2.1 How has the PRC’s development finance changed over time in absolute terms and relative to the alternatives?

From a slow start, Beijing’s development finance has skyrocketed over the last 20 years. However, the PRC’s assistance does not operate in a vacuum. There are a host of other bilateral and multilateral development partners actively supporting development in the Philippines. This raises a critical question: how does Beijing’s contribution compare to the alternatives when it comes to the volume, focus, and terms of its assistance? In this section, we take a closer look at variations in PRC financing compared with other development partners (Section 2.1.1), across administrations (Section 2.1.2), and between different subnational regions (Section 2.1.3).

2.1.2 How has Beijing’s financing changed across administrations?

As an economist by training, President Arroyo was adamant that growth and job creation would drive her foreign policy (Government of the Philippines, 2004; Tran, 2019). She publicly embraced the PRC as a friend, even amid the Philippines’ maritime disputes with China (ibid). In parallel, Jiang Zemin’s “Going Out” (or “Going Global”) policy provided PRC officials with a clear mandate to look outward to put China’s excess industrial capacity to productive use abroad. Beijing’s development finance to the Philippines grew by over 950 percent during Arroyo’s time in office (from US$88 million to US$931 million), particularly in the areas of energy and telecommunications.

Nevertheless, even during a so-called “golden age” of PRC-Philippine relations (PRC Embassy, 2005), Beijing’s bankrolling of development projects was episodic, with notable peaks in 2004, 2006, and 2010, surrounded by lower activity (Figure 2.2). These fluctuations were likely driven, at least in part, by the nature of PRC development finance, which prioritizes a few large-dollar investments that take multiple years to implement alongside many small-dollar education and social development efforts (Figure 2.5).

Figure 2.5: PRC-funded development projects in the Philippines, 2000-2022

Notes: This “raincloud” visualization illustrates the distribution of PRC-funded development projects in the Philippines according to the financial values associated with the project. Each black dot along the x-axis represents a PRC-funded development project. (Note that dots overlap and that not all projects can be visualized due to space constraints.) The interquartile range, from nearly $0 to $10 million, represents the upper and lower limits of the middle half of project values. The density curve represents the distribution of values in the dataset. For visualization purposes, a custom scale along the x-axis expands values closer to $0 and compresses values above $1 million. Sources: AidData’s Global Chinese Development Finance Dataset, Version 3.0 for 2000-2021 (Custer et al., 2023; Dreher et al., 2022). Supplemented by limited desk research and media article review by the research team to identify additional projects and details for 2022.

The Philippines’ first PRC debt-financed development project beginning in 2001, a US$88 million line of credit for the Department of Finance for an irrigation project in Ilocos Sur province, was a sign of things to come (Custer et al., 2023; Dreher et al., 2022). The project’s emphasis on water supply and power grid expansion served as something akin to a trial run for even larger investments in those two sectors over the next two decades. With the exception of humanitarian aid, the vast majority of PRC project funding during Arroyo’s administration would come via loans with fairly standardized interest rates (3-3.5 percent interest) and maturities (7-12 years).

Ambitions were high: the Banaoang Pump Irrigation Project aimed to expand local rice production and market access through improved roads and electrical connectivity, building a pumping station and a series of irrigation canals (Custer et al., 2023; Dreher et al., 2022). The project was expected to irrigate over 6,000 hectares of land to benefit over 5,000 farming families. However, the implementing partner for the irrigation project, the state-owned China National Construction & Agricultural Machinery Import & Export Corporation (CAMC), quickly ran behind schedule, an indication of CAMC’s relative inexperience at this early stage in delivering overseas projects.

In 2006, Beijing bankrolled 10 projects worth US$204 million dollars, spanning business development and trade expansion, along with emergency response to aid communities impacted by Typhoon Reming and the Southern Leyte landslide. In 2010, Arroyo’s final year in office, PRC investment jumped to a historic high, reaching US$931 million in a single year driven by two projects: a coal-fired power plant in Mariveles, and the treatment of wastewater in Metro Manila (Custer et al., 2023; Dreher et al., 2022). An additional agreement for the expansion of Digital Mobile’s 3G network was signed in September 2010 after Arroyo had left office.

Noteworthy for their size (the largest was worth US$687 million), these projects were also illustrative of a broader trend: the privatization of debt financing for development. Increasingly, the PRC was lending to private sector actors in the Philippines and elsewhere, often with sovereign guarantees that made the host country government accountable if a private company failed to repay (Malik et al., 2021).

Arroyo’s enthusiasm to pursue stronger ties with Beijing was not without criticism. Domestic critics accused the president of corruption, election fraud, and “trading Philippine sovereignty for personal benefits” (Quimpo, 2009; Zha, 2015; Tran, 2019). Under pressure at home, Arroyo suspended a Cyber Education project worth US$466 million, canceled a US$329 million National Broadband Network project, and was compelled to safeguard Philippine maritime boundaries as the PRC began to flex its naval muscles to assert its territorial claims in the South China Sea (West Philippine Sea) (Tran, 2019).

The election of President Aquino in May 2010 marked an inflection point in the PRC-Philippine relationship. Diplomatic relations with Beijing took on a chillier turn. During the first few months of Aquino’s presidency, the PRC expanded its presence in the Spratly Islands and made six incursions into Philippine territorial waters (Thayer, 2014). Heated rhetoric and gamesmanship over conflicting claims in the South China Sea (West Philippine Sea) characterized much of the Philippine-PRC relationship during Aquino’s tenure. Aquino protested the PRC’s claims, initiating arbitral proceedings against Beijing in 2013 under the United Nations Convention on the Law of the Sea (PCA, 2013), and meeting with ASEAN peers and the U.S. Coast Guard (Thayer, 2014).^[7]

Frosty diplomatic relations extended to declining interest from leaders on both sides to collaborate on new development projects and move forward with past agreements.^[8] During the Aquino administration, the Philippines received less money from the PRC over six years and 14 projects than it did from just one of the three projects that Chinese banks funded in 2010, the final year of the Arroyo administration.

There were only three consequential development finance agreements between the two countries during the Aquino era. Two of these agreements were loans issued by PRC state-owned banks to two Philippine firms: the San Miguel Corporation (a business conglomerate working across the food and beverage, energy, and infrastructure industries) and Rizal Commercial Banking Corporation (a privately owned bank) (Custer et al., 2023; Dreher et al., 2022). In both instances, Chinese banks were the primary but not sole lenders, instead working as part of a larger group of 33 and 17 entities, respectively. The third instance was a loan agreement with the Development Bank of the Philippines (a state-owned development bank), where the Bank of China was a mid-sized lender among a group of 20 banks. This arrangement is often referred to as “syndicated lending,” in which a lead bank manages contributions from other lenders (i.e., the syndicate) who jointly provide financing to the same borrower using the same loan terms (BOC, n.d.).

Otherwise, PRC assistance during Aquino’s tenure was limited to smaller-scale goodwill projects oriented more towards stoking positive public opinion than responding to the priorities of political leaders. In this ‘quiet’ phase of PRC-Philippine relations, Beijing was likely cultivating people-to-people ties to create a more conducive environment for a resurgence of cooperation with the next administration, once Aquino stepped out of power.

