china singapore

8/9/2019 China Singapore

1/26

Institute of International Relations and Area Studies, Ritsumeikan University

Abstract

The main thesis of this paper is to argue that Singapores China policies is based on enlightened economic pragmatism. The

island Republic saw Chinas push for modernization from l978

onwards as a good business opportunity to get a foothold in China

as part of its second wing strategy to expand its markets, region-

ally and globally. Similarly, Chinas policies toward Singapore is

mainly based on economic rationality. Singapores strategic posi-

tion, its populations ethnic Chinese background, its strong and

stable government, plus the success of its economic development

strategy has attracted Chinas interest to learn from Singapores

experience of modern management of its economy, including run-

ning ports, managing the public housing programmes, and social

security. Economic pragmatism and seeking business opportunities

and profits are the main thrusts in pushing both Singapore and

China to widen and deepen their special symbiotic economic rela-

tions in the areas of trade, investments, joint developments and

finally free trade area and economic integration in the 21st century.

Keywords:

Special, pragmatism, trade, investment, model.

Singapore-China Special Economic Relations:

In Search of Business Opportunities

SHEE Poon Kim*

RITSUMEIKAN INTERNATIONALAFFAIRSVol.3, pp.151-176 (2005).

* Visiting Professor, Faculty of International Relations, Ritsumeikan University. I am grate-

ful to the East Asian Institute, National University of Singapore for providing the research

facilities for writing this paper and to Dr. Lam Peng Er for his valuable comments.


2/26

INTRODUCTION

When Singapore became an independent Republic on 9 August 1965, LeeKuan Yew became its first Prime Minister, a post he held until he stepped

down in November 1990. Goh Chok Tong became Singapores second Prime

Minister on 28 November 1990. He resigned on 11 August 2004 so that Lee

Hsien Loong could become its third Prime Minister on 12 August 2004.

The focus of this paper is to analyse Singapores special economic rela-

tions with China mainly from Singapores perspective. Its central theme

can be depicted as Singapores search for business opportunities in China.

The paper is divided into three parts: first, it briefly describes the basicprecepts and principles of Singapores foreign policy; the second section

deals with Singapores economic policies toward China; the third part

analyses the economic issues between Singapore and China and finally,

the conclusion.

Why is it important to study these special economic relations? First,

Singapores special economic relations with China can be an important pil-

lar for China-ASEAN economic relations. Second, the emergence of the

flying dragon model of developmental regionalism1) can be an alternative

flying geese model for economic integration. Third, they offer a possibilityof creating a greater flying dragon model of an economic commonwealth,

including Taiwan, Hong Kong, Macao and the ethnic based Chinese bam-

boo network. Fourth, for Singapore, a Singapore-China economic nexus

will imply an alternative to the western oriented human capital develop-

ment such as from advanced higher-education training in the Ivy Leagues

in the US to Chinese universities in China. In the long run, it will revi-

talise Confucian culture as the core of East Asian civilisation and bring

about the emergence of a Sinic cultural renaissance as happened in the

10th century during the Tang dynasty (AD 618-907).

. BASIC PRINCIPLES OF SINGAPORES POLICIES TOWARD CHINA

Singapores diplomatic interactions with China raises a theoretical

RITSUMEIKAN INTERNATIONALAFFAIRS152 Vol.3

1) Developmental regionalism can be defined as a type of East Asian new regionalism in which

states intervene to promote national agendas. See Nesadurai, Helen, E.S. Globalisation,

Domestic Politics and Regionalism: The ASEAN Free Trade Area, (London: Routledge 2003),

Chapter 1, p.41.


3/26

question, i.e. how and why a small state adopts certain policy options vis-

-vis a rising major power in East Asia with the desire to ensure the sur-

vival, economic development and the sustenance of a democratic andmulti-racial nation. The foreign policy outputs of a state cannot be formu-

lated in a vacuum and therefore Singapores foreign policies towards

China can be examined and analysed in the context of the following basic

precepts and principles.2)

From Singapores perspective, the first basic principle is to ensure the

survival and security of its democratic, multi-racial state through econom-

ic development. Thus one of the most important goals of Singapores poli-

cies towards China is to promote economic prosperity and well being forSingaporeans as a whole.

Second, Singapores foreign policy is not based on any fixed ideology.

Singapore will establish diplomatic relations with any state, whose

national interests coincide with Singapores basic national interests, irre-

spective of differences in ideology and political systems.

