Maritime Dispute Raises China Sanctions Risk

BMI View: Escalating tensions between China and the Philippines in the South China Sea may spur Beijing to impose economic sanctions on the Philippines. This would pose downside risks for our 2014 real GDP growth forecast of 6.3%.

There is no end in sight to the maritime dispute between China and the Philippines over their sovereign claims to the Scarborough Shoal and Spratly Islands in the South China Sea. Bilateral talks have proved futile thus far in resolving the dispute, and while the Philippines has sought arbitration at the United Nations, China has reiterated that it will not participate in any of the legal proceedings. With tensions rising between both countries, we believe that the Philippines is facing an increasing risk of economic sanctions by China. The recent request by the arbitral tribunal for China to submit its side of the argument by the December 15 deadline will also likely be rebuffed by Beijing.

China's Growing Assertiveness Raises Regional Tensions

Strong Trade Ties With China
Philippines - Exports To China (LHS) & Imports From China, % Total

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This article is tagged to:
Sector: Country Risk
Geography: Philippines

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