On 28 July 2016, the Foreign Service Institute hosted a Mabini Dialogue on “Prospects for Philippines-China Cooperation: Amid US Pivot to Asia and Global Post-Brexit Tensions” with Dr. Dan Steinbock, founder and CEO of the Difference Group, as the resource speaker.
Dr. Steinbock discussed the current secular stagnation that has mired advanced economies since the 2008 global financial crisis, which led to the “new normal” level of growth. Aside from the weak expansion, the global economy is also facing increased risk-taking by the private sector and rising global debt reaching USD 57 trillion from 2007 to 2014. He noted that risk and debt have been socialized from the private sector to the public sector, and that the serious efforts to deleverage in the long-run have yet to be witnessed.
On the United States, Dr. Steinbock stressed that the absence of a credible, bipartisan, medium-term debt reduction plan poses a tough challenge in managing the sovereign debt worth USD 19.3 trillion (or over 105 percent of its GDP). Moreover, he viewed the upcoming election as the top global risk given the polarizing nature of the two Presidential candidates.
On China, he discussed the government’s goal of building a moderately prosperous society by 2020 through doubling its GDP per capita. To reach this goal, the Chinese government aims to implement structural reforms, tougher anti-corruption campaigns, and stricter discipline in the Communist Party.
For the Philippines, Dr. Steinbock expressed confidence that the Duterte administration will enjoy an economy that has stable macroeconomic fundamentals, a strong balance sheet, robust domestic demand, and favorable demographics. In his estimate, the Philippines is well-positioned for an economic growth of 6.5 to 7.5 percent in the medium term. However, he stated that the country needs to ramp up infrastructure spending, increase foreign direct investment (FDI) inflows, and raise public debt to support modernization. Moreover, he emphasized that the country has to carefully manage its relations with the US and China in promoting its security and economic interests. In terms of bilateral economic cooperation, China remains the country’s third largest export market, but receives little FDI.
Lastly, Dr. Steinbock provided four possible outcomes for Philippines-China relations that are greatly influenced by developments in the US and ASEAN member states. According to him, regional dead-end would ensue if China refuses cooperation with the Philippines; while destabilization, the most dangerous scenario, would occur if talks between the two parties fail and accidental conflicts in the South China Sea arise. Likewise, polarization would take place if China works with the Philippines but the latter decides to step back due to domestic and/or external pressure. He explained that the best outcome bilaterally and for the region is stabilization, which should be founded on fostering geopolitical trust, enhancing traditional settings of economic cooperation, and advancing new cooperative venues.