Socioeconomic Planning Secretary Ernesto Pernia assured on Thursday the Philippine government would be very cautious in utilizing loans from China.

Pernia, also director general of the National Economic and Development Authority, made the assurance following the warning of former President Benigno Aquino III loans being offered by China could be a "debt trap" for the Philippines. Manila and Beijing are engaged in territorial dispute in the South China Sea.

"We certainly are going to be very careful with our dealings in terms of project financing from the Chinese government," he said in a press briefing in Malacanang.

He noted that the Duterte administration has not signed any loan agreement with China despite its multi-billion dollar offer of official development assistance for the Philippines as a result of the President's two visits to Beijing.

"Well, we haven’t yet signed any loan agreement with China except oral commitments or some written memorandums --- memoranda of understanding," Pernia said.

He explained the two governments agreed to have "clearing mechanisms" for the loan agreements and project implementation.

"We have two clearing mechanisms: First on the China side, we have a clearing mechanism. We want the Chinese side to certify to us that the companies, private or state-owned enterprises that will be involved in projects, will be truly competent and with impeccable integrity. That’s on the Chinese side. So they can submit three names " he said.

"And on the Philippine side, we also have a clearing mechanism to seek --- to pick one of the three recommendees from the Chinese side," he said.

"So that is the best we can do to ensure that we are not going to get into problems."

Under the Aquino administration, the Philippines questioned China's sovereign claim over almost the entire South China Sea before the United Nations Arbitral Tribunal.

In July 2016, the arbitral tribunal made an award to the Philippines and invalidated China's sovereign claim in the whole area.

Duterte, contrary to Aquino, decided to take a softer stance with China and placed at the back burner the ruling of the Permanent Court of Arbitration.

China, in turn, invited Duterte to Beijing and offered huge assistance for the Philippines. Celerina Monte/DMS