Commentary: The impact of growing US-China tensions on Singapore

Commentary: The impact of growing US-China tensions on Singapore

US-China tensions will impact Singapore’s external relations and economy. Singapore must begin preparing for these consequences and adapt quickly to new international realities, says Prime Minister Lee Hsien Loong.

FILE PHOTO: U.S and China trade talks in Beijing
Staff members adjust US and Chinese flags before the opening session of trade negotiations between US and Chinese trade representatives in Beijing on Feb 14, 2019. (Photo: Mark Schiefelbein/Pool via Reuters)

This is the second of three commentaries by Prime Minister Lee Hsien Loong based on the Chinese speech he delivered at National Day Rally on Aug 19, 2019.

Read the first on the Singapore identity and the third on the outlook for the Singapore economy.

SINGAPORE: We are all worried about the growing tensions between the United States and China. Their disputes have placed other countries in a dilemma.

No country wants to take sides, and Singapore is no exception. This is why I want to discuss US-China tensions, and their impact on us.

Since its reform and opening up, China has developed rapidly to become the world’s second-largest economy. This has significantly benefited both China and the world, in many ways. It has also reshaped the world order.

As the world’s pre-eminent power today, the US has to accommodate an increasingly powerful and influential China. This is by no means an easy adjustment for the US. But the US needs to accept that China’s rise is inevitable, and that it is neither possible nor wise to prevent it.

READ: US-China face-off is not a ‘strategic inevitability’, says PM Lee Hsien Loong

Instead, the US should seek to build constructive bilateral relations, including economic cooperation, with China.

At the same time, as a rising global power, China needs to put itself in other countries’ shoes, and take greater account of their interests and viewpoints.

By doing so, it will enhance prospects for peaceful and harmonious relations with other countries. It is also more likely to be viewed as a magnanimous country, and a partner willing to work for mutual benefit.

Naturally, the US and China will compete for influence and power in the world. But amidst this competition, both parties also need to strengthen mutual trust, and develop appropriate mechanisms to manage the inevitable frictions between them.

READ: Why this US-China trade war is harder to resolve, a commentary

Regrettably, both the US and China have yet to find a way to manage their differences. Their tensions will persist for some time, and this will impact the whole world.

The US-China trade dispute already is inflicting collateral damage
The world's two largest economies have engaged in a tit-for-tat tariff war. (Photo: AFP/Fred Dufour)

IMPLICATIONS FOR SINGAPORE’S EXTERNAL RELATIONS

There are two major implications for Singapore. First, on the external front, in our relations with the US and China. And second, on the domestic front, the impact on our economy.

Singapore is a good friend of both the US and China, and we want to remain so. The US is our major security partner. We buy advanced military equipment from them, including fighter aircraft and missiles. Our troops train extensively with US forces. We also cooperate closely on counter-terrorism.

We hope the US will continue to remain engaged in the Asia Pacific. The US’ presence in the region has helped to underwrite regional peace and stability since World War II, and we hope it will continue to remain a presence in the region.

The US is also our important economic partner. The size and scale of US investments in Singapore far out-strip any other country’s. These investments create many quality jobs for Singaporeans.

We also have many collaborative endeavours with US institutions, companies and experts, in the fields of innovation, research, and development.

With China, Singapore has established an “All-Round Cooperative Partnership Progressing with the Times”. We have extensive economic cooperation with China, including three government-to-government initiatives in Suzhou, Tianjin and now in Chongqing.

China is also our largest export market. Singapore companies have sizeable investments there, as do Chinese companies in Singapore.

Teo Chee Hean and Lawrence Wong visit Tianjin Eco-City
Former Deputy Prime Minister Teo Chee Hean, National Development Minister Lawrence Wong, Senior Parliamentary Secretary for National Development Sun Xueling and other members of the Singapore delegation at the Ganluxi Waterway in Tianjin Eco-City. (Photo: Olivia Siong)

Our relations with China are unique. Apart from China itself, Singapore is the only sovereign country in the world with a majority ethnic Chinese population.

This shared cultural heritage is an advantage, for it helps us deepen people-to-people ties and strengthen cultural exchanges with China. All this helps to build good relations between our two countries, promoting understanding and partnerships between our peoples, companies and institutions.

But we must always remember to engage and cooperate with China as Singaporeans. We have our own history and culture. Hence we have our own perspectives on various issues, and must take our own stand.

Being a Chinese-majority country presents its own challenges for us in foreign affairs, because it makes it easy for other countries to misunderstand us.

This is especially so when the US and China are at odds. If we support China, the US and other countries may think we do so because we are a majority Chinese country, and therefore automatically defer to China. And if we support the US, China may misunderstand our motivations.

READ: The US, China, a security dilemma and a way out in Singapore, a commentary

Sometimes, when Singapore and China take different positions on some issue or other, our PRC friends ask us: Since we share a common heritage, a common ancestry and a common language, why does Singapore not share our common view?

Our position is this: On any issue, our views and actions will always be based on principles, and not sentiment. Regardless of who our audience is, whether it is in Singapore, Washington or Beijing, we always express the same views.

When we can agree, we will do so. When we cannot, we must maintain our principled position and explain our stand.

We hope other countries will understand that Singapore is a multiracial, independent and sovereign country, with our own position on issues. And of course, Singaporeans ourselves must fully understand this as well.

We must be clear-eyed about our own national interests and understand the Government’s considerations when we adopt principled positions on bilateral, regional or international issues.

IMPLICATIONS FOR SINGAPORE: ECONOMY

Aside from international relations, US-China tensions will also adversely impact the global economy. Supply chains will be disrupted, investments and R&D restricted, and people-to-people exchanges constrained.

Let me give you an example. The smartphones in your hands contain many components designed, produced and assembled in many different countries. It is so for Apple phones and Huawei phones alike.

A Huawei logo is seen on a cell phone screen in their store at Vina del Mar
A Huawei logo is seen on a mobile phone screen. (File photo: Reuters/Rodrigo Garrido)

However, if the US does not allow Chinese companies like Huawei to use American microchips, and US companies to use components manufactured in China, and if China does likewise, then, Chinese and American companies will each have to develop their own microchips, smartphones and telecommunication systems.

When we go overseas, we may have to carry multiple phones, just as we did years ago when we visited Japan, because Japan used the CDMA system while Singapore used GSM.

Notwithstanding such a bifurcated world, we still hope we can communicate with all our friends conveniently. So, the big headache for us is this: Which telecommunication system should we install in Singapore?

Singapore is a small open economy that has benefited greatly from globalisation. If US-China relations continue to worsen, the world will continue to bifurcate.

READ: The end of unrestricted commerce and the dawn of the great US-China disentanglement, a commentary

This augurs a more troubled future for us. Our growth will be affected. Singapore companies that export to China, and those that export to the US from factories in China, will be hit.

Some hope that manufacturers that decide not to set up in China may come to Singapore. A few may come, but most will not, given the nature of the industries and their primary considerations of cost and proximity to markets.

For example, clothing manufacturers will likely move their factories to Vietnam or Bangladesh; electronics to Mexico; furniture manufacturers to the Philippines. 

These companies will not prefer to locate in Singapore. Overall, deteriorating US-China relations is bad news for the world economy, and a definite minus for Singapore.

US-China tensions have already hurt confidence worldwide. But the deeper and wider structural effects I have described will only be felt over time.

Nevertheless, we must begin preparing for these consequences, and adapt ourselves quickly to the new international realities.

Lee Hsien Loong is Prime Minister of Singapore.

Source: CNA/sl

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