China on Sunday said it is negotiating with the Philippines over the funding of some infrastructure projects after a transport official said Beijing had pulled its funding commitment to three big-ticket railway projects.
The Chinese Embassy issued the clarification after Transport Undersecretary for Railways Cesar Chavez revealed that Beijing had failed to act on a government request for funding for the Philippine National Railways Bicol project, Subic-Clark Railway Project, and the first phase of the Mindanao Railway Project.
Chavez earlier said President Ferdinand Marcos Jr. ordered the Department of Transportation to renegotiate the loans with Beijing or open negotiation with other countries.
Two lawmakers, meanwhile, said renegotiations should include a lowering of interest rates on Chinese loans, which are higher than those offered by other countries.
In its statement, the Chinese Embassy did not directly mention the funding withdrawal, but vowed to “tap its own advantage and support the Philippines to improve its infrastructure.”
“Our two sides have been negotiating technical issues and made positive progress to move the projects forward,” the embassy said.
The embassy said, “China is open for technical discussions over our G-to-G [government-to-government] projects, and is ready to carry our cooperation forward, in close communication with the Philippine new administration.”
The embassy added that China has helped the Philippines complete 17 projects while more than 20 projects are under implementation or in progress.
“Over the past two years, COVID-19 has impacted implementation of some projects, hindering the site availability, causing delays of procurement, affecting goods mobility, and so on. Despite those difficulties and challenges, our two sides have worked tirelessly to push the projects forward and yielded rich outcomes, spanning from anti-pandemic response, disaster relief to infrastructure, agriculture, and other fields,” the embassy said.
The Chinese Embassy described the phone conversation between Chinese President Xi Jinping and Marcos on May 18 and recent high-level visits as having ushered in “a new era of China-Philippine friendship.”
“Governments of the two countries are dedicated to further enhancing friendship and mutual trust, adhering to good-neighborliness and deepening mutually beneficial cooperation. China’s policy towards the Philippines has always been and will continue to be consistent and stable as ever,” the embassy said.
The Chinese Embassy expressed confidence that “continuity” would be secured in relations between two countries as well as the bilateral practical cooperation.
Chavez said China’s funding commitment for the railway projects was “deemed canceled” as China has been unresponsive to the Philippine government’s loan application since 2019.
He said the Chinese bank was asking for 3-percent interest on the loans, much higher than the 0.01-percent rate charged by Japan.
Senator Grace Poe said the renegotiation of loans should address interest rates and payment terms.
“The President’s directive presents an auspicious opportunity to go back to the drawing board and craft deals that are fair and will produce tangible benefits to the Filipino people,” Poe said in a statement.
“Renegotiation should iron out issues that saddled the previous agreements, including interest rates and payment terms.”
Albay Rep. Joey Salceda, chairman of the House ways and means committee, urged the government to explore alternative financing options for the Calamba-Bicol railway, after the loan agreement between China and the Philippines for the 380-kilometer line was deemed withdrawn.
“The interest rate for the loans appears to be on the high end, at 3 percent per annum, when Japan offers a 0.1 percent per annum rate,” Salceda said. “Of course, the Chinese yuan is generally a more stable currency than the Japanese Yen, but factoring exchange rate parity, the Japanese offer would still be significantly more attractive, by around 2.5 percentage points, even taking the worst peso performance versus the yen and the best peso performance versus the yuan,” he said.
“So what I gather is we asked for a better rate, and China appears to have stopped responding,” said Salceda, who noted that the Bicol railway would also benefit nearby regions.
He said if a Japanese offer comes in, the country should take it, even though it might cause some initial disruption.
“If China wants to continue the deal, they should offer more competitive rates. Anyway, I think we should open up to other offers,” he added.