UPDATE 2-Philippines says won't stop projects with China firms blacklisted by U.S.

* Philippines needs Chinese investments - Duterte spokesman
* Country not a vassal state, infrastructure a priority
* China ambassador welcomes Duterte's decision
* Senator seeks probe on possible collusion on islands

(Adds comments from Chinese ambassador paragraphs 11, 12)
By Neil Jerome Morales
MANILA, Sept 1 (Reuters) - The Philippines will not halt
infrastructure projects involving Chinese firms blacklisted by
ally the United States and will act in its own interests, not
those of a foreign power, the president's spokesman said on
Tuesday.
President Rodrigo Duterte will not follow Washington's move
to sanction Chinese firms involved in building and militarising
artificial South China Sea islands, because infrastructure was a
national priority, Harry Roque told a regular briefing.
"We are not a vassal state of any foreign power and we will
pursue our national interest," Roque said.
Duterte has a race against time to make headway in his $180
billion infrastructure overhaul, which is fraught with
complications.
The United States, a defence treaty ally of the Philippines,
has blacklisted 24 Chinese companies and targeted individuals
over the building of military facilities on reefs in disputed
waters, escalating tensions with Beijing.
The Philippine foreign minister had recommended his
government terminates deals with those entities. Duterte's non-intervention could cause some friction, as
several of China's islands challenge his country's interests,
especially Mischief Reef, built within its 200-mile Exclusive
Economic Zone and equipped with missiles capable of striking the
Philippines.
Among firms involved are China Communications Construction
Co (CCCC) 601800.SS , which has teamed up with a Philippine
partner for a $10 billion airport project, and its subsidiary,
China Harbour Engineering Company, which is partnering on a $1.2
billion reclamation project with the firm of tycoon Dennis Uy,
Duterte's top election campaign donor.
China Harbour will partner with the Philippines' richest
family on another $1.86 billion reclamation venture.
Those firms have not responded to Reuters requests for
comment.
China's ambassador, Huang Xilian, welcomed Duterte's
decision.
"Any attempt to undermine the normal economic cooperation
between China and the Philippines will never succeed," Huang
said in a statement.
Opposition Senator Risa Hontiveros filed a resolution on
Tuesday to investigate possible collusion by Filipinos over
China's artificial islands.
"It is not hard to suspect dubious engagement by either
party," Hontiveros said.