirectly bolsters Philippine maritime awareness through shared intelligence and Japan's provision of patrol vessels under a 2024 defense cooperation pact. The United States has allocated $500 million in security assistance since 2023, funding radar systems and coast guard vessels to counterbalance Chinese presence.

Manila's balancing act grows complex as these alliances risk provoking Beijing's countermeasures, including economic restrictions on Philippine exports, while domestic debates in Congress weigh the benefits of deepened interoperability against sovereignty concerns over foreign basing arrangements.

ASEAN centrality remains a concern for all parties. Expanded external military presence risks diluting the organization's role in shaping regional norms. Beijing's preference for bilateral mechanisms aligns with its broader objective of managing disputes without multilateral frameworks that could internationalize the issue further.

Economic Ties: The Counterweight to Conflict

China stands as the Philippines' largest trading partner, with bilateral trade exceeding $87 billion. Chinese investment under the Belt and Road Initiative has supported Philippine infrastructure projects, creating tangible economic stakes for both sides. These linkages generate incentives for restraint even amid maritime tensions.

At the same time, economic interdependence introduces vulnerabilities. Disruptions from security incidents could affect supply chains and investment flows. Beijing views sustained economic cooperation as a means to build resilience in the relationship, encouraging Manila to balance its security choices with economic realities.

ASEAN Chairmanship: Opportunity or Burden?

The Philippines assumes the ASEAN chair for 2026 and has indicated plans to advance a Code of Conduct for the South China Sea by the end of that year. This role positions Manila to influence regional diplomacy, yet it also requires navigating consensus among diverse member states. Beijing supports a Code of Conduct reached through consultations among directly concerned parties.

Manila's dual-track approach, as pursued by Foreign Affairs Secretary Ma. Theresa Lazaro, seeks to combine economic engagement with security assertions. The chairmanship tests whether national priorities can align with collective ASEAN processes without undermining either.

What This Means for Regional Stability

Looking ahead to 2026-2027, the interplay between economic incentives and security frictions will shape trajectories. Successful management of South China Sea issues through bilateral channels could reduce immediate risks, while continued emphasis on external alliances may prolong tensions. Beijing's strategic calculus prioritizes preventing escalation that could draw in wider involvement.

Should the Code of Conduct be concluded by 2026, it could establish binding rules for resource exploration and incident avoidance, easing pressure on ASEAN forums; a stall, however, would likely accelerate unilateral actions and heighten collision risks. Escalating tensions could influence the 2028 Philippine elections by amplifying nationalist sentiments, potentially favoring candidates who prioritize defense spending over diplomatic overtures. From Beijing's vantage, long-term strategic patience allows economic leverage to shape outcomes, contrasting with ASEAN members' growing impatience over stalled multilateral progress.

Second-order effects would ripple to Vietnam and Malaysia, prompting accelerated naval acquisitions and closer Indo-Pacific alignments with Quad partners, thereby reshaping broader security architectures beyond bilateral disputes.

ASEAN centrality faces tests as external powers maintain influence. Outcomes will depend on whether Manila can reconcile its economic partnership with China and its security alignment with the United States. Regional stability hinges on pragmatic steps that address core disputes without disrupting broader cooperation frameworks.