Third, Singapore believes in free trade and will trade with any coun-

try based on the principle of mutual benefits.

Fourth, Singapore believes in the principle of peaceful coexistence

with the neighbouring states and operates within the framework ofASEAN. Due to geographical imperatives, Malaysia and Indonesia are the

top priorities in Singapores foreign policy. The importance of Malaysia

and Indonesia to Singapore can best be described as a lips and teeth

relationship. Singapores future is therefore closely linked with the future

of Malaysia and Indonesia. Geo-strategic considerations are important cal-

culations in Singapores China policies, especially during the earlier years

of Singapores independence. Survival was of paramount concern and

Singapores China policy was a function of both domestic needs and exter-

nal imperatives.

Fifth, Singapore believes in the principle of the balance of power of

international politics in Southeast Asia. Therefore, Singapore supports the

legitimate interests of and the presence of all the major/superpowers in

Singapore-China Special Economic RelationsSHEE2005 153

2) For details of the basic precepts of Singapores foreign policy, see, Michael Leifer,

Singapores Foreign Policy: Coping with Vulnerability, (London: Routledge, 2000), Chapter

1, pp.10-42; see also Bilveer Singh, The Vulnerability of Small States Revisited, A Study of

Singapores Post-Cold War Foreign Policy, (Yogyakarta: Gadjah Mada University Press,

1999), Chapter 2, pp.11-36; Bilveer Singh,Singapore Foreign Policy Imperatives of a Small

State, (Center for Advanced Studies, National University of Singapore, 1988).


4/26

the region, including China, Japan, the U.S. and Russia.

Sixth, Singapore believes in world peace and order and therefore sup-

ports the UN Charter to promote world peace and order. It also believesthat inter-state conflicts should be solved by peaceful means. Singapore

thus condemns using force as an instrument to resolve conflicts, in partic-

ular by a bigger states hegemony against a smaller one.

. ECONOMY IN COMMAND: IN PURSUIT OF BUSINESS OPPORTUNITIES

The hallmark of Singapore-China relations since l965 can best be

described as economy in command. During the period from l965 to l975and even at the height of the Cultural Revolution (hereafter CR) in China,

for example and despite all the ideological polemics, the mutual suspicion

and hostilities, including the Bank of China crisis in l969, economic inter-

ests were the most important consideration. The trade data on Table 1

show that the volume of trade between Singapore and China ironically

was at its peak during the period from l967 to l969, even at the height of

the CR. In l949, the total amount of trade between the two countries

amounted to S$453.3 million but did reach the S$593.3 million mark in

l969, i.e. the highest in the twenty years period from l949 to l969.3) Thesedata support the thesis that despite the political turmoil during the CR,

ideology and trade were clearly separated in the diplomatic relations

between the two countries during l965 to l975. In this sense, one can

argue that geo-strategic considerations were not as important in Chinas

Singapore policy as was the case for Vietnam.

Economic rationality was an important factor in Chinas policy formu-

lations towards Singapore, as the latter has historically always been per-

ceived by China as an important gateway to Southeast Asia. This argu-

ment can be supported by the seven great journeys by Zhen He (Cheng

Ho) (1405-1433) to Southeast Asia during the early part of the l5th centu-

ry. In fact, since the l9th century, after the Opium War (1840-1842) and

with the establishment of Hong Kong as a British Colony, Singapore had

increasingly emerged as an important hub in Chinas trade with Southeast


3) See, Table 1, Singapores Trade with China: 1965-1999. See also Shee Poon Kim,

Singapores Foreign Policies Towards the Peoples Republic of China since l965, in ed by

Theresa C. Carino, China ASEAN Relations: Political, Economic and Ethnic Dimensions,

(Manila: De La Salle University, l99l), p.111.


5/26

Asia.4)

From Singapores perspective, being a resourceless entrepot city, it

had historically no choice but to be the middleman of all the tradingnations, including China. Due to its strategic and well-located geographi-

cal position, Singapore had emerged as an important middleman and re-

export centre for natural rubber from Malaya to be exported to China and

a distribution-centre for Chinas goods to Southeast Asia.5)

Singapores economic importance to Chinas economic modernization

can be seen from fact that Singapore has consistently been one of Beijings

top ten economic partners in the areas of trade and investment in China.

Singapore was also Chinas largest overseas labour market and the secondlargest overseas contractual engineering market.6)

How does one explain Chinas special interest in Singapore?