One such goodwill project was a US$2 million grant from the PRC’s Ministry of Commerce to continue technical cooperation with the Philippines-Sino Center for Agricultural Technology, though notably at a lower level of support than its previous grant to the joint effort in 2003 (Custer et al., 2023; Dreher et al., 2022). Beijing also made modest donations to the National Library of the Philippines and helped establish a Confucius Institute at the University of the Philippines. On a somewhat larger scale, the PRC sent several rounds of emergency aid and a hospital ship to aid victims of Typhoon Yolanda.

Assuming office in mid-2016, President Duterte’s stated aspiration for the Philippines to pursue an “independent” foreign policy, his appreciation for the PRC’s economic power, and Beijing’s willingness to back his anti-drug policies provided a favorable environment for renewed cooperation between the countries (Tran, 2019; Blanchard, 2016). By extension, the Philippines attracted by far the greatest volume of new projects (174) and development finance dollars (US$6.2 billion) during Duterte’s tenure (2016-2022), as compared to his predecessors (Figure 2.6).

In record time, Duterte mobilized US$2.2 billion in loans for two power projects in Dinginin and Kauswagan (from July to September 2016). Following his state visit to China (between October and December 2016), Beijing agreed to bankroll 10 additional development projects in the Philippines worth US$28 million. GNPower, through its special purpose vehicles^[9] GNPower Dinginin Ltd. Co (GNPD) and GNPower Kauswagan Ltd. Co (GNPK), was looking to secure project funding prior to the election; however, the speed with which these loans were finalized suggests that the PRC was weighing the political situation in their calculus (Custer et al., 2023; Dreher et al., 2022).

The PRC was highly attuned to the priorities of its newfound ally in President Duterte, namely his “Build, Build, Build” program, which aimed to usher in a new “golden age of infrastructure in the Philippines” (DBM, n.d.). The largest PRC-financed projects in the early years of Duterte’s tenure were in hard infrastructure sectors (industry, mining, and construction; energy; and water). Telecommunications also attracted ample attention from PRC financiers during this period, though these investments were more diffused across partners and years. In fact, the top sectors attracting PRC development finance dollars (by project value) for the 2000-2022 period highly converged with the infrastructure priorities of both Duterte and Arroyo.

Beijing’s interest in financing development in the Philippines proved to be fairly durable, as the number of projects increased at a rapid clip throughout Duterte’s presidency—from 14 projects in 2016 to 44 projects in 2021. Although the big-ticket infrastructure projects still tended to attract debt financing (loans approaching market rates and export credits), the year-on-year growth in the number of projects was driven by an uptick in aid activities in the health, education, and emergency response sectors financed on more generous terms (e.g., grants and no- or low-interest loans).^[10]

Riding high following a resurgence of inbound PRC development finance in 2016, Philippine officials were publicly optimistic about the prospects of their country joining Chinese President Xi Jinping’s signature Belt and Road Initiative (BRI) in 2017. Finance Secretary Carlos Dominguez III declared that the initiative would bolster the Philippines’ ports and airports (DoF, 2017), and the South China Morning Post promised a “flurry of Chinese-invested projects” destined for Duterte’s hometown of Davao (Huang, 2017).

Instead, new development finance from Beijing decreased in 2017 and 2018, while commitments in 2019 and 2022 were one billion dollars lower than the peak of 2016. As the PRC’s development finance tapered off, the Philippines still mobilized FDI from commercial Chinese enterprises, rather than state-backed banks, in 2018. However, this, too, was relatively unstable and fell off in 2019. Section 2.2 discusses Chinese FDI in the Philippines in greater depth.

Despite warming relations, Beijing did not become more generous to the Philippines in terms of the cost of accessing its financing. For every US$1 of aid that Beijing gave the Philippines in 2016, it issued US$167 of debt. By 2019, the terms were even more unbalanced: US$1 of grant funding for every US$211 of debt. The reason comes down to a common feature in the PRC’s development finance globally: it bankrolls a small number of high-cost hard infrastructure projects from which it expects an economic return, alongside a large number of inexpensive social projects to cultivate goodwill. Although the PRC occasionally has financed infrastructure projects with grants and no- or low-interest loans, these are increasingly the exception rather than the rule.

The decrease in new development finance dollars from Beijing, alongside increasing costs for the Philippines to access this financing, may be less a reflection of bilateral Philippine-PRC relations than a broader repositioning of Beijing’s portfolio. PRC officials, seeing a growing number of BRI countries struggling to service mounting debts from PRC-financed development, began to pivot away from bankrolling ‘new’ infrastructure projects to bailing out the ‘old’ projects through supplying emergency lending (e.g., balance-of-payment loans, currency swaps) to assist its borrowers with limited-term cash liquidity to avoid default (Horn et al., 2023). Moreover, in an attempt to “de-risk its overseas lending portfolio” globally (Parks et al., 2023), the PRC expanded the frequency with which it co-financed projects with commercial banks in other countries to pool risk and mobilize capital.

This global context may shed insight into the rationale behind the PRC’s less generous financing terms in backing the Philippines Clark Global City project. Highly aligned with the stated priorities of Beijing’s Maritime Silk Road Strategy (PRC State Council, 2017), the Philippines sought to expand a mixed-use business district in the Clark Freeport Special Economic Zone adjacent to Clark International Airport (in the city of Mabalacat in Pampanga province). The Bank of China teamed up with two Philippine commercial banks, Banco de Oro and Philippine National Bank, as co-financiers to make a US$265 million syndicated loan commitment to the project. The financing came with a 10-year maturity and a 7.61 and 8.98 percent interest rate (Custer et al., 2023; Dreher et al., 2022). Comparatively, development finance loans offered by Japan (another frequent supplier of loans) are typically more concessional, with interest rates close to 1 percent on average (OECD, 2023), grace periods of 10 years, and repayment periods of 40 years (OECD, 2020).

Two years into the tenure of Duterte’s successor, President Marcos Jr, we can only make educated guesses as to how the PRC’s development finance may evolve. There was a post-COVID-19 pandemic rebound in the dollar value of new PRC projects in 2022 (US$1.06 billion), compared to a slump in 2020 and 2021. Three planned projects account for eighty percent of the estimated new money: the Samal-Davao bridge project in former President Duterte’s hometown; a loan for Manila Water Company to expand its operations; and an investment in the next phase of the Kaliwa Dam project. This debt financing was paired with 11 smaller aid-like activities in the social sector (e.g., education, health, and social services). Some deals could reflect Beijing’s warm relations with Duterte, whose tenure ended mid-2022.

The PRC’s behavior in past election years (e.g., 2010 and 2016) has signaled anticipated relations with an incoming president. Beijing’s naval assertiveness in the early months of Aquino’s presidency was matched with a slowdown in development finance. At the same time, its rapid approval of a few high-value infrastructure projects paired with a larger number of small-scale goodwill social projects was responsive to a perceived thaw in relations with the Philippines in the early months of Duterte’s tenure. As the Marcos Jr administration diversifies its international relationships and distances Manila from Beijing, it is likely that PRC investments will mirror the dynamics observed previously under Aquino.

