Backgrounder - PGMA's State Visit to China 2004

Overview of Philippines - China Relations

The Philippines’ relations with China are among the most important ties the Philippines has with any member of the international community. China is one of the fastest growing economies in the world and a major regional power with a modernizing military.

President Gloria Macapagal-Arroyo has said in various fora that the Philippines desires a healthy, comprehensive and long-term relationship with China that transcends the specific issues between them.

Although the Philippines’ ties with China date back many centuries ago, formal diplomatic relations were established with the People’s Republic of China (PRC) on 9 June 1975. The year 2000 was a significant milestone in Philippines-China relations with the commemoration of the 25^th year of the establishment of diplomatic relations between the two countries. Fittingly, it was during this milestone year that a Joint Statement on the Framework of Bilateral Cooperation in the Twenty-First Century was signed between the two countries. The document sets the course for the future direction of Philippine-China relations in the areas of cooperation and in the defense and military fields, trade and investment, science and technology, agriculture, education and culture, judicial-legal and other areas.

This State Visit to China is the first foreign visit of President Gloria Macapagal-Arroyo since she obtained a fresh mandate from the Filipino people in the May 10 elections. She will be renewing ties with President Hu Jintao whom she met in March 2000 when they were both Vice Presidents. She will likewise renew acquaintances with Premier Wen Jiabao and Chairman Jiang Zemin. This will be President Gloria Macapagal-Arroyo’s second state visit to China in two years.

During this visit, several agreements are expected to be signed, which will serve to further strengthen the ties between the Philippines and China. The President will also attend the 3^rd International Conference of Asian Political Parties (ICAPP) as head of the Lakas – Christian Muslim Democrats Party, together with House Speaker Jose de Venecia.

Political security relations

The South China Sea issue, the only irritant in Philippines-China relations, has not hampered the development of relations between the two countries. The Philippines remains steadfast in its commitment to settle the dispute peacefully through consultations and negotiations. It continues to undertake diplomatic efforts, at the bilateral as well as regional/international level, to ensure peace and stability in the South China Sea.

Efforts by China and the Philippines have enhanced the level of political understanding and mutual trust between the two countries and improved over-all ties, particularly following tensions in 1995 on the construction by the Chinese of "fishermen’s facilities" in the Mischief Shoal in the Kalayaan Islands Group.

The exchange visits in 2003 of then Defense Secretary Angelo T. Reyes and Chief of the Chinese People’s Liberation Army General Chi Haotian helped forge a consensus that both sides will endeavor to expand military to military exchanges to enhance working relations and build mutual confidence between the two countries’ defense establishments.

One-China Policy

A major principle underlying Philippines-China relations is the "One-China" policy. The 1975 Joint Communiqué establishing diplomatic relations between the Philippines and the PRC explicitly provides that the Philippines recognizes the government of the PRC as the "sole legitimate government " of China and "fully understands and respects the position of the Chinese government that there is but one China and that Taiwan is an integral part of Chinese territory." This doctrine – now widely known as the "One-China" policy – is being adhered to by all countries having diplomatic relations with PRC, including all the world’s major powers.

Trade and Investments

Trade

In the area of trade and economic relations, the two countries concluded a Trade Agreement in June 1975, under which the Philippines-China Joint Trade Committee (JTC) was set up. And given the task of finding ways to solve problems caused by the implementation of the agreement and of proposing measures that would promote bilateral trade. JTC agreements are recorded in yearly trade protocols that specify the commodities to be traded as well as the volume and targets. Trade between the Philippines and China has expanded considerably since 1975 and continues to improve.

Philippines-China trade has registered a steady growth during the past years. For the past three years, Philippine trade with China grew at an average annual rate of 50.16% from US$1.7B in 2001 to US$3.9B in 2003. Total RP-China trade from 1999-2003 grew by 26.81%. Over the same period, Philippine exports to China grew by 39.72% while imports grew by 16.94%.

China is among the top ten trading partners of the Philippines. In 2002, China ranked 9^th. By 2003, she was the country’s 6^th largest trading partner, accounting for 5.38% of total Philippine trade with the world. For the same year, China ranked as the 8^th biggest export market and 6^th largest import supplier of the Philippines.

Top exports in 2003 consisted of semi-conductor devices, US$933 million or 43.55% of total export receipts; storage units, US$362 million or 16.91%; copper cathodes, US$ 170 million or 7.92%; parts and accessories of automatic data processing machines US$ 120 million or 5.59%; and portable digital automatic data processing machines, US$54 million or 2.54%.