First, Singapores strategic location and infrastructure are one of the

important factors. China can make Singapore as a centre for its trading in

Southeast Asia because Singapore has the advantage of being an interna-

tional trading and distribution hub for China. For example, Singapore has

been the second largest oil-refining centre in the world next to Huston,

Texas. With the discovery of oil in the l970s China could gain from

Singapore to upgrade its oil products so that Beijing can meet the require-ments for its oil products in the international markets. Singapore, with its

sophisticated technology, skills, market and industrial management, can

share its experience with China. The Suzhou Industrial Park project

(SIP), for example, is a good illustration that Singapore can transfer its

modern management skills to China.

China could use Singapore as a stepping stone for a regional opera-

tion centre or a gateway to other markets (530 million people) in Southeast

Asia. This could be seen from the fact that more and more Chinese compa-


4) Wong, John, The Political Economy of Chinas Changing Relations with Southeast Asia,

(London: MacMillan Press, l984), p.66-68.

5) For details of Singapores and Malaysias trade with China, see John Wong, The Political

Economy of Chinas Changing Relations with Southeast Asia, (London: MacMillan Press,

1984), p.65-91.

6) See, Xiao Zhengrong, Sino-Singapore Relations: Its Present and Future, unpublished

Conference Paper, 11 August l998, Joint Seminar Between Singapore and The Peoples

Republic of China Research Institutes, (Singapore: East Asian Institute, National

University of Singapore, 11 August l998), p.2; see also i.e. journal (international enterprise,

a Journal published in Singapore), Issue 15 August 2004, at accessed 15 November 2004.


6/26

nies are operating in Singapore. Singapore can act as a middleman and

regional representative to help China to get more markets and invest-

ments. Furthermore, China can use Singapore as an area from whichsophisticated technology from Multi-National Cooperations (MNCs) oper-

ating in Singapore can be transferred to China.

Second, the dynamic growth of Singapores economy for more than thir-

ty years, with the exception of the recession in 1985 and l986 and the slow

growth in 1997 and 1998, impressed China. The small flying dragon can be

a limited model for the big flying dragon to gain inspiration and experience.

Third, the ethnic bond and the cultural ties between Singapore and

China added to the closer economic ties between the two countries.Singaporean Chinese businessmen have the ability to speak Mandarin and

skilfully cultivate kuanxi (connections) with their Chinese counterparts

which may give them some advantage in doing business in China vis--vis

other non-Mandarin speaking competitors like Malays, Indonesians, etc. It

is easier for Chinese to communicate with Chinese speaking Singaporeans

than with non-Chinese speaking foreign investors.

Fourth, Singapore can be a useful place for China to raise international

funds for its huge financial appetite for economic modernization. By 2004,

there were 46 Chinese companies listed on the Singapore Stock Exchange.7)

Fifth, Singapores political stability is an attraction to China to do

business in the Island Republic. It was no coincidence that Deng Xiaoping

visited Singapore twice that is in 1978 and 1981. Unlike other countries in

Southeast Asia, domestic political inputs, such as pressure groups do not

come into play in Singapores China policy. In Indonesia, for example,

direct trade was suspended after the unsuccessful communist coup in

l965, until Indonesia signed a Memorandum Of Understanding with

China in July, l985.8) Domestic political considerations were one of the

main reasons for Indonesia to suspend its diplomatic relations in l967

until August, l990.9)


7) See i.e. journal, Issue 15 August 2004 at accessed 15

November 2004.

8) Prior to l990, Indonesia engaged from time to time in pro and anti-China debates within

Suhartos military dominated government. The ABRI was the most important political

group to set Indonesias China policies from l966 to l990. The Straits Times, (Singapore), 5

July l985.

9) See, Leo Suryadinata, Indonesias Foreign Policy Under Suharto, (Singapore: Times

Academic Press, l996), p.121.


7/26

Sixth, the economies of both Singapore and China are more comple-

mentary than competitive. Singapores open, modern, sophisticated urban

economy can be complementary to China, which has vast and abundantlabour and is rich in natural resources. China needs high-value added

technology-based goods and services that Singapore can offer. Singapore

requires Chinas resource-based materials, which include among others

such items as energy, industrial and agricultural raw materials and food-

stuffs, etc. The bulk of Chinas imports from Singapore mainly consists of

electronic components, plastic resins, computers and computer peripherals

and other industrial products. Thus the trade structure shows that there

is a complementary need for each others economies. The comparativeadvantages and international specialization of both economies augur well

for sound and stronger economic cooperation.

Why does Singapore have special economic interests in China?