2.1.3 In which communities is the PRC investing—and why?

In this section, we explore whether and how the PRC’s development finance may vary in another respect: geography. To answer this question, we draw upon the location information in AidData’s project-level data on PRC development finance to identify the subnational distribution of Beijing’s activities within the Philippines across 17 regions (the first administrative division level). Looking at these investments over more than two decades (2000-2021),^[11] Beijing was most interested in bankrolling activities in politically important regions, which represent attractive markets for Chinese firms (see maps below).

Figures 2.7a and 2.7b: PRC-funded development projects in the Philippines by region, 2000-2021

Mega projects (over $1M)

Goodwill projects (under $1M)

The National Capital Region (NCR), the country’s political epicenter and home to many of its largest companies, received the most projects by count (45 projects) and second-most by value (US$1.3 billion) (Table 2.8). Neighboring Central Luzon received the greatest value of PRC projects (US$2.7 billion), concentrated in the south. Central Luzon is the home region of President Arroyo, who declared her interest in developing the Luzon Urban Beltway as a “globally competitive industrial and service center” (E.O. 561, 2006). Beijing funded several projects related to this goal, including a series of container inspection scanners in 2007 and the GNPower Mariveles Coal Plant in 2010.^[12]

Table 2.8: PRC-funded development projects in the Philippines by region, 2000-2021

Region name	Project count	Total project value, millions USD	Project value per capita, USD
National Capital Region (NCR)	45	1,284.27	95.24
Region III (Central Luzon)	26	2,659.16	214.07
Region XI (Davao Region)	26	238.73	45.53
Region I (Ilocos Region)	11	222.06	41.89
Region IV-A (Calabarzon)	10	634.07	39.15
Region VII (Central Visayas)	10	0.86	0.11
Region X (Northern Mindanao)	10	1,161.96	231.34
Cordillera Administrative Region (CAR)	9	33.91	18.86
Region VIII (Eastern Visayas)	9	58.42	12.85
Bangsamoro Autonomous Region In Muslim Mindanao (BARMM)	7	61.57	13.98
Region XIII (Caraga)	6	61.64	21.98
Region VI (Western Visayas)	5	56.25	7.07
Region XII (Soccsksargen)	5	127.51	26.01
Region II (Cagayan Valley)	4	33.96	9.21
Region V (Bicol Region)	4	82.43	13.55
Mimaropa Region	3	0.68	0.21
Zamboanga Peninsula	3	56.84	0.00
Unspecified	86	1,342.24	NA

Notes: This table shows PRC-funded development projects by region between 2000 and 2021 (inclusive of aid and debt instruments) by number of projects, dollar value (in millions of constant 2021 USD), and dollar value per capita based on 2020 census figures. “Unspecified” indicates that projects were either national/cross-regional in nature or were otherwise unable to be conclusively linked to a specific region. Sources: AidData’s Global Chinese Development Finance Dataset, Version 3.0 for 2000-2021 (Custer et al., 2023; Dreher et al., 2022); Philippine Statistics Agency 2020 Census of Population and Housing.

Davao, another politically important region, is the home of former President Rodrigo Duterte and current Vice-President Sara Zimmerman Duterte-Carpio. Although the total dollar value of PRC projects is moderate (US$239 million), the number of projects is the second-highest in the country (26 between 2000 and 2021). Timing plays an important role: 85 percent of Beijing’s projects were committed after Duterte’s election in 2016. These projects were more about soft power than economic return and included donations of educational materials, medical supplies, emergency food relief, and motorcycles for the Davao City police department.

PRC financing did not shy away from the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), despite the armed conflict in Marawi. Beijing instead identified an opportunity to bolster President Duterte following one of his administration’s defining domestic crises. From 2017 through 2019, the PRC financed seven projects in the region, principally focused on relief and reconstruction efforts in Marawi City, but expanded to funding Dito Holdings Corporation to install a nationwide 4G/5G system in 2019, positioning it as the third telecommunications player in the Philippines alongside Globe and PLDT/Smart.

Energy potential was another factor in the direction of PRC development finance; however, the rationale was not necessarily about proximity to raw energy resources and critical minerals.^[13] PRC state-backed investments do not overlap with regions with the greatest concentration of nickel mines (Carraga and Mimaropa) or proximity to oil and natural gas deposits^[14] (Calabarazon, Central Visayas, Central Luzon) (see Figures 2.7a and 2.7b, above). Instead, Beijing’s interests appear to lie in boosting local electricity consumption to unlock increased productivity and follow-on projects for Chinese firms.

The Alegria Oil Field in Cebu, in the Central Visayas region, is the only petroleum site identified that was directly operated by a PRC company, China International Mining Petroleum Co., Ltd. (Trimmer et al., 2024; Padayhag, 2014). However, there were no apparent direct connections to concentrations of Chinese official development finance. Instead, the large coal-powered GNPower sites in Central Luzon and Northern Mindanao appear to be the main anchors for additional PRC investment, including both official development finance and FDI—a theme we will further explore in the next section.

2.2 How has Chinese FDI changed over time, in both absolute terms and in relation to the PRC’s development finance?

Beijing’s state-directed development finance across the Philippines is substantial but sensitive to changes in political administrations and concerns over the degree of risk in its global debt portfolio. Moreover, discrete development finance investments are also time-limited rather than long-term. By comparison, FDI implies a longer-lasting ownership stake or financial interest between individual or corporate investors in one economy and another (OECD, n.d.a and n.d.b). The trends described here reflect new inbound FDI annually, not the stock or total value of all previous and current FDI in a given year.

Between 2010 and 2023, new commitments of inbound Chinese FDI to the Philippines skyrocketed by 514 percent, from US$214 million to US$1.3 billion.^[15] This growth was by no means steady. As with the PRC’s development finance (section 2.1), Chinese FDI in the Philippines fluctuated dramatically year-on-year. Inbound FDI commitments from China peaked in 2018 with US$11.2 billion announced (Figure 2.9), accounting for 44 percent of new projects that year and roughly half of the growth in the Philippines' global FDI inflows that year (Figure 2.10). By contrast, just two years prior, in 2016, Chinese FDI comprised just under 8 percent of the total inbound investment.

The 2018 investments followed the Philippines’ hosting of two ASEAN summits in 2017, where President Duterte courted leaders from the PRC, the U.S., Japan, and the European Union, among others (Heydarian, 2017). Duterte’s 2017 diplomatic press aligned with the first anniversary of his “Build, Build, Build” Infrastructure Program. The ASEAN summits served as a valuable expo for the Philippines to pitch potential investors and mobilize billions of pesos in infrastructure and transportation projects.

Two massive steel projects undergirded Chinese FDI investment commitments in 2018: a US$3.5 billion investment by the state-owned company Panhua Group Co. Ltd. to build a new steel mill and port facility (Canivel, 2018)^[16] and a US$4.4 billion joint venture announced by the state-owned enterprise Hesteel Group in conjunction with SteelAsia Manufacturing Corp^[17] (Asia Times, 2018; Choo and Fox, 2018). Both of these pledged investments aimed to expand steel production capacity in the state-owned Philippines Veterans Investment Development Corporation (PHIVIDEC) Industrial Authority’s 3,000-hectare estate in Misamis Oriental Province, Northern Mindanao.^[18]

Critical minerals do not readily explain the geography of inbound Chinese FDI in the Philippines. Caraga and Mimaropa account for over three-quarters of the country’s viable nickel production sites, but neither region attracted a single Chinese FDI project (Figure 2.11).^[19] Hydrocarbons are a similar refrain. Although China International Petroleum Company Limited has explored petroleum extraction from the Alegria Oil Field in Central Visayas since 2012 (Padayhag, 2014; Polyard Petroleum International Group, Ltd. 2012), the region attracted less than 4 percent of inbound Chinese FDI.