Major imports in 2003 consisted of semi-conductor devices and components, US$168 million or 13.69% of total imports; parts and accessories of automatic data processing machines, US$142 million or 11.56%; motor spirit (gasoline), US$92 million or 7.45%; unmilled wheat and meslin US$46 million or 3.73% and input or output units for automatic data processing machines, US$ 37 million or 3.03%.

The balance of trade from 1999-2001 had been in favor of China. However in 2002 and 2003, it swung in favor of the Philippines.

Bilateral Merchandise Trade, 1999-2003

(value in US$ million)

Year	Total Trade	Exports to China	Imports from China	Balance of Trade
1999	1,613	575	1,038	-463
2000	1,431	663	768	-105
2001	1,746	793	953	-160
2002	2,584	1,353	1,231	122
2003	3,936	2,143	1,793	350
2004 (Jan.-May)	1,764	842	922	-80
Growth Rate (%) (1999-2003)	26.81	39.72	16.94

Source: NSO

Investments

China is not a major foreign investor to the Philippines. From 1999 to the 1^st semester 2003, only US$30.24 million has been invested in the Philippines, accounting for an average of only .78% of total foreign investments in the Philippines.

TOTAL INVESTMENTS IN THE PHILIPPINES

Value in US$ Million

YEAR	CHINA INVESTMENTS IN RP	TOTAL FOREIGN INVESTMENTS IN RP	% CHINA TO TOTAL FOREIGN
1999	3.8	1,223.55	0.3
2000	3.9	1,818.83	0.2
2001	2.87	1,224.48	0.2
2002	16.65	858.80	2.0
2003 (Jan-June)	3.02	244.06	1.2

Sources: Board of Investment (BOI), CDC, PEZA, SBMA

In 2003, major investors from China were in the fields of IT-enabled services, hotel and commercial complex operation, energy generation, transport equipment and exports of silicon crystals/microsilica.

BOI REGISTERED MAJOR INVESTORS FROM PROC, 2003

COMPANY	PRODUCT/ACTIVITY
Philweb Corp (formerly Philweb Com, Inc.	IT-Enabled Services
New Phil-China Group Dev. Corp	Hotel & Commercial Complex Operation
Binga Hydroelectric Plant, Inc	Hydroelectric Plant Binga (ROL Scheme)
Salcon Power Corp	Naga Power Plant
Intermedia Solutions, Inc (formerly IMGAME Com., Inc.)	IT Services Firm ASP Platfrom
Grand Ocean (Phil) Co. Inc.	Transport equipment (evaporating & condenser coils
United Silicon Mindanao, Inc.	Exporter of silicon crystals & microsilica
Source: Board of Investment

The Philippines welcomes and encourages joint cooperative undertakings especially in the following sectors identified by the Board of Investments: Automotive & Motor Vehicle (parts and components), Engineered products (e.g. agricultural machinery), Electronic manufacturing services, Agriculture, Information Technology (IT) and IT enabled Services, Consultancy Service Sector (Engineering /Architectural Design/Construction Management Services), Environmental projects

Cooperation in Agriculture

Cooperation between the Philippines and China in the area of agriculture has intensified in the last two years with the signing in July 1999 of a Memorandum of Understanding on Cooperation in Hybrid Rice Technology and in September 1990 of an Agreement on Cooperation in Agriculture and Related Fields.

Among the important projects under the Agriculture Cooperation Agreement are the establishment of the Philippines-China Agricultural Technology Center, which was inaugurated in Muñoz, Nueva Ecija on 20 March 2003, continued production and testing of improved Chinese rice seed varieties, cooperation in agricultural machinery, and exchanges in agricultural research and development.

On 16 May 2000, a Memorandum of Understanding (MOU) on Irrigation and Agriculture-related Areas was signed by the Philippines and China. The MOU aims to enhance agricultural development through the rehabilitation of irrigation facilities in different locations of the country and the provision of agricultural services (post harvest and service centers). Pursuant to this, a financing protocol was signed on 20 December 2000 between the Department of Finance and the China National Construction and Agricultural Machinery Import and Export Corporation (CAMC), which provides a credit facility of US$100M for the construction of agricultural support facilities in the Philippines.

Science and Technology

The Scientific and Technological Agreement between the Philippines and China was signed on 14 March 1978. Since 1978, 12 protocols have been signed to implement the agreement. The 13^th Protocol is scheduled for signing this year.

Cultural Exchanges

Cultural exchanges between the Philippines and China continue to flourish under the aegis of the Philippines-China Cultural Agreement signed on 8 July 1979. To date, a total of 12 Executive Programs have been concluded to implement this agreement. The latest Executive Program was signed in December 2002 and covered cultural exchange projects for the years 2002 and 2004. The projects include reciprocal exchanges in culture and arts, education and research, books and education and film.