From Singapores perspective, China with a huge population of close

to 1.3 billion people is a very attractive market for Singapores second-

wing strategy of regionalization and globalisation of its economy. China is

an important partner for Singapores push for the free trade area zone in

East Asia. As an clairvoyant and futuristic-oriented state, Singapore will

benefit most by adopting a bandwagon strategy to fly together with therising big dragon in the 21st century. As a small dragon, Singapore in fact

has shown the big dragon how to modernize its economy by transferring

its management and governance skills to China. Not surprisingly,

Singapore has been keen in promoting a bilateral free trade area with

China besides actively pushing for multi-lateral free trade areas in the

Asia-Pacific. The most recent attempt is to conclude a free trade area

agreement between Singapore and China.10)

As China has opened up since the late l970s Chinese Singaporeans

(particularly Mandarin speaking Chinese businessmen) have been active-

ly pursuing economic opportunities in China. When Deng Xiaoping

embarked upon Chinas economic modernization in the 1970s and early

1980s, the Chinese-speaking graduates from Nanyang University were

the first batch of ethnic Chinese from Singapore who went to China in

search for business opportunities. Singapores investments have been

growing steadily, more so after the diplomatic normalization of relations


10) See accessed 13

November 2004.


8/26

on 3 October, l990. From l990 to June, l994, for example, Singapore has

invested in more than three thousand eight hundred and thirty-four pro-

jects in China amounting to a total contract volume of US$6.8l billion,11)

and by the end of l997, Singapores actual investment increased to

US$8.78 billion.12) By the end of 1999, the total contracted amount went

up to US$34.3 billion with the actual amount being US$14.8 billion.13)

From the ASEAN grouping, the Republic is the largest direct foreign

investor in China. More than eighty percent of Singapores investments in

China are in real estate, tourism and industrial parts. Among Singapores

major investment projects is the SIP, the Wuxi Industrial Park, Shanghai

Sanlin Housing Development, Beijing Xiangjian Garden, the DalianContainer Terminal, etc. Most of the investments are concentrated in

southern China, mainly in the provinces of Fujian and Guangdong from

where their ancestors came from.14) In 1996 alone, for instance, Chinese

Singaporeans invested about US$418 million in Guangdong (about 3% of

Chinas FDI, and US$529 million (about 3.8% of Chinas FDI) in Fujian

Province.15) Over all, Singapore was the third largest foreign investor in

Xiamen (Fujian Province)16) and the fourth largest in China in 2000.17) By

the end of March 2000, Singapore became Chinas seventh largest trading

partner, whereas China was Singapores sixth.18) In 2004, China becameSingapores fifth largest trading partner, whereas Singapore was Chinas

seventh largest foreign investor with more than 12000 projects and a


11) Lianhe Zaobao, (Singapore), 6 October l994.

12) See, Xiao Zhengrong,Supra note 6, p.2. See alsoBusiness Times, (Singapore), 28 May l998.13) Data provided by Chinas Ambassador to Singapore, Her Excellency, Chen Baoliu, on 15

March 2000.14) See John Wong, Southeast Asian Ethnic Chinese Investment in China, Institute of East

Asian Studies (EAI), National University of Singapore (NUS) Working Paper No. 15, 23

October 1998, p.16.

15) See John Wong, Southeast Asian Ethnic Chinese Investment in China, October 1998,ibid., pp.27-28.

16) Lianhe Zaobao, 6 December 1997.

17) John Wong, Sino-Singapore Relations: Looking Back and Looking Forward, inSingaporeChina: 1990-2000, Commemorative Souvenir in Celebration of the 10thAnniversary of the

Establishment of Diplomatic Relations Between The Republic of Singapore and The

Peoples Republic of China, (World Scientific Publishing Co. Pte. Ltd., 2000), p.75.18) Data provided by Chinas Ambassador to Singapore, Chen Baoliu, on 15 March 2000. See

also John Wong, Sino-Singapore Relations: Looking Back and Looking Forward, inSingapore-China 1990-2000, Commemorative Souvenir in Celebration of the 10 th

Anniversary of the Establishment of Diplomatic Relations Between The Republic ofSingapore and The Peoples Republic of China, (World Scientific Publishing Co. Pte. Ltd.,

200), p.76.


9/26

cumulative contractual FDI value of about US$43.5 billion.19)

China is complementary to Singapore as Beijing has the worlds

largest relatively cheap labour force, which can be an attractive alterna-tive labour force to substitute the increasingly high labour and land costs

of doing business in Singapore. Thus it is logical to transfer labour inten-

sive light industries from Singapore to a developing economy like China.

