By Benjamin Kang Lim

BEIJING (Reuters) - The South China Sea arbitration case will "take the back seat" during talks with China, Philippine President Rodrigo Duterte said on Wednesday in Beijing, adding that he would wait for the Chinese to bring up the dispute rather than doing so himself.

Duterte arrived in Beijing on Tuesday with at least 200 top business people to pave the way for what he calls a new commercial alliance, amid deteriorating ties with longtime ally the United States.

The effort to engage China, months after the Permanent Court of Arbitration in The Hague ruled over South China Sea disputes in favor of the Philippines, marks a reversal in Philippine foreign policy since Duterte took office on June 30.

China refused to participate in the arbitration case or recognize its findings.

Speaking to reporters at his hotel, Duterte described the judgment as a "piece of paper".

"It would not be in keeping with courtesy and goodwill if I am the one to open it," he said. "And you will say, will it take a back seat? Of course, it has to take the back seat."

China has welcomed the shift in tone that has added to strains between the Philippines and the United States, even as Duterte has vowed not to surrender any sovereignty to Beijing.

Duterte said on Sunday he would raise the arbitral ruling, and vowed not to deviate from the tribunal's award.

Speaking in Beijing, Duterte said he did not want to make any "hard impositions" on the South China Sea, and would wait for Chinese President Xi Jinping to raise the subject.

"I have to be courteous and I have to wait for your president to mention it in passing for me to respond," he said.

"It is in the broader outline of talks that we have agreed. But as a matter of courtesy, and the oriental way, we will always wait because I am a visitor. I cannot destroy the goodwill just by blurting out something."


In a series of conflicting statements, Duterte has insulted U.S. President Barack Obama and the U.S. ambassador in Manila for questioning his war on drugs, which has led to the deaths of 2,300 people. He told Obama to "go to hell" and alluded to severing U.S. ties.

Speaking earlier, Philippine Foreign Secretary Perfecto Yasay said territorial disputes between China and the Philippines may take a lifetime to resolve, but should not prevent warming ties.

On Wednesday, Philippine Trade and Industry Secretary Ramon Lopez told reporters in Beijing that Bank of China had agreed to provide a $3 billion credit facility for infrastructure investments in the Philippines.

Their remarks came as Philippine police used teargas to disperse about 1,000 anti-American protesters outside the U.S. embassy in Manila.

Yasay reiterated that the thaw with China was "not going to erode our close ties with the rest of our allies and traditional partners".

"As we renew our ties with this great nation, it does not mean that we are weakening ties with the rest of the members of the international community. This is at the core of the independent foreign policy that our president has moved and put forward," he said.

After weeks of anti-American rhetoric, Duterte said the Philippines would maintain its existing defense treaties and its military alliances.

China has expressed support for Duterte's drug war, even as it has sparked concerns in Western capitals about extrajudicial killings.

Philippine police made 29 arrests at the rally outside the U.S. embassy, where protesters were calling for the removal of American troops in the southern island of Mindanao.

(Additional reporting by Karen Lema in Manila; Writing by Ben Blanchard; Editing by Robert Birsel and Mike Collett-White)