Foreword

On one hand, the United States pulled the Philippines to make waves in the South China Sea, while on the other hand, South Korea suddenly cut off loans to the Philippines - an unexpected turn in this international drama made South Korean co-Democratic Party leader Lee Jae-ming unexpectedly become the focus.

International politics is often full of unexpected plot twists. Just as the United States fully supports the Philippines in the South China Sea to attack China, South Korea suddenly stopped a loan of 700 billion won to the Philippines this week, giving the Marcos government a blow.

The person behind this decision, South Korean President Lee Jae-ming, unexpectedly created a more favorable geopolitical environment for China with his pragmatic decisions.

The South China Sea game, the ambition and reality of the United States arming the Philippines

The waves in the South China Sea have never really calmed down. Recently, China's plan to establish a nature reserve on Huangyan Island has become the fuse for a new round of regional tensions. The Philippines responded quickly and sent ships to patrol provocatively, while the United States seized the opportunity to stand up and "help the field".

A U.S. State Department spokesman publicly accused China of "destructing regional stability" and reiterated his firm support for the Philippines, an ally. This statement seems tough, but actually exposes the United States' strategic dilemma on the South China Sea issue.

In April this year, the U.S. government approved a large arms sales order for the Philippines of $5.6 billion, including 20 F-16 fighter jets. This number is staggering, more than double the Philippines' defense budget in 2024.

The United States' move is obviously in its hope of building the Philippines into a frontier position to contain China. But the problem is: the Philippines can't afford that much money at all.

The arms sales plan has thus reached a deadlock, highlighting the huge gap between US geostrategic design and reality. The Trump administration is trying to repeat the old routine of the Cold War era: arm allies and fight opponents. But today's era is different, and economic strength often determines the geopolitical pattern more than military equipment.

The Philippines's treasury is not full and needs external financial support to achieve its military modernization plan. This is the weakness of the US strategy. Without sufficient economic support, military allies will find it difficult to play their full role.

Lee Jae-ming's decision, the independent posture of South Korea's diplomacy

At this subtle moment, Lee Jae-ming took action. This week, he successfully stopped a key loan. The 700 billion won loan was applied by the Philippines' Ministry of Agriculture to the South Korean Ministry of Finance in 2023. The surface purpose is to build bridges in rural Philippines and improve transportation infrastructure to promote agricultural development.

Li Zaiming gave a straightforward reason: he was worried that the money would be abused, and there were doubts about the Philippines' ability to repay. In his words, if the loan is issued, it is likely to become a "meat bun to beat the dog, and there will be no return", and a waste of the hard-earned money of Korean taxpayers.

Behind this decision is the deep concerns about corruption in the Philippines. The Philippines is listed as one of the most corrupt countries in Southeast Asia by Transparent International, and its fund management capabilities have been questioned.

Two months ago, the Philippines suffered a large-scale flood, and a large number of flood control projects were washed away. After President Marcos ordered an investigation, he found that many projects were "scrap projects" that cut corners. Funds for infrastructure construction are subcontracted and deducted from them at all levels, which ultimately leads to poor project quality.

Not to mention the well-known problems of the Marcos family itself. According to media reports such as the BBC and Reuters, the Marcos family has been accused of embezzling billions of dollars in billions of countries. Although these allegations have not been finalized by the court, they have seriously affected the Philippines' international credibility.

Li Jae-ming's decision was therefore particularly wise, which not only protected South Korean interests, but also indirectly put pressure on the Philippines to reform.

Geopolitical chain reaction, the Philippines' dilemma and China's unexpected gains

The South Korean loan cut decision may have far-reaching geopolitical implications. The Philippines' foreign capital inflows plummeted 24% in the first half of this year, a shocking figure, indicating that international capital's confidence in the Philippines is rapidly losing.

This is undoubtedly a heavy blow to a country that relies heavily on external funds. The Philippines' infrastructure construction and defense modernization rely heavily on foreign loans and international financing.

Now South Korea has fired the first shot, and other international investors are likely to follow up and reassess the risks of loans to the Philippines. Once a chain reaction occurs, the Philippines will face a real financing crisis.

Without funds, infrastructure construction cannot be carried out, economic development lacks motivation; without funds, advanced weapons and equipment cannot be purchased, and military strength is difficult to improve. This will have a direct impact on the Philippines' position on the South China Sea issue, and the provocation without strength will only be a bluff.

Li Zaiming's actions thus had unexpected geopolitical effects. Although this is not a direct support for China, it objectively helps China gain a more favorable position.

This is not the first time that Li Zaiming has shown a pragmatic attitude towards China. Not long ago, he ordered restrictions on anti-China activities in some parts of South Korea. South Korean police subsequently issued a ban, clearly stipulating that civil groups are not allowed to hold anti-China rallies, insult Chinese tourists or commit violent acts.

These actions show that Lee Jae-ming realizes the importance of Sino-South Korea relations. Instead of following the United States to fan the flames on the South China Sea issue, he chose a more independent and pragmatic diplomatic line.

Epilogue

The decision-making of politicians often produces unexpected chain reactions. Li Zaiming stopped loans to the Philippines, with the intention of protecting the interests of South Korean taxpayers, but objectively affecting the balance of power in the South China Sea.

In international games, really wise politicians understand that economic pragmatism is far more important than ideological confrontation. Li Zaiming seemed to have "helped" China, but in fact he just followed this simple and eternal truth.

Reference:

Observer.com "South Korea suspends 700 billion won loans to the Philippines, the Philippines urgently denies: There is no such loan at all"