Singapore can also depend on Chinas abundant semi-skilled labour-force

to minimize its labour shortage problem. Finally, the new wave of Chinese

migrants20) from China (mainly professional, semi-skilled and skilled

workers) are important to sustain the continued growth in Singapores

economy, especially in the areas of sophisticated technologies, like the lifesciences, information technology, communication, etc.

China can be an important alternative to minimize Singapores trade

dependencies on advanced industrialized economies such as the U.S. and

Japan. In the past, Singapores economy has been vulnerable to the oscil-

lation of the economic health of the advanced industrialized economies,

such as Japan and the U.S. It is mainly dependent on the MNCs.21) China

can therefore be an important market to cushion off, to some extent, its

lopsided trade dependency. Since the late 1970s Singapore has emerged as

one of the leading trading partners for China. Table 1 shows that thetrade volume between the two countries has increased steadily since the

beginning of the l980s. In 1992, the total trade volume amounted to about

S$5.48 billion (US$3.22 billion) and it increased to about S$ 6.95 billion

(US4.27 billion) in l993. In l997, the total amount was about S$14.5 billion

(US$9.14 billion), making Singapore Chinas largest trading partner

among the ASEAN states.22) In 1998, the total two-way trade increased to

US$8.2 billion and rose to US$8.60 billion in 1999.23) Chinas share of

Singapores total trade was 4.2% (1998 data), whereas Singapores share of


19) Xinhua News, 2 November 2004, at ,

accessed 13 November 2004.

20) There are between 200,000 + 300,000. SeeSin Chew Jit Poh, (Malaysia) 24 April 2004.

21) See, Shee Poon Kim, Singapore in l99l: Endorsement of the New Administration,Asian

Survey,Vol. 32, No. 2, February l992, p.121.

22) See, Yearbook of Statistics, Singapore, 1993, l995 and l997, (Singapore: Department of

Statistics).

23) Chinas Ambassador to Singapore Chen Baolius speech to NUS on 15 March 2000 enti-

tled: China-Singapore Relations in the 21st Century. Goh Chok Tong disclosed that the

total trade for 1999 was US$9.5 billion as compared to US$3 billion in 1990, an increase of

12% for each year. See The Daily Yomiuri, 4 October 2000.


10/26

Chinas total trade was 7.5%.24) In 2003, the total two-way trade jumped to

S$36.9 billion.25) From January to September 2004 alone it already

amounted to about US$22 billion (about S$36.1 billion)26) and by the endof the year, is likely to pass the S$40 billion mark.

. ECONOMIC ISSUES

The following sections deal with a) the trade deficit; b) the competi-

tion over foreign investment funds; c) the changing roles of middlemen; d)

whether Singapore can be a model for Chinas economic modernization

and finally a case study of the SIP.1. Trade Deficit

Since l949, but with the exception of l950, Singapore has been consis-

tently suffering a trade deficit with China.27) Has this persistent trade

deficit adversely affected political relations with China? From Singapores

perspective, the trade deficit does not politically affect Singapores diplo-

matic relations with China, as the problem has not been a serious political

and economic issue. Imports from China to Singapore could be for re-

export to Malaysia and Indonesia.28) Singapore benefited economicallyfrom the Suharto governments suspension of diplomatic relations from

l967 to l989, as there was no direct trade between Indonesia and China.

Thus, Singapore and Hong Kong became the two destinations for the

ongoing trade between Indonesia and China.

The trade deficit did not lead to deterioration of diplomatic relations

and to serious political conflicts, partly also due to Chinas flexibility. From

time to time, China offered special discount prices below those in the inter-

national markets on its exports to the Southeast Asian countries so as to

win their political friendship.29) In other words, China can be sensitive and


24) John Wong, supra note 17, p.78.

25) See Table 1 for trade data.26) Xinhua English 2 November 2004, at

accessed 13 November 2004.27) See, Yearbook of Statistics, Singapore, from l950 to l997. See also Table 1, Singapores

Trade with China: l965-1999.28) Wong, John, supra note 4, p.117.

29) Shee Poon Kim, The Politics of Thailands Trade Relations with the Peoples Republic of

China,Asian Survey, Vol. 2l, No. 3, 1981, pp.310-24.