The main reported energy investments in Central Visayas and Central Luzon were instead power generation for domestic consumption, as opposed to refining or exporting petroleum (Griffiths, 2019). 2017 talks between Philippine Trade Secretary Ramon Lopez and a Chinese firm (Handi Group) about investing in a Northern Mindanao petroleum refinery (Campos, 2017; DTI, 2017; Handi Group, 2017; Philippine Star, 2017) failed to progress beyond an initial handshake.

Figure 2.11: Critical natural resources and inbound Chinese FDI in the Philippines, 2010-2023

Instead, these inbound FDI flows may be more a reflection of three other strategic factors: (i) proximity to existing PRC-funded development projects; (ii) tax incentives; and (iii) a pivot to producing higher value-added projects. The 2018 Chinese FDI investments in two Misamis Oriental steel factories (contributing to the 72 percent Chinese share of all FDI in the metals sector) are a useful illustration of these dynamics. The two new FDI commitments were announced less than two years after a PRC development finance agreement was reached to construct a power plant in neighboring Lanao del Norte province (Custer et al., 2023; Dreher et al., 2022).^[20] Just 75 miles down the coast from the PHIVIDEC Industrial estate, the power plant offers cheap electricity^[21] to power the operations of the two steel factories (GNPower, n.d.). The integration of the factories within the PHIVIDEC industrial estate was also an attractive proposition—as the state-owned enterprise offers various incentives to attract foreign investment, from low-priced land leases to tax exemptions (PHIVIDEC, n.d.a.).^[22]

Memoranda of Understanding (MoUs) for the Panhua and Hesteel plants were personally signed by then Secretary of Trade and Industry Ramon Lopez (Canivel, 2018; Choo and Fox, 2018), underscoring the high alignment of interest at the time between private Chinese investors,^[23] the Duterte administration,^[24] and Philippine companies. In fact, local organizations, such as the left-leaning think tank IBON Foundation, have criticized the coziness between local mining interests and foreign steel manufacturers in the Asia-Pacific region, arguing that the Philippines should either process more minerals for domestic construction purposes or export a higher value-added product than raw ores (IBON Foundation, 2017).

Comparatively, China is underrepresented as a share of inbound FDI supporting other sectors of the Philippine economy. This asymmetry is noticeable in the tourism and leisure industry—the single largest sector in terms of inbound FDI overall (Table 2.12). Aside from a US$850 million joint venture investment in 2012 by Jin Jiang International Investments Co. of Shanghai with Liwayway Marketing Corporation to build 28 economy hotels, Chinese investors have been markedly less interested in this sector than their peers in other countries (Gonzalez, 2012; Travel Weekly Asia, 2016).^[25]

The ramp-up of Chinese FDI in the metals industry has mobilized substantial inflows of capital, but not without setbacks. The Panhua steel plant was unable to start construction by the end of 2019 as planned and was stalled until it was restarted in May 2022 (Desiderio, 2019; DFA, 2022). There have been unconfirmed reports of work permit violations^[26] related to another Panhua steel plant in Sarangani province that came under scrutiny in 2021 (Gubalani, 2021; Rebollido, 2021). We further explore concerns regarding the economic, environmental, and social outcomes of PRC financing for development in Chapter 4.

Table 2.12: Inbound Chinese FDI versus total FDI by sector in the Philippines, 2010-2023

Notes: This table shows the top ten sectors for (i) total inbound Chinese FDI and (ii) FDI from all sources in the Philippines from 2010 through 2023. FDI dollars represent capital expenditures (CAPEX) in billions of 2021 USD. Sources: fDi Markets, from the Financial Times Ltd.

3.1 Supply side: Who finances and implements PRC projects?

There is a staggering number of players involved in the supply of PRC-financed development projects in the Philippines. Over roughly two decades (2000-2022), we identified 228 discrete entities involved in financing or implementing such activities. These players were surprisingly diverse, hailing from 24 countries or territories (Figure 3.1). While the majority were headquartered in China (95) or the Philippines (56), one-third of these entities span other parts of Asia, Europe, and North America.

Some actors supplied primary financing in the form of aid (e.g., grants and no- or low-interest loans) or debt (e.g., loans approaching market rates and export credits). Since we are interested in PRC-financed development investments, all 52 primary financiers were, by definition, from mainland China. Two-thirds of these actors were less consistent in supporting the Philippines’ development—bankrolling just one project in the country over the time period. By contrast, the top 15 financiers were mentioned in two or more projects (Figure 3.2). Figure 3.3 illustrates the interconnectedness of these actors, where financiers and recipients overlap across multiple projects.

Two state-owned commercial banking groups—Bank of China (BOC) and the Industrial and Commercial Bank of China (ICBC), and their subsidiaries—along with the state-owned policy banks of Export-Import Bank of China (Eximbank) and the China Development Bank (CDB) have outsized importance in not only the number of projects they support but also the volume of the financing they mobilize. These banks typically bankroll larger infrastructure projects such as BOC’s and CDB’s investments in power plants and telecommunications (e.g., coal-fired power plants in Lanao Del Norte and Mariveles, as well as DITO Telecommunity Corporation’s network of towers), Eximbank’s interest in irrigation, power, and technology (e.g., the Kaliwa Dam, a Chico River irrigation project, and Safe City initiatives with 18 local government units), along with ICBC’s syndicated loans (e.g., for San Miguel Corporation, Bangko Sentral ng Pilipinas, and Jobin-SQM, Inc).

Under the purview of the PRC’s Ministry of Foreign Affairs (MFA), the Chinese embassy in Manila and its three consulates (in Davao City, Laoag, and Cebu City) are at the front lines of Beijing’s engagements with Filipino counterparts. These representational institutions tend to finance a large number of small-dollar projects positioned to win hearts and minds. In contrast to other financiers, frequent thematic areas of focus of these diplomatic institutions include educational cooperation (e.g., donating textbooks and computer equipment to local schools), visible support to healthcare systems (e.g., distributing masks and medical supplies to local hospitals and health clinics), and humanitarian assistance (e.g., supplying rice and other food aid).

In a similar vein, Hanban (renamed in 2020 as the Ministry of Education Center for Education and Cooperation, CLEC) was also a top financier of educational cooperation projects related to opening Confucius Institutes (CIs) with local university counterparts such as Ateneo de Manila University, Angeles University Foundation, Bulacan State University, and the University of Philippines Diliman. As part of Hanban’s 2020 rebranding, Beijing moved oversight and funding of the Confucius Institutes into a separate non-profit, charitable organization—the Chinese International Education Foundation (CIEF). Observers largely saw the decision as a defensive posture in response to international scrutiny and criticism over the PRC’s influence over CIs (Sharma, 2022).^[27]

The PRC’s Ministry of Commerce (MOFCOM), another line ministry that is a top financier, has more of a commercial orientation to its projects, given its mandate to advance China’s economic interests (Mathew and Custer, 2023). MOFCOM projects focus on large-scale connective infrastructure to improve market access and ease the flow of goods. High-profile examples of such projects include bridges (such as the Bucana or Davao River Bridge, Estrella-Pantaleon Bridge, and Binondo-Intramuros Bridge), roads (Davao City Expressway), and the rehabilitation of Marawi City in Mindanao, among others. Nevertheless, even with MOFCOM’s commercial orientation, these example projects were outliers for Beijing, in that they were financed with more generous grants akin to official development assistance, rather than the debt instruments it typically favors.

