A South China Sea US warship route

Consider the below:

Philippine-listed energy exploration company Philex Petroleum Corp. has engaged in on-and-off talks for years now with China National Offshore Oil Company (CNOOC) on joint exploration and development of Reed Bank. The specific focus has been on Service Contract 72 (SC72), located in the Sampaguita Field in the southern part of Reed Bank.

These stalled Philex-CNOOC talks suggest political interference. Should China and the Philippines negotiate seriously, the specifics of a deal are easy to imagine.

Joint exploration and development of Sampaguita's SC72 could yield natural gas supplies that could be pumped to Luzon through extending the existing gas pipeline serving the mature Malampaya pipeline just to Sampaguita's northeast.

Needed investment in jointly developing SC72 could be funded by loans from the China-based Asian Infrastructure Investment Bank (AIIB), of which the Philippines is a founding member.

CNOOC could share in the proceeds of Philippine domestic sales of natural gas from Sampaguita. Joint development also would enable CNOOC to demonstrate a cooperative working relationship with a Philippine counterparty in the natural gas industry.

This could follow up Chinese state champion State Grid Corp. of China's successful 25-year contract to upgrade and manage the Philippine electricity grid through the Chinese-Philippine joint venture National Grid Corp. of the Philippines.

That Philippine contract has provided major demonstration for State Grid. It almost certainly contributed to State Grid's subsequent successful entries into other overseas markets such Australia, Italy and Brazil.

The economic bargain of China's infrastructure 'going out' efforts is clear to see. China provides recipient countries with investment capital and world class Chinese infrastructure. China, in turn, benefits from gaining a crucial economic 'relief valve' that helps maintain employment in China's now huge infrastructure industry.

China's infrastructure industry is now one of the nation's largest employers, employing roughly three percent of the workforce. That makes it a bigger employer - by far - than the People's Liberation Army, which employs about two percent of the workforce..

Keeping this civilian infrastructure workforce employed is now critically important for China. It presents the classic 'bicycle dilemma' - keep peddling or fall off. Viewed this way, China's AIIB-funded overseas infrastructure investment can be seen as a sign of Chinese mercantile weakness than economic strength.

If countries come to mistrust China, it will immensely complicate efforts of State Grid, CNOOC and other Chinese state champions to win overseas infrastructure projects. Should this occur, layoffs may follow. This may strain China's brittle internal social contract of higher living standards in return for stifled civil society.