11/26

take certain measures to minimize the trade deficit between its trading

partners so as to safeguard larger political and strategic relations with the

ASEAN states, especially, for example, with Thailand. China could do thesame, if necessary to minimize Singapores trade deficit vis--vis China.

2. Competition Over Investment Funds

In one dimension, Singapore and China have been competing to

attract foreign investments from the MNCs. Singapore is slowly loosing its

competitiveness to China partly due to increasingly higher costs of doing

business in the island Republic. In September l994, Siemens, a giant

German MNC announced the companys plan to establish its overseasheadquarters in China and decided to reduce its investment in Singapore.

The high cost of running its business in Singapore has deterred Siemens

to invest large amounts of money in Singapore. Instead, in November,

l994, Siemens announced that the company decided to invest US$3.5 bil-

lions in Asia from l995 to the year 2000. About US$l billion and US$500

millions will be allocated to China and India respectively.30) From 1987 to

1993, China attracted FDI US$53910 million, whereas Singapore received

US$33400 million in the same period. In 2000 China received US$40.7 bil-

lion whereas Singapore acquired US$21.7 billion.31) China has the advan-tage over its neighbouring states when attracting more FDI, because the

MNCs perceive China as a future rising economic superpower in the 21st cen-

tury. Singapore on the other hand is constrained by its size and population.

Aware of the intense competition for foreign investments funds among

the Asian states, former Prime Minister Goh Chok Tong raised the issue

at the ruling Peoples Action Partys (PAP) anniversary dinner on 8 th

November, l994, in which he highlighted the adverse effect Asias rapidly

changing economic order had for Singapores economic competitiveness.

He described the opening up of China and India to foreign investments

like switching on powerful big vacuum cleaners simultaneously which

sucked away the low and semi-skilled manufacturing industries from the

established centres, including Singapore. Furthermore, due to Chinas

huge population who provides a vast labour force, China has the advan-

tage over Singapore to attract labour intensive industries to its cities.32)


30) Business Times, 11 October l994.

31) Shri Prakash, Chinas Relationship with the ASEAN Countries: Conflict Management in

a Multi-Polar World, in . p.9.


12/26

3. Changing Roles of Middlemen

How can one minimize Singapores weaknesses and strengthen its com-petitiveness? One way is to change the role of the middlemen in Singapores

economy. In order to compete more effectively, Singapore must go regional

and global. The traditional role of its entrepot services must be widened to

include a larger and wider range of services for the MNCs such as invest-

ment consultancies, management, finance, information and intellectual ser-

vices, joint partnerships, etc. One practical way, for example, is to form con-

sortiums, which can be joined by western MNCs investing in China.

Singaporeans rich experiences in doing business and their ability tospeak Chinese and English adds to their advantage when performing the

roles as investment advisors not only for western MNCs to invest in

China but also for Chinas state enterprises which want to invest in

Southeast Asia. Similarly, Singapore and Taiwanese MNCs can form con-

sortiums to invest in China as Singapore had signed an Investment

Protection Agreement with China in September 1996 and the Double

Taxation Agreement in April l986.33) Hence, Taiwanese MNCs registered

in Singapore with Singaporean companies as their partners could thus be

legally guaranteed of their investments in China.

4. Singapore as a Model for Chinas Economic Modernization?

Can Singapore be a model for Chinas economic modernization?34) A

Model connotes a framework, which can be used as a means to achieve

certain goals. The extent of usefulness or application of a model from one

country to another cannot be completely or comprehensively emulated, as

the conditions of each state are different. Four prerequisites must be met

for a meaningful transfer of a model to China. First, the country must

have a culture and working ethics similar if not identical to China; second,

that countrys economic development policies must have been tested suc-

cessfully; third, the country has moved from a poor developing society to a

prosperous industrialized nation. Finally, that political system must dis-


32) Lianhe Zaobao, 9 November l994;Business Times, l0 November l994; TheStraits Times, 9

November l994.

33) See, Shee Poon Kim, supra note 3, p.108.

34) Former Minister of Finance and Deputy Prime Minister Dr. Goh Keng Swee was appoint-

ed as advisor to the Chinese government in l985.


13/26

play tight political control in line with Chinas centralized political system.