Future Areas of Cooperation

The Joint Statement on the Framework of Bilateral Cooperation in the Twenty-First Century stipulates that the two countries "will continue to explore new areas of cooperation among their law enforcement, judicial, security and defense agencies in order to address the serious threats posed by organized transnational crimes."

In October 2000, the Philippines and China concluded agreements on mutual legal assistance in criminal matters, cooperation against transnational crime and cooperation against illegal trade and abuse of narcotic drugs, psychotropic substances and control of chemical precursors.

On 11 September 2002, the Philippines signed a Memorandum of Agreement on Tourism Cooperation with China to enable the country to take advantage of the vast potentials of the Chinese market. The World Tourism Organization forecasts that by 2010, outbound tourists from China will grow to about 30 million from about 8.5 million in 2000.

Philippine and Chinese officials have also discussed the possibility of signing a memorandum of agreement between the Department of Transportation and Communications (DOTC) and China’s Ministry of Information Industry on cooperation in information and communications technology.

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Chronology of Philippines-China Relations

600 B.C.	Chinese traders engage in barter trade with Filipinos.
982 A.D.	Barter is carried on between the natives of Mayi (Mindoro, Philippines) and Chinese traders.
1278-1368	Natives of Sulu and Chinese enjoy direct commerce.
1405	Emperor Yung Lo sends a Chinese mission, headed by a governor, to Luzon.
1419	Two rulers from Sulu, the Paduka and the Maharaja, visit China to pay tribute to Emperor Yung Lo. They are received with great courtesy. The Paduka is taken ill and dies in Tekchow (now Shandong). A tomb and monument are erected for the Paduka by Emperor Yung Lo. The Paduka’s widow and concubines and some of his followers stay behind in China for three years of mourning.
1570	Spanish explorer Martin de Goiti enters Manila and finds a colony of Chinese peacefully co-existing with the native Filipinos.
1644	Chinese migration to Manila reaches its peak
1675	The arrival of the Spaniards in the Philippines ushers in a period of brisk trade with the South China. Luxury articles and prime commodities are brought from South China to Manila, then to Acapulco.
1680	Spanish Governor-General Gonzalo Ronquillo assigns to the Chinese a place they can use as a silk market or "parian". The "parian" grows rapidly and becomes the center of economic activity in Manila.
1600-1900	The Chinese in the Philippines continue to engage in trade and to prosper, but remain largely unassimilated into the Filipino society. Intermarriages produce such illustrious Filipinos as the national hero, Dr. Jose Rizal, whose great grandfather, Domingo Lam-co, was pure Chinese, from Fujian.
1949	President Elpidio Quirino adopts an open policy on China following the establishment of the People’s Republic of China.
1971 September	An exploratory trade mission from the Chamber of Commerce of the Philippines visits the People’s Republic of China.
1972 May 11	President Ferdinand Marcos signs Executive Order No. 384 (Promulgating Policy Guidelines and Trade with the Socialist and Communist Countries), which effectively opens trade relations with China and other socialist countries.
1973 November 25-December	A Chinese trade mission from the China Council for the Promotion of International Trade visits the Philippines.
1974 September 20	First Lady Imelda Marcos arrives in Beijing for an eight-day official visit. A trade agreement is signed: China is to sell to the Philippines 750,000 tons of crude oil and the Philippines to sell coconut oil, lumber and copper to China.
1975 June 7	President Marcos arrives in Beijing for a four-day state visit.
June 9	President Marcos and Premier Chou En Lai sign a joint communiqué establishing diplomatic relations between their two countries. The Philippines adopts a One-China policy under which Taiwan is considered an integral part of Chinese territory. A Trade Agreement is signed in Beijing.
October 13	The People’s Republic of China sets up its first embassy in Manila.
November 14	The Philippines and the People’s Republic of China sign an agreement ensuring a continuous supply of crude oil to the Philippines
November 27	The Philippines opens its embassy in Beijing, with Ambassador Raphael Gonzales as Charge d’ Affaires.
December 1	The first Chinese Ambassador to the Philippines, Mr. Ke Hua, presents his credentials to President Marcos.
1976 April 5	The Exchange of Notes on Trade Exchanges and the Exchange of Notes on the Establishment of a Joint Commission on Trade between the Philippines and the People’s Republic of China are signed in Manila.
1977 June 22	The Philippines and the People’s Republic of China reach an agreement expanding trade between them.
1978 March 12	President Marcos receives Vice Prime Minister and Vice Chairman of the People’s Republic of China Li Hsien-nien in Malacanang.
March 14	An Agreement on Scientific and Technical Cooperation is signed in Beijing.
