The arrest comes as maritime confrontations between the Philippines and China, over contested reefs and waters in the strategic South China Sea, have escalated in recent months.
The Chinese software engineer, identified as Deng Yuanqing, and his two Filipino drivers were arrested last week as part of counter-espionage operations that began last month, National Bureau of Investigation (NBI) chief Jaime Santiago told a news conference.
The Chinese embassy in Manila did not respond immediately to requests for comment on the arrest and allegations.
“They were basically collecting data and they have this remote application which transmits outside the country in real time data that they collected in our country,“ Lotoc said.
Philippine military chief General Romeo Brawner said it was possible the information “could be used for military targeting purposes”.
The group received funding of 1.5 million pesos (about $26,000) a week via “shell companies”, he said.
Philippine police also said this week they had recovered a suspected Chinese submarine drone in waters off the central Philippines.
Brawner said authorities were investigating whether all three cases were linked.
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