Unlike many other leading bilateral suppliers, the PRC does not disclose the details of its development finance activities via internationally accepted reporting regimes like the OECD’s Creditor Reporting System or the International Aid Transparency Initiative. Instead, tracking Beijing’s state-directed aid and debt in the Philippines requires painstaking work by AidData and other third parties to piece together data points from multiple sources meticulously.^[28] This context may explain why the most frequently mentioned financier is an “unspecified Chinese government institution.”

Figure 3.3: Top PRC financiers and their recipients in the Philippines, 2000-2022

Many of the PRC’s big-ticket infrastructure projects crowded in co-financiers from China and internationally to mobilize additional capital, pool risk, or facilitate debt refinancing. The number of co-financiers per project varies widely, from one or two additional actors in smaller projects to double-digits in the larger ones. In the Philippines, we identified 101 co-financiers of PRC-financed development projects, 68 percent of which were private sector entities. This dynamic is consistent with Beijing’s increasing use of “collaborative lending arrangements with Western commercial banks and multilateral institutions” globally in an effort to borrow their risk management expertise in vetting borrowers and project viability (Parks et al., 2023).^[29]

These co-financing institutions were most often from the financial services sector with extensive international operations in investment management and commercial banking, as well as insurance, foreign exchange, and other capital market solutions. There was strong representation from across Asia among these co-financiers, including Taiwan (17), Japan (12), the Philippines (11), and Malaysia (4). However, not all of the co-financiers were equally important in terms of the consistency of their engagement in PRC-financed development projects. Roughly 40 percent of the co-financiers were involved with only one Philippines project each.

By contrast, the top 22 co-financiers (by project count) each supported five or more projects over two decades (Figure 3.4). Well-known names in Europe’s banking sector—the United Kingdom’s Standard Chartered Bank PLC and HSBC Bank PLC, the Netherlands’ ING Group NV and ABN AMRO, and Germany’s state-owned Norddeutsche Landesbank Girozentrale (NORD/LB) featured prominently in the list of top co-financiers. They were joined by U.S. commercial banks (Citigroup and First Commercial Bank Limited) and an Australian banking conglomerate, ANZ Group.

Another critical component of the PRC’s capacity to deliver development projects is its stable implementation partners. In the Philippines, this group includes 88 identified implementers, representing a smaller set of countries than the other roles. Since Beijing is known for tying access to financing to the use of Chinese implementers (Horn et al., 2019),^[30] it stands to reason that Chinese firms, agencies, or organizations account for the second-largest group of implementers (41 entities). Philippine government agencies, non-profits, and private sector entities were also frequently referenced in projects as implementers (45 entities), either alone or in concert with a Chinese partner.

The top 20 implementers overall were identified as supporting three or more projects (Figure 3.5). Over half of these actors were focused on physical infrastructure (e.g., energy and utilities, construction, and transportation) or digital connectivity (e.g., telecommunications and technology). This profile aligns with one of Beijing’s stated motivations for its overseas development finance and the Belt and Road Initiative: to open up raw materials, energy supplies, and export markets for Chinese goods and services through increased connectivity within and between countries (Mathew and Custer, 2023; Hillman and Sacks, 2021). Other entities emphasized education projects that advance Beijing’s reputation-building objectives or humanitarian response in one of the world’s most climate-vulnerable countries (ADB, 2021). Implementers often have long-standing relationships with Philippine counterparts, as underscored by Figure 3.6 which visualizes the connections between recipients who partner with the same implementer in three or more projects.

Figure 3.6: Top Philippine recipients of PRC-funded development projects and their implementers, 2000-2022

Chinese state-owned companies were among the most prolific implementers across numerous PRC-financed projects in the Philippines. This trend is not unique to the Philippines. It is part of the design and delivery of the BRI, which is an extension of Beijing’s 1999 “Going Global” (or “Going Out”) strategy that seeks to export excess capacity in its construction, steel, and cement industries and put this to productive use abroad in ways that advance the PRC’s national interests (Mathew and Custer, 2023). As state-owned companies, many of the Chinese entities on the list of top implementers ultimately report to the same oversight body: the State-Owned Assets Supervision and Administration Commission of the PRC’s State Council (SASAC).

Within China’s heavily state-planned economy, SASAC plays an outsized role in guiding the productivity and direction of Chinese SOEs and their estimated $30.48 trillion in total assets (SASAC, 2022). For example, one of the top 20 implementers (by number of projects) in the Philippines, China State Construction Engineering Company (CSCEC), is a SASAC subsidiary that has been involved in the design and delivery of a wide variety of physical infrastructure (e.g., power plants, airports, and tunnels) worldwide and in the Philippines.

SASAC also oversees the China Communications Construction Company (CCCC), which has outsized involvement in a large number of projects in the Philippines, primarily through its extensive network of subsidiaries. Collectively CCCC and its subsidiaries are a go-to implementer for BRI projects related to transportation and power infrastructure—from construction and dredging to manufacturing and export services. This includes CCCC Highway Consultants Company, Ltd., China Railway 25th Bureau Group, and China Road and Bridge Company, which all feature in the top 20 implementers list in their own right. CCCC is also the parent company for China Harbour Engineering Company, Ltd. and China Dredging, which have also been involved in Philippine development projects.

Other state-owned corporations in the construction and power sectors round out the list of Chinese implementers, including Shanghai Electric Power Construction Co., Ltd. (power transmission and distribution), China National Machinery and Equipment Group (agriculture, industrial, and power projects), and China National Construction & Agricultural Machinery Import & Export Corporation (import-export of heavy equipment). Leading Chinese technology companies also feature prominently on the list. Nuctech (formerly Tongfang Vision Technology Co, Ltd.), a state-owned company, provides advanced security and inspection solutions for civil aviation, customs, and other industries. The partly state-owned ZTE Corporation^[31] and the state-influenced Huawei Corporation (private sector in name, but with an opaque ownership structure and suspected ties to the Chinese Communist Party)^[32] are household names in the information and telecommunications technology industry.

All but one of the Philippine actors in the top 20 implementers were government agencies, SOEs, or public universities. There was only one private sector firm: San Miguel Corporation. Many of the Philippine entities had mandates related to the PRC’s traditional emphasis on hard infrastructure sectors and were often jointly named as implementers alongside a Chinese counterpart. For example, the Philippine Bureau of Customs partnered with the Chinese technology company Nuctech to develop inspection systems (e.g., mobile x-rays to inspect container vehicles and luggage) to detect illegal drugs and other harmful items at critical international transit points such as the ports of Manila and Subic Bay and Ninoy Aquino International Airport, among others.