November 18	A Postal Parcel Agreement is signed in Beijing. An Agreement on Cooperation in the field of Agriculture and other Related Areas is signed in Beijing.
1979 May 8	An Air Services Agreement is signed in Manila.
July 8	Agreements on long term trade, civil aviation, hotel construction, and Chinese oil supply of 1.2 million barrels to the Philippines are signed in Beijing. A Cultural Agreement is signed in Beijing.
August 5	Philippine Airlines makes its inaugural flight to Beijing.
1980 April 24	A Memorandum on Understanding on Scientific and Technical Cooperation in Agriculture is signed in Beijing.
1980 August 26	An Agreement for Exchange Programs in Arts, Education and Sports is signed in Manila.
December 1	A memorandum is signed in Manila providing for an exchange of study groups and in-service training in science and technology
1981 June 30	Chairman Yang Shangkun of the People’s Republic of China arrives to attend the inauguration of President Marcos
August 6	Chinese Prime Minister Zhao Ziyang arrives in Manila for a four-day visit.
1982 June 7	First Lady Imelda Marcos arrives in Beijing for a four-day visit as personal envoy of President Marcos.
1984 January 7	First Lady Imelda Marcos arrives in Beijing for a four-day visit as a special envoy of President Marcos. A US$500 million trade agreement, a cultural agreement, and a scientific and technological agreement are signed.
January 10	An Agreement on a Credit Line between the Bank of China and the Central Bank of the Philippines is signed.
1985 April 22	A Memorandum of Understanding for the expansion of economic cooperation and trade is signed in Manila.
1986 January 30	The Protocol on the Importation and Exportation of Commodities is signed in Beijing.
June 15	Vice President Salvador Laurel arrives in Beijing for a four-day visit.
October 18-21	Chinese Vice-Premier Tian Jiyun visits the Philippines, conveying the invitation of Chinese President Li Xiannian to President Aquino to visit China.
1987 March	The 10^th Protocol of the Joint Trade Agreement between the two countries is signed in Manila.
1988 April 14	President Aquino arrives in Beijing for a three-day state visit.
1989 April 21	A Memorandum of Understanding on Tourism Cooperation between the Department of Tourism and the National Tourism Administration is signed in Manila.
1990 May 10	An Agreement on Tourism Cooperation is signed in Beijing.
December 13	Chinese Premier Li Peng arrives in Manila for a three-day official visit.
1992 July 20	An Agreement Concerning Encouragement and Reciprocal Protection of Investments is signed in Manila.
1993 April 25	President Ramos arrives in China for a five-day state visit.
1994 June 8	A Protocol on the Importation and Exportation of Commodities for the Year 1994 is signed in Manila.
June 24	The 10^th Protocol on scientific and technological cooperation is signed in Beijing.
December 8	An Exchange of Notes on the Establishment of Consulates General in Xiamen and Cebu is signed in Beijing.
1995 August 3	A Protocol on the Importation and Exportation of Commodities for the Year 1995 is signed in Manila.
1996 March 26	The Executive Program of the Cultural Agreement for 1996 and 1997 is signed in Beijing.
July 29	An Agreement on the Utilization of the Military Engineering Equipment Assistance Loan provided by China to the Philippines is signed in Manila. An Agreement between the Department of National Defense of the Republic of the Philippines and the Ministry of National Defense of the People’s Republic of China on the establishment of the offices of the Defense and Armed Forces attaches is signed in Beijing.
November 23	Chinese President Jiang Zemin arrives in Manila for two-day visit.
November 26	An Agreement of additional Consulates-General is signed in Manila.
1997 October 6	A Confidential Memorandum of Understanding on Bilateral Air Services Consultations is signed in Pasay City.
1998 August 4	The Executive Program of the Cultural Agreement for 1998 and 1999 is signed is signed in Manila.
1999 July 12	A declaration of intent through the Philippine Department of Agriculture and the Chinese Ministry of Agriculture to enhance the existing friendly relations between the two countries, to recall the 1978 scientific and technical cooperation agreement and to recognize the importance of agriculture in national development of the standard of living of the citizens of two consulates-general is signed in Manila.
July 13	A Memorandum of Understanding on Technical Cooperation on Hybrid Rice Technology between the Republic of the Philippines, Department of Agriculture and People’s Republic of China, Ministry of Agriculture is signed in Manila.
September 13	An Agreement on Cooperation in the field of Agriculture and other Related Areas is signed in Beijing.
November 18	An Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income is signed is signed in Beijing.
November 26	Chinese Primer Zhu Rongji arrives in Manila for a two-day visit.
2000 February 16	Negotiations for the Accession of the People’s Republic of China to the WTO are done in Manila.
