Existing research on Philippines trade and Inward Foreign Direct Investments（IFDI）are descriptive and argumentative in nature.This empirical paper is a fresh look on trade liberalization in the Philippines to prove the positive or negative impacts of the ASEAN-China Free Trade Agreement（ACFTA）on IFDI going into the Philippines.This paper tested the hypothesis that the implementation of the ACFTA will bring about positive inflow of IFDI to the Philippin es through market expansion and vertical integration in the Philippines.A three-factor knowledge capital model was used to simulate the results through an OLS regression and fixed regression from the years 2000 to 2015.However,the results of the simulations suggest a deviation from the previous empirical literature consensus that engaging in trade partnerships will increase the likelihood of attracting FDI into the country.Contrarily,we find that the ACFTA h as negatively affected the IFDI going into the Philippines.This is significant at the level P<0.05.Entering the ACFTA has made the Philippines more suscep tible to com petition from its neighboring countries and China.This further implies that the Philippines should change some policy measures to enable the country to maximize the benefits of current and future trade partnerships.This research also discusses some concrete policy suggestions and plans that the Philippines could undertake to tap into opportunities.