Philippines Walks $60 Billion Chinese Tightrope: The Ticker

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By William Pesek

Benigno Aquino has proven to be quite adept at tightrope walking in his 14 months as Philippine president.

Scaling the heights of his family legacy -- his mother was president and his opposition-leader father was assassinated -- was the first challenge. Then came balancing the need to clean up a corrupt political system without killing the economy. Juggling infrastructure projects remains quite a feat.

This week, Aquino is attempting his most ambitious high-wire act yet. On his first state visit to China, Aquino is targeting more than $60 billion in trade and investment. He also aims to resolve tensions over oil exploration in the disputed South China Sea after months of sparring.

This trip speaks to a bigger point with which many of Aquino's Asian counterparts also must grapple: balancing economic and security relationships with China and the U.S.

The U.S. has few better Asian allies than the Philippines and Manila treasures that coziness. Yet in the post-Lehman Brothers world, China is proving far more vital to economies. Philippine exports to China have more than doubled since January 2009, eclipsing trade with Japan and the U.S.

Things aren't that simple, though. China recently unveiled its first aircraft carrier. The spectacle highlighted the rapid military expansion by the most populous nation. It drew new scrutiny of the opaqueness of Beijing's military budgets and its intentions, something that worries officials in Tokyo, Washington and Asia, from Seoul to Hanoi.

The concern is that China's fast-growing navy bodes ill for geopolitics amid disputes over islands and natural-resource deposits. The Philippines, Vietnam, Malaysia and Brunei have competing claims in the South China Sea. Most claimants have troops on the Spratlys, a group of islands and reefs with a total land area equivalent to 1 1/2 times the size of New York’s Central Park, spread over waters roughly the size of Iraq.

Asia has never been closer economically, yet it's rarely been further apart diplomatically. How Aquino walks this tightrope will be instructive for other U.S. allies when their turn comes.

(William Pesek is a Bloomberg View columnist.)

-0- Aug/31/2011 14:27 GMT