The state-owned Philippine Bases Conversion and Development Authority (BCDA) previously worked with Chinese actors such as China Gezhouba Group Ltd. and China Road and Bridge Corporation to transform former U.S. military bases into alternative productive civilian use, including projects related to Bonifacio Global City and New Clark City. The Philippine Presidential Communications Office collaborated with the China Electronic Engineering Design Institute to jointly implement a project to expand the country’s state radio and television broadcasting network.

Looking across all three supplier roles (financier, co-financier, implementer), we can better understand the profile of entities involved in PRC development projects in the Philippines. Outside of government entities, these actors cluster around three thematic areas: financial services, hard infrastructure sectors (construction, energy and utilities, and telecommunications), and the social sector (educational cooperation and humanitarian response and recovery), as shown in Table 3.7. Chinese (41 percent) and Filipino (24 percent) actors are the two most prevalent nationalities among suppliers. However, co-financiers were more heavily drawn from a more diverse set of third-country actors (35 percent).

Of the more than 200 entities that finance or implement PRC development projects in the Philippines, private sector entities from third countries are the most frequent type (60), almost exclusively providing co-financing support to one or more Chinese primary financiers. There is a heavy state orientation in the remainder of entities, including Chinese state-owned companies (38); Chinese government or other public agencies (38); Philippine government or other public agencies (27); third country state-owned funds, commercial or policy banks (16); and Chinese state-owned fund, commercial or policy banks (11).

3.2 Demand side: Who are the primary recipients of PRC investment projects in the Philippines?

In section 3.1, we scrutinized the supply side of PRC development finance—from the banks and other agencies who provide financing or in-kind support to the firms who implement these projects in practice. However, this is only one side of the picture: for every project that Beijing bankrolls, it must have a willing counterpart. In fact, between 2000 and 2022, there were 136 known recipients of PRC-financed development projects in the Philippines, 96 percent of which were Filipino.^[45] These recipients are concentrated in three areas (Table 3.9): government (47 percent), hard infrastructure sectors (20 percent), and the social sector (24 percent).^[46]

Local governments were most frequently Beijing’s partners of choice (Table 3.10), followed by national-level government agencies—from departments working on energy and telecommunications to law enforcement, including the Coast Guard and the Philippine National Police. The focus on public sector partners makes strategic sense for the PRC, since its top sectors of investment by project dollar value (energy, transport and storage, and communications) and by project count (health, emergency response, and education) tend to be government-regulated and controlled. The PRC also counts holding companies and private enterprises among its partners, including media and telecom companies and internet providers. In the social sector, Beijing works with public and private schools, universities, non-profits, and cooperatives.

Beijing has demonstrated interest in collaborating with Philippine entities that have an affinity for the Chinese mainland via language, culture, or diaspora ties. Twenty of the recipients of PRC development finance projects had something in their mandates or public profiles that self-identified as teaching the Chinese language, supporting Chinese diaspora communities, or promoting Chinese culture. The preponderance of these actors was in the education sector, including Chinese schools and cultural institutes, Chinese language media outlets, and non-profits providing medical, firefighting, and other social services.

Another subtheme in the recipient entities was related to their ownership. Twenty of the recipients were owned, in whole or in part, by companies or individuals that were members of the Filipino-Chinese diaspora or from mainland China. This list included large corporations and banks, along with smaller social services organizations. Most commonly, prominent individual Filipino-Chinese families (including those related to Filipino-Chinese businessmen George Ty,^[47] Ramon S Ang,^[48] Henry Sy,^[49] Dennis Uy,^[50] and the Yuchengcos^[51]) held ownership stakes of 10 percent or higher in recipient entities, either directly or via holding companies they controlled.

Sometimes, ownership was tied to a Filipino-Chinese diaspora group such as a non-profit association like the Filipino-Chinese Women’s Association, the Filipino-Chinese Chamber of Commerce, the Negros Occidental Filipino-Chinese Amity Club, the Chinese Community of Baguio, and the Philippine-Chinese Charitable Association. In addition to ownership shares in prominent companies via the Filipino-Chinese diaspora community, the PRC less frequently has held a direct stake in a recipient entity, as in the case of Dito Telecommunity Corporation, of which the China Telecommunications Corporation owns a 40 percent stake,^[52] and the case of the Philippines-Sino Center for Agricultural Technology, a joint venture between the Philippine and PRC governments.

The PRC routinely prioritizes regions and communities that are economically dynamic and politically important in its global development finance. This dynamic extends to its choice of local partners across the Philippines. Geographically, Beijing concentrates most of its attention on entities in the National Capital Region (Metro Manila), which account for 47 percent of all project recipients. The Davao, Ilocos, and Central Luzon regions captured the second, third, and fourth largest shares of recipient entities, respectively (Table 3.11).

Three of these regions are among the country’s top five largest economies by GDP, while the Ilocos region is one of the fastest-growing localities (Philippine Statistics Authority, 2023 and 2024). As the seat of the national government, the National Capital Region holds considerable political clout, while the Davao region is home to former President Rodrigo Duterte and current Vice President Sara Duterte. Central Luzon is the home region of President Arroyo.

Another indication of the importance of these regions is the degree to which they attract an outsized share of the PRC’s public diplomacy overtures. In our analysis, we considered the distribution of Beijing’s public diplomacy activities across education (Confucius Institutes and Classrooms, Luban workshops),^[53] mass media (content-sharing partnerships), and local governments (sister city agreements, diplomatic visits).^[54] The National Capital Region, Central Luzon, Davao, and Ilocos were among the recipients of educational agreements and diplomatic visits. Sister cities/province agreements were an outlier, with larger concentrations of activity in Central Visayas (Region VII) and Mimaropa (Southwestern Tagalog Region), though they also appeared in the four previously mentioned regions.

4.1. To what degree does the PRC follow through on promised investments on time and in line with its advertised commitments?

Beijing’s development finance investments in the Philippines have been heralded in the media and by political leaders as having transformative potential—creating high-value jobs, boosting trade revenues, and stimulating economic productivity (Custer et al., 2024). However, this potential can only be realized when Beijing follows through on its promises: successfully moving a project along from commitment to completion. Given Beijing’s propensity to invest in large-scale, complex, and risky infrastructure projects, this follow-through is neither straightforward nor quick. In this section, we assess the PRC’s capacity to follow through on its promises from two perspectives: average wait times to move from when funding is committed to when projects are delivered (section 4.1.1) and occurrences of suspensions or cancellations of its projects (section 4.1.2).

4.2. How are PRC investment projects implemented within and experienced by recipient communities in the Philippines?

Throughout this research, we have highlighted many laudable contributions of the PRC’s development finance investments to help the Philippines build critical industries and infrastructure. Nevertheless, we have also highlighted several cases where Beijing’s development projects have failed to materialize, struggled during implementation, and triggered scrutiny and debate over their outcomes. In this section, we examine environmental, social, and governance (ESG) risks across Beijing’s development projects in the Philippines (section 4.2.1) and assess the PRC’s willingness to contract with Chinese firms as implementers on the basis of various performance metrics (section 4.2.2).