May 16	President Joseph E. Estrada arrives in Beijing for a four-day state visit. A Memorandum of Understanding on Cooperation in the Field of Agriculture, Irrigation and Other Related Areas is signed in Beijing.
May 16	Joint Statement Between the Government of the Republic of the Philippines and the Government of the People’s Republic of China on the Framework of Bilateral Cooperation in the Twenty-First Century is issued in Beijing.
May 17	Memorandum of Understanding Between the Bangko Sentral ng Pilipinas and the People’s Bank of China on the Establishment of Banking Institutions in Each Other’s Territory is signed in Beijing.
September 12 and 20	An Exchange of Notes on the Establishment of the Philippine Consulate General in Macau Special Administrative Region is signed in Beijing.
September 19 and October 10	An Exchange of Notes on the Establishment of the Office of the Agricultural Attaché is signed.
October 16	A Treaty Concerning Mutual Legal Assistance In Criminal Matters is signed in Beijing.
October 20	An Agreement on Cooperation Between the National Prosecution Service of the Department of Justice of the Philippines and the Supreme People’s Procuratorate of the People’s Republic of China is signed in Beijing.
December 20	A Financial Protocol Between the Department of Finance the Government of the Republic of the Philippines and the China National Construction and Agricultural Machinery Import and Export Cooperation is signed in Manila.
2001 May 16	An Exchange of Notes on the Establishment of the Proposed Philippine-Sino Center for Agricultural Technology is done in Beijing.
October 26 and 29	An Exchange of Notes on the Establishment of the Philippine Consulate in Shanghai is done in Beijing.
October 30	A Treaty on Extradition is signed in Beijing.
October 30 (ratified on December 18)	A Memorandum of Understanding Between the Philippine Sports Commission of the Republic of the Philippines and the State General Administration of Sports of the People’s Republic of China on Sports Cooperation is signed in Beijing
October 30	A Loan Agreement for the Banaoang Pump Irrigation Project, dated 30 October 2001, Between the Government of the Republic of the Philippines, through the Department of Finance and the China National Construction and Agricultural Machinery Import and Export Corporation, a corporation duly owned and operated by the Government of the People’s Republic of China is signed in Beijing.
October 30 (ratified on December 18)	Memorandum of Understanding Against Illicit Traffic and Abuse of Narcotic Drugs, Psychotropic Substances and Precursor Chemicals is signed in Beijing. A Memorandum of Understanding on Cooperation in Combating Transnational Crime is signed in Beijing.
October	A Cooperation Agreement between the Philippine Chamber of Commerce and Industry (PCCI) and China Council for the Promotion of International Trade (CCPIT) is signed.
2002 July 03	A Visa Agreement allowing Filipino diplomatic and consular personnel to receive multiple-entry entry visas from the Chinese Government for a maximum validity period of five years is signed in Beijing.
September 11	A Memorandum of Understanding Between the Republic of the Philippines and the People’s Republic of China Concerning Tourism Cooperation is signed in Beijing.
December 17 2003	A Cultural Agreement is signed.
August 30	A Bilateral Swap Agreement between the Bangko Sentral ng Pilipinas and the People’s Bank of China is signed. A Memorandum of Understanding on the Utilization of the US$400-million Preferential Buyers’ Credit from China to the Philippines between the Export-Import Bank of China and the Department of Finance of the Philippines is signed.
2004 March 3	A Memorandum of Understanding on Air Services Cooperation is signed in Beijing.

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Filipino Community in China

There are currently some 2,305 Filipinos in China as of December 2003. Based on reports from the Philippine Embassy in Beijing, and the Philippine Consulate Generals in Xiamen, Guanghzou and Shanghai, a majority are documented (2,045 or 88%) while 260 or 11% are undocumented. The largest Filipino community is found in Guanghzou (1,264 Filipinos), followed by Beijing (455), Shanghai (301) and Xiamen (285). Shanghai has the largest number of undocumented Filipinos (145), followed by Guanghzou (65) and Xiamen (50). No undocumented Filipinos were reported residing in Beijing.

Most of the Filipinos in China are professionals employed as teachers, engineers architects, consultants, doctors, managers and accountants. Some are working in international organizations, foreign embassies, multinational media companies, joint venture companies, hotels, entertainment establishments and households.

The most frequent problems faced by OFWs in China, usually by musicians and teachers, are the poor conditions in their place of employment, failure of their employers in securing for them the appropriate working visas and violation of employment contracts. The lack of the proper visas is particularly difficult for OFWs as they face possible detention if caught.

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