South China Sea Territorial Disputes and Sino-Philippine Trade

As political factors affect trade activities greatly, this paper considers whether a series of political events have had a negative impact on Sino-Philippine trade relations. Of particular concern is the influence on bilateral relations and the Philippines’ domestic economy from political and diplomatic tensions between China and the Philippines caused by territorial disputes in the South China Sea. Political events are divided into two levels, general conflicts and serious conflicts, which are analyzed from the perspectives of both overall level and product level to present their final impact on trade. This research finds that territorial disputes between the two countries deteriorated trade, as the volume of trade usually decreased distinctly after conflicts. The negative impact on trade generated by serious conflicts usually occurred more rapidly and on a larger scale. The effect of trade deterioration caused by political events weakened over time. Furthermore, after serious conflicts, although the volume of trade of certain products decreased temporarily, it rebounded quickly or even increased soon. However, industrial equipment or industrial raw materials trade activities between the two countries were basically independent of the conflicts’ impact.