By Alan Chan

KUALA LUMPUR, Malaysia--The recent elections in the Philippines is another opportunity for China to further strengthen its position in Southeast Asia.

The Xi Jinping regime in Beijing will continue to take advantage of the region‘s  economic needs to force regional states to see China as their only viable economic and security partner.

If the Philippines new president is not wary of Beijing's efforts to subvert Philippine interests in favor of its own economic and security preferences, Philippine economic self-determination will become subordinate to China's.

China's Belt Road Initiative comes with strings attached

Belt and Road Initiative (BRI) loans are often at high interest rates, to countries to build infrastructure such as highways, power generation stations, railroads, and airports.

Oftentimes the construction work is  carried out by Chinese companies who supply Chinese labor and raw materials. As part of the terms of the agreement, Chinese companies associated with the BRI don't pay taxes to the local government  for the first several years.

Chinese contracts often favor the lender through unusual confidentiality clauses, control over revenue accounts, and cancellation, acceleration and stabilisation clauses that limit the  borrower's policy space to cancel any adverse loan or issue new environmental regulations that could impinge on the terms of the Chinese agreements.

The average BRI loan has an interest rate of 4 percent, as opposed to 1 percent for OECD loans. Additionally, OECD loans are transparent, while BRI loans aren’t.

The Cost of Dealing with China

Countries throughout the region are grappling with how to  manage the mounting debt from unfinished projects and in some cases, governments risk losing  commercial control over key infrastructure.


China's increased investments in Pakistan mean that Beijing is already gaining access  to the Indian Ocean as well as easier entry into Middle Eastern and African markets, says Harsh V. Pant, Professor of International Relations at King's College in London.

In this regard, Adeney points out that the investments were due to be repaid through an increase in exports and an  increase in gross domestic product. However, this has not materialized - since 2018, GDP per capita  in Pakistan has declined. Moreover, Pakistan has not managed to export effectively into China.^

Sri Lanka

Between 2005 and 2017, China provided Sri Lanka with economic assistance worth US$15 billion, including a host of infrastructure projects.

However China's commercial loans with high-interest rates caused Sri Lanka's foreign debt to rise from 36 per cent of GDP in 2010 to 94 percent in 2017, and again increased from 94 per cent in 2019 to 119 per cent in 2021.

The Hambantota port in Sri Lanka was built with US$8 million from China and once held the promise of flourishing trade.

However, Sri Lanka struggled to pay off the five loans it had secured  from the Exim Bank of China to construct it.

In 2017, former Prime Minister Ranil Wickremesinghe negotiated an unusual settlement, leasing a 70 percent stake of the port to China Merchant Port Holdings for 99 years at US$1.12 billion.


Laos has sovereign debts equivalent to about 60 percent of its GDP on the books, with about half of it owed to China. In part because of this debt, a Chinese state-owned company has already assumed control of  part of the electric grid.

China is likely looking to the recent Philippine elections as an opportunity to further strengthen its influence in Southeast Asia.

The next Philippine government should consider that dealings with China are overwhelmingly designed to benefit Chinese businesses and Chinese patrons, with hidden financial costs that can damage a country's ability to provide for its population and strengthen China's influence in the region.

The region must continue to cooperate in multilateral forums like ASEAN to promote independent sovereignty and choice, or risk a domino effect of China's control.