The Philippines is exiting China’s Belt and Road Initiative. This is a comprehensive failure of Xi Jinping’s vision for China’s economic power there.
The Philippines is exiting China’s Belt and Road Initiative (BRI), the infrastructure-development project at the center of Xi Jinping’s international economic policy. Asia Times reports, “The Philippine Department of Transportation has announced the full termination of a series of big-ticket infrastructure projects with China in favor of Japanese and Western rivals.” Filipino president Ferdinand Marcos Jr. did not attend a recent BRI summit in Beijing.
Seven China-supported projects, including a major rail project, have been scrapped by the Filipino legislature. Legislators pointed to the unfavorable terms of Chinese lending, and the better deals the Philippines could get from Japan, South Korea, Europe, and the World Bank. They also noted that increased tensions with China could have something to do with the decision.
A Chinese coast-guard vessel collided with a Filipino resupply vessel on October 22 in the South China Sea. The Philippines called China’s actions “provocative, irresponsible and illegal,” while China claimed the Filipino boat had ignored warnings as it approached China’s vessels.
As Jimmy Quinn wrote for NR in February, “While there was some worry that the Philippines was inching toward closer ties with China during the administration of Marcos’s predecessor, Rodrigo Duterte, the current president has reversed that trend.” Many of these projects were agreed to when Duterte was president, and the withdrawal from the BRI is further confirmation of Marcos’s change in policy.
Duterte is now seen as having been duped by China, which promised investment in exchange for concessions in the South China Sea. The investments hadn’t come by the time Duterte left office in 2022, and Marcos is canceling them.
The Philippines has also increased its cooperation with the U.S. this year, granting U.S. forces access to four military bases. The Philippines is very close to Taiwan, and Marcos is aware of his country’s likely involvement in a potential Chinese invasion of the liberal-democratic island.
This is a comprehensive failure of Xi Jinping’s vision for China’s economic power in the Philippines. The BRI is supposed to fund economic development in countries that need it and engender fond feelings in the recipient for China. But despite Duterte completely falling for the BRI’s allure, the Philippines is now turning against China militarily and politically. And it isn’t doing so to go it alone. It’s turning towards the West and China’s East Asian adversaries.
The BRI is in trouble overall as well. China has already sunk $1 trillion into BRI projects, and many of its politically motivated investments are going to become even more unworkable than they already were as interest rates rise around the world. China has outsize exposure to emerging-market debt at the exact time that investors are fleeing to safety in the developed world.
BRI investment has decreased since it peaked at $122 billion in 2018 and is only at $40 billion this year. Italy, the only G7 country in the BRI, announced it would be leaving this year as well. Many of the developing countries China lent to are now in distress over their debts and are unlikely to be able to fully repay what they owe.
Rather than change course, China is doubling down. The BRI is one of Xi’s top policies, and to jettison it would be to contradict the supreme leader. A Chinese government report in October still called the BRI “a key pillar of the global community of shared future” and at the BRI summit that Marcos snubbed, Xi announced another $100 billion in state financing for the initiative.
This comes on top of Xi’s stubborn refusal to change course from his plan for China’s domestic economic development. One of the top problems China has is its consumers don’t spend enough, so it constantly needs export markets for its government-driven production. Rather than seeking to liberalize markets and allow more domestic free enterprise, Xi is doubling down on party control of the economy.
Jeremy Friedman gave some examples of Xi’s domestic economic thinking recently for Foreign Policy:
In contrast with Deng, Xi has embraced a distinctly Maoist socialism that emphasizes personal sacrifice for the collective good, harking back to the Cultural Revolution of the 1960s and 1970s. As China’s economic situation has worsened, Xi has harped ever more emphatically on this approach. He has encouraged Chinese youth to “eat bitterness”—in other words, to sacrifice and work hard for less. He has criticized the moral character and work ethic of today’s youth, which has popularized concepts such as “lying flat,” rejecting the intense competition of the workplace in favor of a minimalist lifestyle. Xi’s administration has also launched a campaign to resurrect traditional masculinity by attempting to banish “sissy men” from the public sphere, embracing the conservative asceticism of the Maoist period. His administration has also sought to limit video gaming for fear of the deleterious effect it could have on the moral constitution of China’s youth. In short, Xi’s version of socialism is not a socialism of abundance. Rather, it seems to be very much a moral socialism, derived from the Maoist values of his youth to which Xi is known to be partial—despite the persecution of his father by the CCP under Mao.
“To [Xi], boosting consumption is seen as an ideological surrender to the West that would be even more dangerous to his regime than economic stagnation,” Friedman concludes.
The West’s response to that ought to be: Your terms are acceptable.