A US ambassador noted the “deepening" trade relations between the Philippines and China due to “shared history and ethnic connections" – particularly wealthy Filipino taipans – despite smuggling that “distort economic data," according to a cable released by Wikileaks on Thursday.

Francis Ricciardone Jr., who is now the incumbent US ambassador to Turkey, sent the cable to Washington days after the April 2005 state visit of Chinese President Hu Jintao, which he titled “Embracing the Dragon: The Philippines Deepens Economic Engagement with China".
President Benigno Aquino III himself is already set to embark on a five-day state visit to China next week, focusing on getting investments on infrastructure, mining, energy, information and tourism.

“As China offers more foreign aid to the Philippines and becomes an increasingly large market for Philippine goods, the relationship between the two countries is likely to deepen economically and may extend to cooperation in other areas," observed Ricciardone more than six years ago.

“The Greater China market, including Hong Kong and Taiwan, however, now absorbs 21% of all Philippine exports, and these economies have collectively become the country's largest export market, so the ‘China market’ for Filipinos is significantly much more than that of the PRC," he noted.

Filipino ‘taipans’

“Many companies, especially those run by Filipinos with Chinese ancestry, have set up operations in China, and the Philippines anticipates increased Chinese commercial investments that will further strengthen ties," he said.

Aquino will bring with him on his state visit to China on Aug. 30 to Sept. 3 some 200 to 250 Filipino businessmen as part of his entourage.

“The emergence of a class of wealthy and powerful Chinese-Filipinos known as Taipans (most notably Lucio Tan and John Gokongwei) who exercise considerable influence over business has changed the role of the Chinese community within the Philippines," he added while also mentioning businessmen brothers Carlos and Ben Chan as prominent Chinese Filipinos with eyes on China.

“These investors have historical ties to China, speak Chinese, and have, for the most part, been successful in their business endeavors there. Their increasing focus on mainland China for their investments reflects an economic move away from Taiwan and towards the PRC [People’s Republic of China]," Ricciardone observed.

“Filipinos of non-Chinese origins have also begun to recognize China as a business opportunity. Pacita Juan, founder of Figaro Coffee Company, a local brand that has set up its first franchises in China, found that hiring a good translator was key to her success in her business endeavor. She responded to the allegation that Filipinos investing in China will abandon their home country, assuring ‘we can be successful and repatriate the profits’," he pointed out.

Chinese competition, smuggling

But the US envoy did see some hurdles. “The high degree of intra-industry trade in this bilateral relationship threatens many Philippine manufacturers and exporters. Philippine businesses and labor unions remain concerned about China's growing export competitiveness and large labor market. Big business, especially firms headed up by Chinese-Filipinos, can cope with competition through investments in China, but smaller firms, which make up the bulk of manufacturers here, will face difficult adjustments in the years ahead."

He pointed out that “discrepancy between the data collected by the Chinese and Philippine governments suggests that a great deal of the trade between these two countries is happening ‘under the radar’." He was referring to “large-scale smuggling of Chinese goods," particularly pirated DVDs and “designer knock-offs that line the stalls of some of Metro Manila’s largest shopping districts."

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