4.2.2 Exposure to performance risk in PRC-financed projects

Not all Chinese implementers of PRC-financed development projects are equally strong performers when it comes to delivering quickly and responsibly. So the choice of who implements a project bankrolled by Beijing is a consequential one, with far-reaching implications for local communities. In this section we examine whether and how three dimensions of performance risk vary across Chinese implementers: (i) speed of delivery from project start to completion; (ii) management of ESG risk in projects; and (iii) reputation for unsavory financial practices. Moreover, we assess whether firms that perform worse on any of these measures are less likely to attract repeat business from Beijing in being tapped to implement its projects.

Some Chinese firms deliver more quickly than others (Table 4.8). For instance, China International Water and Electrical Corporation (CWE) completed projects much earlier than planned (86.5 days ahead of time). Comparatively, China National Construction & Agricultural Machinery Import & Export Corporation (CAMC) experienced substantial delays (an average delay of 1,972 days). These differences could signal varying levels of operational efficiency and project management capacity in these firms. Alternatively, this state of play could reflect differing levels of complexity in the projects these actors implement.

Fifteen Chinese state-owned firms on the roster of implementers for PRC-financed projects in the Philippines have been sanctioned (directly or indirectly as a subsidiary to a sanctioned parent company) by the Asian Development Bank or World Bank for questionable business practices related to financial management or corruption. Moreover, 11 Chinese firms (10 state-owned and one private sector with deep ties to the Chinese Communist Party) have been flagged as having a heightened level of exposure to one or more ESG risk dimensions in their projects in the Philippines.

Given the large-dollar and high-stakes nature of PRC-financed development projects, we might expect to see issues of poor performance with individual firms. The more critical question is how much of Beijing’s development finance portfolio in the Philippines is associated with risky implementers based on two measures of performance (exposure to ESG risk in their projects and association with World Bank or ADB sanctions)? It turns out this is a relatively high number.

We estimate that US$4.5 billion of Beijing’s development finance commitments to the Philippines across 36 projects relied on Chinese implementers with tarnished performance track records. Put another way, roughly 55 percent of Beijing’s development finance dollars to the Philippines involved the use of risky firms (e.g., those with higher exposure to ESG risk or facing direct or indirect sanctions). The picture is less bleak in terms of the number of projects, as only 16.7 percent of Beijing’s total development activities relied on such firms.

Examining the financiers behind these projects reveals significant exposure to high-risk Chinese implementers. Among the top Chinese financiers of Philippine development projects, the Export-Import Bank of China (China Eximbank) stands out with 91 percent of its project count and an equal share of its financial commitment associated with performance risk. China Development Bank (CDB) follows closely, with 67 percent of its project count and a staggering 95 percent of its financial commitment linked to risky implementers. Notably, the State Grid Corporation of China (SGCC) has a lower financial commitment associated with risk, albeit with a limited project count.

Noticeably, nine of the high-risk firms attracted repeat business from Beijing despite their performance issues and were awarded the implementation of between two and four projects. This state-of-play suggests that performance is not always top-of-mind for the PRC, which favors some firms over others as its go-to implementers in the Philippines. There may be other considerations for the PRC as well: financial cost, political connections, specific expertise, and more.

Six of the highest-risk firms involved in Philippine development projects over the last two decades appear on both problem lists, associated with questionable financial practices and higher ESG risk exposure. These firms include China CAMC Engineering Co., Ltd. (CAMCE); China National Construction & Agricultural Machinery Import & Export Corporation (CAMC); CCCC Highway Consultants Company, Ltd.; China Energy Engineering Group, Ltd.; China International Water and Electrical Corporation (CWE); and China Railway 25th Bureau Group Company, Ltd. Taken together, these six higher-risk firms were involved in nine known PRC-financed development projects in the Philippines valued at US$870 million (Table 4.9). This represents 9.6 percent of the PRC’s development finance dollars and 4.1 percent of its projects in the country.

4.3. How may PRC financing shape perceptions and contribute to development outcomes in the Philippines?

Beijing is an important supplier of financing for development in the Philippines. It bankrolls ambitious infrastructure projects with the potential to transform local economies, ecosystems, governance norms, and social rhythms—for better or worse. Moreover, the sum and total of these overtures may shape public and elite opinion about the PRC as a global power and development partner. Looking beyond specific projects, financiers, or implementers, in this section, we examine whether and how the PRC’s overall portfolio of investments appears to shape Philippine perceptions (section 4.3.1) and the country’s development trajectory (section 4.3.2).

5.1 What projects does China finance, where, and when via its state-directed development finance and private sector FDI?

Beijing’s development finance to the Philippines has grown over two decades and is worth a formidable US$9.1 billion (2000-2022). However, its support was smaller, at least until 2016, and less generous than many donors. PRC financing lagged behind many multilaterals (e.g., the Asian Development Bank and the World Bank) and a key bilateral donor (Japan). Moreover, Beijing’s financing came at a higher cost: only 6 percent was issued as aid (i.e., grants or no- or low-interest loans), and the rest was high-interest debt. Affinity did not translate into better financial terms. At the apex of diplomatic relations, for every US$1 of aid Beijing gave to the Philippines in 2016, it issued US$167 in debt. By 2019, the terms were worse: US$1 of aid for every US$211 of debt.

The PRC’s appetite to finance Philippine development is erratic and influenced by its relations with Manila. Beijing bankrolled the Arroyo and Duterte administrations’ priorities with gusto—ramping up financing by 950 percent under Arroyo and fast-tracking new projects at an unprecedented rate under Duterte. Frosty relations with Aquino extended to declining interest in collaborating on new projects and past agreements. Aside from an initial post-pandemic rebound in 2022, as the Marcos Jr administration diversifies its relationships and distances itself from Beijing, it is likely that future PRC investments will mirror dynamics observed previously under Aquino.

Beijing employs a two-track model in the Philippines. High-risk, high-reward, big-bet infrastructure investments capture the lion’s share of PRC state-directed development finance and private sector FDI dollars. Beijing counts on these infrequent big-ticket projects, typically financed with debt on less concessional terms, to generate economic returns. These projects span various types of infrastructure: economic, information, connectivity, utilities, food, and power. The PRC also subsidizes a larger number of inexpensive social projects on a more frequent basis to cultivate goodwill.

If budgets reflect priorities, then Beijing is most interested in using its development finance to crowd in market opportunities for Chinese firms and bankroll activities in politically important regions. By extension, the National Capital Region attracted the most projects overall and Central Luzon, President Arroyo’s home region, received the largest share of financing overall. The PRC is highly attuned to the power of timing: Davao region, home to President Duterte, attracted the second highest number of development projects, 85 percent of which came after Duterte’s election in 2016.

The metals sector showcases how Beijing’s state-directed development and private sector FDI reinforce each other to advance shared goals. Between 2010 and 2023, new commitments of inbound Chinese FDI to the Philippines skyrocketed by 514 percent (US$214 million to US$1.3 billion), peaking in 2018 from two projects to expand steel production capacity. The timing, sector, and geographic focus of these FDI flows reflect the importance of three strategic factors: proximity to existing PRC development finance projects, the presence of attractive local tax incentives, and a desire to position itself in higher value-added goods industries. Chinese FDI is notably skewed toward the metals sector, where it accounts for 72 percent of all inbound FDI.

