Duterte's China visit: President aims to strike balance between investment and settling territorial dispute

President Rodrigo Duterte's state tour to China, his first outside of Southeast Asia, is a stern test for the leader's strongman image as he attempts to navigate a hot-button territorial conflict while luring investments from the mainland.

The former Davao City mayor, the first Philippine leader to visit China since 2011, arrived Tuesday in a visit that he called a "key turning point in both our [nation's] histories." The 71-year old, who recently marked 100 days in office, has been increasingly cozying up to the mainland to gain Chinese funds and distance his country from the U.S., which has criticized the extra-judicial killings under his war on drugs.

Philippine's President Rodrigo Duterte waves to Philippines nationals living in Brunei after delivering his speech during his official visit in Brunei on October 16, 2016. Duterte arrived for a three-day official visit to hold talks with Brunei's Sultan Hassanal Bolkiah before leaving for China.
DEAN.K / AFP / Getty Images

Duterte, who previously said he would ride a jet ski to the Scarborough Shoal—the South China Sea island claimed by both Beijing and Manila—to stake his country's claim, has recently adopted a friendly attitude towards the world's second-largest economy, dubbed the 'China pivot'. This comes even after President Xi Jinping's administration refused to recognize the Philippines' legal victory regarding the territory.

Now, the big question is whether Duterte will use the state visit to bargain away his country's assertion of sovereignty in the Scarborough Shoal in return for greater mainland investment. So far, it's unclear whether the 71-year old leader, nicknamed 'The Punisher' and 'Duterte Harry' for his hard stance on crime, will raise the matter during his four-day stay.

On Monday, Foreign Secretary Perfecto Yasay announced that the conflict wouldn't be "specifically discussed" during bilateral meetings, local media reported. "The President has made it clear that maybe this is not the time to talk about resolving the South China Sea dispute as we are still continuing to build trust and confidence between the two countries," Yasay was quoted as saying.

Benefits of closer China ties

Duterte's 'China pivot' is essentially economic in nature, CSIS explained. "He would like Chinese aid to develop badly needed infrastructure, including a railroad in his native Mindanao, and he has said Beijing has offered him a 25-year loan to buy weapons from China."

Just this month, China reversed a four-year ban on Philippine bananas, a billion-dollar industry for the Southeast Asian nation, as Beijing took note of Duterte's newfound attitude.

A contingent of around 250 business executives also accompanied the President to Beijing, and is expected to ink a slew of deals. Jaime Augusto Zobel de Ayala, chairman and CEO of Ayala Corporation, one of the largest Philippine conglomerates, told CNBC it would be building on existing linkages it held with Chinese multinational Huawei.

Economic motivations aside, warming up to China has other advantages.

"While much of the international community reprimands Duterte's anti-drug campaign, China offers its support and collaboration....China's non-interference in Duterte's anti-drug campaign may serve as a push toward a stronger tilt to China as it supports the Philippines aims of steering a more independent course," CSIS noted.

Expected outcomes

Political scientists widely believe the tough-talking Duterte will make a compromise on territorial claims.

"Duterte risks playing directly in to Beijing's hands. At best, he will be able to strike a deal for some kind of joint development of Scarborough and other disputed territories, but under Chinese sovereignty. This would be in return for various forms of economic assistance," Bates Gill, professor of Asia-Pacific Strategic Studies at Australian National University, told CNBC.

Chinese state-run newspaper The Global Times echoed that view in an editorial on Tuesday, stating that China can adopt a flexible policy on the Philippines' fishing rights by enabling the return of Filipino fishermen.

"In exchange, Beijing would no doubt like to see Manila continue to distance itself from Washington," Gill added.

Duterte, who said he wants to adopt an independent foreign policy, has already vowed to "break up with America," threatening to end a key U.S.-Philippine military pact.

The move away from the U.S. is aimed at quashing the Philippines' "self-perceived identity as the little brown brother of the United States," CSIS said. That's a sharp turnaround from his predecessors, including Benigno Aquino III, who traditionally viewed Washington as their closest ally.

However, if Duterte panders too heavily to Beijing, it could drastically transform regional geopolitics by allowing China to deepen its grip on Southeast Asia.

"The reconfiguration of the archipelagic nation's foreign policy will certainly alter the balance of power in the South China Sea," the Council of Foreign Relations said in a note on Friday.

A soft Philippine stance on the Scarborough Shoal could also impact Duterte's alpha-male reputation at home, where he rode to power on a populist campaign that catered to nationalist sentiment.

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