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TESS VIGELAND: China is investing its vast foreign reserves around the world. In African oil projects, U-S banks, and infrastructure projects in Southeast Asia. But in the Philippines, Beijing is facing tough questions about alleged kickbacks and bribery in a number of major contracts. Filipinos have protested in the streets and the congress there summoned Chinese execs to testify about questionable deals. The growing scandal is threatening the presidency of Gloria Arroyo.
From Manila, Marketplace's Scott Tong reports.
SCOTT TONG: Clark Air Field north of Manila once stood as the largest U.S. military base in the world, housing 30,000 forces. 17 years ago, the U.S. and the Philippines agreed to close the base and remake it into a Philippine economic zone. Among the key investors were the Chinese.
Tony Biggs: Right now we're on our new 18 hole golf course. It's the first 18 of 36.
Tony Biggs runs Fontana Leisure Parks, a Chinese resort catering to Asian tourists.
Biggs: ...from Shanghai, Guangzhou, Beijing. They love to come here.
Chinese money is also bankrolling a rail line linking Clark to Manila and its 16 million people. It's called Northrail, and Beijing has pledged half a billion dollar in loan for it. Philippine President Gloria Arroyo hailed the deal as part of a golden era with China. Here she is in a 2006 speech about ASEAN, Southeast Asia's regional trading bloc.
Gloria Arroyo: I am very proud that among China's trade with all the countries of ASEAN, the fastest growing trade is China's trade with the Philippines.
Beijing is investing in projects across the region, in Burma, Vietnam, Indonesia - all places with natural resources that China covets in return. But the Philippine Northrail project is mired in controversy; not a single track has been laid. Attorney Harry Roque advises the Philippine Congress.
Harry Roque: The contract is illegal because among others it did not undergo any competitive bidding.
He says the Chinese lender broke Philippine law when it picked which contractor would get the job -- a Chinese contractor.
Roque: While American and European companies have to comply with anti-corruption principles, the Chinese I should say are completely ignoring these tools of transparency and accountability. And that is what worrisome.
And in his view, here's the larger problem: China is like the giant new bank in town, lending to its friends, no questions asked.
HEARING: Senator Enrile, would you like to make use of your three minutes?
Northrail isn't the only Chinese-funded project facing corruption questions. There are at least four. Senator Alan Cayetano heads the investigations.
Alan Cayetano: This is the year of the rat, and here in the Senate we smell big rats.
Still, not everyone sees a Chinese master plan here. Peking University international relations scholar Zhang Xizheng sees rookie mistakes.
Zhang Xizheng: China has been developing so fast. Its companies just got rich, and they think they have all this economic power. But they don't understand market rules and laws, so it's almost inevitable they broke them.
Political scientist Renato de Castro believes the Chinese were also unprepared for Manila's mudslinging politicians and its nosy journalists.
Renato de Castro: It's a learning process for them. They basically realized things will not work outside China the same way things work inside China.
For the record, Chinese officials blame the scandals on Philippine politicians. Wherever the investigations go, de Castro sees a lot at stake here, both for Beijing and Washington.
RADIO: Number one, number one, 91.5.
On the surface, the American influence seems obvious, just hop in a cab and listen to the radio. But de Castro says while China is doling out economic favors, Washington is distracted.
Renato de Castro: Since the U.S. has been focused on the war on terror, there seems on the part of the U.S. a benign neglect in the region.
China's committed some $2 billion dollars to the Philippines. But the Arroyo government has frozen most of those projects, pending corruption hearings. The Northrail investigation may resume within a month.
In Manila I'm Scott Tong for Marketplace.