The debates of how to make China a rich nation and have a powerful

army has always been a central concern for Chinas modernizing elitesince the l9th century. Since Dengs embarkment on the four moderniza-

tions in l978, some Chinese thinkers believe that Singapores economic

prosperity can be an alternative model to the Western model of protes-

tant ethics and the rise of capitalism.35) Singapore seems to be qualified

to be emulated as a limited model for China as it fulfils the above four pre-

requisites, i.e. the efficient work ethics of Chinese Singaporeans with an

authoritarian political culture, the role of the state spearheading economic

development, and the ideology of economic pragmatism attract the topChinese leaders attention. In November l978, for example, when Deng

Xiaoping visited Singapore, he was deeply impressed with Singapores

economic achievement. Two years later, i.e. in l980, Jiang Zemin visited

Singapore. He too, was impressed with the success of the Jurong Town

Corporations Industrial estate. Likewise, in August l98l, the then Chinese

Premier Zhao Ziyang while visiting Singapore, praised the island Republic for

its achievements in managing economic and social development.36) In June,

l990, the then mayor of Shanghai, Zhu Rongji who later became Prime

Minister of China came to Singapore to study public housing, social securityand how to attract investments for the Pudong Special Economic Zone.37)

In the minds of the Chinese leaders, Singapore can be used as a possi-

ble limited model to emulate. It can be argued that Singapore can share

some of its experience of economic development, skills of management of a

modern city with China because, first Singapores thriving economy and

prosperity has proven that a majority of ethnic Chinese with hard working

ethos can ensure economic development and success.38) Second, Singapores

political stability, law and order appeal to the top Chinese political lead-

ers. Finally, Singapores success in managing corruption also has attracted


35) Max Weber, The Protestant Ethic and the Spirit of Capitalism, (New York: Charles Scribners

Sons, l958).

36) See, The Straits Times, 12 August l98l; The Mirror, (Singapore), l September l98l;Singapore

Bulletin, September l981.

37) Tan Kong Yam, Singapores Role in the Economic Development of China, (Singapore:

National University of Singapore, Faculty of Business Administration, Working Paper

No.55 1991), p.12.

38) See, Hung-Chao Tai, ed., Confucianism and Economic Development, (Washington D.C.:

The Washington Institute Press, 1989), pp.214-18.


14/26

Chinas interest.

Singapores model of political authoritarianism and economic liberal-

ism attracted the top Chinese leaders as they witnessed the collapse ofGorbachevs Perestroika and Glasnost policies, which brought about the

collapse of the communist system. Moreover, Chinese leaders do not accept

either the Western model of modernization, which would necessitate

development along the Western line of liberal democracy.

However, there are constraints and limitations in applying Singapores

model to China. First, historically, Singapore has always been performing

the role of a middleman entrepot economy, whereas China was mainly a

peasant economy. Singapore is a small city-state whereas China has ahuge hinterland economy.

Second, Singapores economy is based on the principles of an export-

oriented open free-market economy, whereas Chinas economy is extensive-

ly controlled by the state. Hence how can a free-market export economy be

fitted into a socialist Chinese economy with capitalistic characteristics?

Third, it is difficult for the ruling CCP government to do away with

the socialist ideology, as it is the basis of legitimacy of its rule. Hence, any

attempt to emulate liberal capitalism can result in ideological debates and

conflicts in the Chinese political system. Can China therefore preservesocialism as its state ideology and follow capitalism for its economy? How

can Singapores unique ideology be transferred, which can be described as

encompassing the pragmatism of America, the rules of law of the British,

the democratic socialism of the Europeans, and Chinese Confucianism.39)

In other words, when looking into the feasibility of transferring a model

from one society to another, the uniqueness of culture and ideology of

these societies has to be taken into consideration. The top Chinese leaders

however, are fully aware that their political tradition, culture, social and

economic conditions are very different from Singapore.

China is now at the crossroad. On the one hand, China cannot reverse

its course of modernization and open policies, which will inevitably bring

about political democratisation in the political system, but this political

modernization, will result in the challenge to the authority of the CCP

rule. On the other hand, without political modernization, China cannot

sustain its economic growth in the long run. As Lee Kuan Yew argued, the


39) The Straits Times, 12 April 1994.


15/26

CCP may not want to give up control of the government, but China cannot

avoid changing its system now that communism has proven to have failed

across the globe.40) But foreign policy influences that come along with for-eign investments cannot be avoided.41) Challenges to the CCP rule and

erosion of the leaderships legitimacy and authority are inevitable as the

society is becoming more pluralistic and open and its economy more afflu-

ent. Furthermore, as China became a member of the World Trade

Organisation (WTO), the process of globalisation will further erode the

hegemony of the CCPs rule. Clearly, globalisation has brought about the

retreat of the authority of the state and strengthened the market forces in

the Chinese domestic economy.Suffice it to argue that in view of the above differences, the Singaporean

model cannot be comprehensively applied to Chinas unique conditions.