5.2 How many players, who are they, what roles do they play, and are some more important than others?

Given the dominant personality of Chinese President Xi Jinping, it is easy to assume that the PRC operates as a unitary actor with tightly controlled operations among a few players. In fact, our analysis shows the opposite is true. Fifty-two Chinese financiers, often state-owned policy or commercial banks, were primarily responsible for mobilizing money. However, Beijing’s development finance apparatus relies on a more extensive network of 101 global banks as co-financiers to pool risk, vet borrowers, assess project viability, and contribute capital for big-ticket infrastructure projects. The top co-financiers—including well-known banks from across Europe, North America, and Asia—supported five or more projects.

Although 88 implementers supported PRC-financed projects, Beijing emphasizes 37 Chinese state-owned enterprises. These implementers have varying reputations for transparency, follow-through, and outcomes. Opaque assistance terms, limited competitive procurement, and weak reporting requirements create perverse incentives for implementers to cut corners or collude with local counterparts. Notably, 43 percent of Chinese SOE implementers in the Philippines have been directly sanctioned for questionable financial practices by the World Bank and the Asian Development Bank or were indirectly associated with such practices through a parent-subsidiary relationship.

Altogether, we identified 136 known recipient entities, 96 percent of which were Filipino. Local governments in economically dynamic and politically connected areas (e.g., the National Capital Region, Davao, Ilocos, and Central Luzon) were frequent partners. National-level government agencies—from departments working on energy or telecommunications to law enforcement, including the Coast Guard and the Philippine National Police—were also popular counterparts. State-owned and private sector firms in the energy and utilities (e.g., Manila Water Company and GNPower) and extractives (e.g., Atlas Consolidated Mining and Development) sectors attracted sizable PRC development finance dollars.

Beijing is favorably disposed to work with recipients that have strong ties to mainland China or linkages via the Filipino-Chinese diaspora. Twenty recipients self-identified as teaching Chinese language, supporting Chinese diaspora communities, or promoting Chinese culture. Most of these actors were involved in small goodwill projects in the education sector, including Chinese schools and cultural institutes, Chinese language media outlets, and non-profits providing medical, firefighting, and other social services. Ownership, in whole or in part, of recipient entities by prominent Filipino-Chinese diaspora families or organized groups was another commonality across twenty entities.

5.3 Does Beijing follow through on its commitments? How does it manage risk? What indications do we have of the downstream outcomes from its investments?

The PRC’s ability to deliver quickly and follow through on its commitments is highly vulnerable to project complexity, management risks, and geopolitical sensitivities. Although Beijing delivers on projects more quickly in the Philippines—just under one year on average between when it commits financing to when it completes projects—some regions and sectors have longer wait times than others. Big-ticket infrastructure projects are more risky and complex to execute. Consistent with this logic, PRC investments in transport and storage, water and sanitation, energy, and telecommunications had substantially longer wait times on average. The worst delays were in the agriculture, forestry, and fishing sector, where projects took more than four years to deliver, reflecting vulnerabilities to logistical hurdles, environmental challenges, or social unrest from displacement.

Although the particulars of six suspended or canceled PRC projects varied, common themes emerged. The Northrail and the National Broadband Network projects were derailed by weak management and oversight systems enabling Chinese implementers to collude with local counterparts to inflate prices or engage in other corrupt practices. The planned Agus 3 Hydropower plant and an Arroyo-era Cyber Education initiative ran afoul of opposition over project goals, debt financing, and concerns over possible negative outcomes for local constituencies. Non-project-specific factors can also play a role—COVID-19 prompted China to back out of the Panay-Guimaras-Negros Island Bridges project, while geopolitical sensitivities in the Philippines have stoked calls to cancel contracts with Chinese implementers over maritime disputes.

Stepping back from projects to take a portfolio-level view, Beijing’s development finance in the Philippines rests on very shaky ground due to heightened exposure to risk from its trusted cadre of Chinese state-owned and private sector implementers. Not all Chinese implementers are equally strong performers when it comes to delivering quickly and responsibly, so the choice of who implements a project bankrolled by Beijing is a consequential one. In this report, we examined three dimensions of performance risk—speed of delivery, management of ESG risk, and reputation for unsavory financial practices.

Strikingly, we found that over half of Beijing’s development finance dollars (US$4.5 billion, 36 projects) relied on Chinese implementers with tarnished performance track records by our measures. Nine high-risk firms attracted repeat business from Beijing despite their performance issues. Among the top PRC financiers, China Eximbank stands out with 91 percent of its project count and an equal share of its financial commitment associated with performance risk. China Development Bank follows, with 67 percent of its projects and 95 percent of its dollars linked to risky implementers.

Six of the highest-risk firms, involved in US$870 million worth of PRC-financed development projects in the Philippines, were associated with both questionable financial practices AND higher risk ESG risk exposure. These high-risk firms include China CAMC Engineering Co; China National Construction & Agricultural Machinery Import and Export Corp; CCCC Highway Consultants Company; China Energy Engineering Group; China International Water and Electrical Corporation; and the China Railway 25th Bureau Group Company Ltd.

If reputational gains are part of the calculus for Beijing in bankrolling development in the Philippines, its efforts have come up short. Filipino approval of the PRC’s leadership declined by roughly 20 percentage points between 2006 and 2023, according to the Gallup World Poll. Moreover, we find that as exposure to Chinese development finance increases (in dollars or by number of projects), Filipinos are actually less likely to approve of PRC leadership. The same dynamic is in play for exposure to inbound Chinese FDI. These attitudes could indicate disapproval of Beijing’s policies in other areas, awareness of troubled PRC projects in the news, or that Filipinos may be more inclined to credit their own government rather than Beijing for the benefits of its projects.

What are the outcomes of Beijing’s infrastructure bonanza in the Philippines? PRC development finance and inbound FDI are associated with mixed results. Economically, there is some evidence to support the idea that Chinese financing (both development finance and FDI) positively contributes to economic gains, at least in aggregate terms across indicators such as GDP, GNI, and GDP per capita. However, these benefits do not yet appear to be trickling down in a visible way to Filipinos. As PRC financing increased, respondents were more likely to say they struggled to afford food and shelter, an indication of personal financial health.

Just under 40 percent of Beijing’s development finance portfolio in the Philippines is associated with at least one type of environmental (E), social (S), or governance (G) risk. Compared to its peers, the Philippines had a higher level of exposure to environmental risk, with the most acute vulnerability in two sectors: (i) energy and (ii) agriculture, forestry, and fishing. However, there is less clarity on whether and how this environmental risk translates into measurable harm. On one facet of environmental health, past research has surfaced concerns that PRC FDI was associated with higher levels of CO2 emissions. Yet, a different measure of environmental health, Filipino perceptions of local air quality, do not appear to follow this same trend.

PRC development finance and inbound FDI were associated with favorable outcomes in the social sector (i.e., improved youth development and civic engagement). Results were polarized, however, when it came to governance. PRC financing was negatively associated with political corruption but attitudes towards democracy were mixed. One possible explanation is that this dynamic may reflect Beijing’s two-track development model in the Philippines. The PRC’s engagement in the social sphere involves lower-risk, small-dollar projects that may generate goodwill and appear less threatening to democratic institutions, but deliver less visible benefits at scale. By contrast, big-ticket infrastructure projects allow elected leaders to visibly demonstrate how democracy can deliver economic growth, but Filipinos don’t necessarily see these projects as strengthening democratic norms and institutions in their country.