Manila has long contested China's territorial claims in the resource-rich zone, home to the world's busiest shipping lanes, and its argument now has validation from international courts. On July 12, a tribunal at the Permanent Court of Arbitration in The Hague ruled that some of China's expansionary tactics in the South China Sea were illegal, leading Chinese President Xi Jinping's administration to declare the ruling "null and void."
China's adamant refusal to acknowledge The Hague's decision introduces a dilemma for 71-year-old Duterte.
Fresh off a landslide election victory, it's unlikely he wishes to risk economic ties with the world's number two economy, but his nationalist pride is at stake, especially after he ran a campaign that promoted his ability to preserve Philippine national interests against both Washington and Beijing. Such a tough-talking image has earned him the nickname of "The Punisher" and "Duterte Harry."
But strategists told CNBC that Duterte will likely push for bilateral talks with Beijing in favor of a peaceful settlement, instead of escalating tensions by riding jet skis to Chinese-owned reefs, as he's previously threatened to do.
"President Duterte is likely to choose negotiations with China, including the possibility of a resources-sharing arrangement for the disputed territorial claims, rather than triggering a confrontation with Asia's military superpower," explained Rajiv Biswas, Asia-Pacific chief economist at IHS Markit.
Washington, which has expressed its desire for a multilateral solution, will be closely watching these talks. President Barack Obama's economic and military pivot to Asia is set to become one of his legacy policies and there's a chance Duterte could undermine that.
"When Duterte went into office, Washington's main worry was that when Duterte said he wasn't afraid to talk with China, they were really worried he was this demagogue with no grasp of foreign policy who would easily give up Philippine interests in the South China Sea in exchange for a couple of economic concessions," Stratfor's East Asia analyst Thomas Vien said in an e-mail.