In the waters of Subic Bay, industrial vessels lumber alongside smaller boats taking tourists on diving and fishing trips. On one side of the bay is a massive shipyard operated by Hanjin Philippines, while on the other is a sandy beach lined with hotels. The bay, on the western coast of Luzon – the Philippines ’ largest and most populous island – has long held strategic military and commercial importance. Now, it is becoming a flashpoint in Manila’s ongoing conflict with Beijing over control of the South China Sea . Last month, Hanjin Philippines – a local subsidiary of South Korean shipbuilder Hanjin Heavy Industries and Construction and a major employer in the area – announced it was pulling out of Subic Bay after declaring bankruptcy over a reported US$412 million in unpaid loans. Within days, at least two major Chinese shipbuilders were eyeing the large plot of land currently occupied by Hanjin, which is located on part of what was the United States’ largest overseas military base before its closure in 1992. This prompted an outcry, fuelled by the latent mistrust of China that has been felt by people in the Philippines for years. According to local polling body Social Weather Stations, net trust in China among Filipinos has been positive in only nine of the 47 surveys it has conducted on the topic between August 1994 and November. Not only is there suspicion over the “ Belt and Road Initiative ”, which Beijing says will grow global trade through infrastructure investment and critics deride as debt-trap diplomacy , but there is also the problem of the South China Sea . About 270km west of Subic Bay is Scarborough Shoal – a territory that was administered by Manila until 2012, when a stand-off over Chinese fishermen operating in the area prompted Beijing to dispatch an armada of coastguard vessels, the likes of which have enforced China’s jurisdiction over the shoal ever since. How the Scarborough Shoal came back to haunt China-Philippines relations An arbitral tribunal at The Hague subsequently ruled that the waters surrounding the shoal were a common fishing ground and censured Chinese-imposed restrictions on Filipino fishermen operating in the area. Relations between the two countries have warmed since then , especially after President Rodrigo Duterte took office in 2016 and announced his intention to broker a new alliance with the world’s second-largest economy, as part of his pursuit of an independent foreign policy . This new-found friendliness, however, has stoked fears that by buying up the shipyard at Subic Bay, Chinese companies could potentially hand Beijing a military base by the back door. On January 12, former Philippine navy chief Vice Admiral Alexander Pama warned of as much in a Facebook post. “Although it is a commercial shipyard, nothing can prevent the owners from making it into a de facto naval base and a maritime facility for other security purposes,” he said, adding that a Chinese takeover would be “a very significant national issue”. Four days later, Philippine Senator Grace Poe introduced a resolution in the country’s Congress calling on the government to conduct an inquiry into the possibility of Chinese firms controlling the shipyard. Hanjin Shipping collapse may be beginning of the end for global trade The resolution described Subic Bay as “a natural deepwater harbour that is protected from typhoons, and its sheltered port and strategic location make it one of the most important maritime facilities in the Philippines”. Any inquiry should determine “the adequacy of existing legal frameworks” regarding foreign corporations’ control of “strategic industries that could be vital to national security development and the economy”, it said. According to Zha Daojiong, a professor at Peking University’s School of International Studies in Beijing, jitters over a Chinese presence in the bay are overblown as even if such firms do take over operations, the land will still belong to the Philippines by law . “So long as the property remains part of the existent market in the port city, it is hard to justify claims that smack of China going after the Philippines,” he said. But for Lucio Blanco Pitlo III, a research fellow at the Asia-Pacific Pathways to Progress Fountain, this explanation is unlikely to pass muster with the Philippine public. “Most Filipinos won’t see any distinction between this being a private or public sector matter. They would think that, if a Chinese company is occupying this place, that means the Chinese government has control of it and can do what they want there,” he said. “Duterte will have to balance the position and historical legacy of Subic along with the sensitivity of relations with the US. If, perhaps, a Chinese consortium with deep pockets can take over and initiate some kind of mixed ownership, that could be a way forward. Duterte will have to be skilful in mitigating any possible backlash.” Duterte calls China’s claim to disputed islands’ airspace ‘wrong’ The Philippines’ history of high-level corruption also has a part to play in public perceptions, said Donald Kirk, a veteran correspondent and author of Looted – The Philippines After the Bases about the country in the years since the US military’s withdrawal. “There is a sense among people in the Philippines that the looting of the state is carried out not just by the country’s own wealthy class, but by the foreigners whom the postcolonial rulers have to call on in times of crisis,” he said. Manila is keen to find a new owner for the 300-hectare Hanjin shipyard, which employed as many as 30,000 people at its peak, but was down to just 3,800 workers in December after more than 7,000 staff were laid off, according to a report in Nikkei Asian Review . At a workers’ housing estate to the north of the shipyard that was once planned to include as many as 2,775 dwellings, a security guard estimated that only 200 or so residents were still present as of last month. Shay Cullen, an Irish priest who has lived in the area for about five decades and helped campaign against the US presence there, said such a drastic reduction in paid employees could undo years of work spent weaning the local economy off of military dollars and transforming it into a retail, tourist and manufacturing hub . “We do worry that the economic development that we planned, and implemented, could be at risk,” the 75-year-old said. “A lot of those Hanjin workers had steady jobs, so they took out loans to buy houses and cars.” In the Philippines, Chinese cash can fill a hole left by the US Not everyone is pessimistic about the future, however. Josito Lucov lost his job as a welder at the shipyard last year and now makes money taking paying passengers in his motorised tricycle – a type of auto rickshaw that is common in the Philippines. He still lives with his wife and two children in company housing. While standing under a tarp shelter waiting for his next fare, Lucov said he was not worried about the shipyard’s next owner because he was happy in his new line of work. “I get to see my family more now,” he said.