Singapores model, which works for the island Republic, may not be totally

practicable in China. However, as a latecomer to modernization, China

can minimize making mistakes by avoiding the pitfalls from the experi-

ences of the New Industrialised Economies (NIEs) in Asia, including

Singapore. In this sense, Singapore can share some of its useful and limit-

ed experiences of the management of a sophisticated modern economy and

even its pitfalls with China. The latter will have to decide ultimatelywhich part of the model could be emulated and which part should be

avoided. The SIP, a joint project to create a modern town in China by

Singapore is a good example, where Singapore can share its experiences in

creating a modern sophisticated industrial city in China. From 1994 to

2000, about 140,000 Chinese officials from different areas visited the SIP

to learn and adopt the model to their own cities and development zones. 42)

Modernization connotes three dimensions, i.e. firstly, physical (i.e.

infrastructure); second, institution-building; three, changes of values and

ideology. The physical dimensions are less problematic than the second

and the third dimensions. The creation of the SIP project, based on

Singapores Jurong Town model, a transfer of software to China was not

too difficult, though some adjustments were necessary to suit the local

conditions in Suzhou. However, it would be impossible to transfer


40) The Straits Times, 25 September l990.

41) Gerald Segal, The Challenge of Chinas Foreign Policy, Asian Affairs, Vol. 21, Part III,

October l994, p.274.

42) The Straits Times, 6 May 2001.


16/26

Singaporean values and ideology to a socialist/communist state, as the

Chinese themselves have not defined exactly what socialism with

Chinese characteristics entails. Culture, especially values are difficult totransfer. Hence, before China decides which model to emulate, some of

these fundamental questions need to be answered. First, what is modern-

ization for? Second, what does China hope to achieve? What are the moti-

vations and the aspirations of the people?

5. The Suzhou Industrial Project: A Case Study of a Build, Manage

and Transfer Model

In September 1992, both then Senior Minister Lee Kuan Yew

43)

andOng Teng Cheong, the then Deputy Prime Minister visited Suzhou.

Suzhous Mayor, Zhang Xinsheng then requested Lee Kuan Yew to help to

industrialise Suzhou like Singapore.44) In 1992, during Dengs Nanxun

(southern trip), he personally instructed the CCP and local officials to

learn from Singapores development experiences. Deng chose Singapore

partly because he perceived the island Republic fit into his image as a sin-

isized state and partly because China could not emulate the developmen-

tal model of either Hong Kong or Taiwan due to political sensitivity.

Moreover, Singapores population is predominantly ethnic Chinese andthus shares part of the common cultural heritage and linguistic affinity.

The diplomatic normalization in October 1990, made it easier for China to

seek closer ties with Singapore. From 1992 onwards, after Dengs open

endorsement of learning from Singapore, many Chinese officials and

bureaucrats from national, provincial and city levels came to Singapore to

conduct field studies on the Singaporean economic and social development

experiences, ranging from studying Singapores public housing pro-

gramme, social security, that is the Central Provident Fund (CPF), port

authority, to industrial management, etc.

In February 1994, Lee Kuan Yew and Chinas Vice-Premier Lee Lanqing

formally signed an agreement to develop a seventy-kilometre industrial

park based on Singapores Jurong Industrial Park experience. The total

cost of the SIP was estimated to be about US$20 billion, to be fully devel-


43) Lee Kuan Yew became Mentor Minister in Lee Hsien Loongs Cabinet since 12 August

2004.

44) Memoirs of Lee Kuan Yew, From Third World to First, The Singapore Story: 1965-2000,

(Singapore: Times Media Private Limited, 2000), p. 719.


17/26

oped in twenty years and based on a Singaporean style of industrial, resi-

dential, recreational community with a population of six hundred thou-

sand providing employment for three hundred and sixty thousand work-ers.45)

The first phase of the SIPs development covered eight square kilome-

tres. A company by the name of China-Singapore Suzhou Development

(CSSD) was set up as a joint venture enterprise between Singapore-

Suzhou Township Development (SSTD), a Singaporean consortium (twen-

ty-four companies) led by the Keppel group, which is a Singapore govern-

ment linked company and its Chinese counterpart, Suzhou Industrial

Park Corporation (SIPC). Singapore took up 65% whereas its Chinesecounterpart subscribed to the remaining 35% equities. The central govern-

ment of China and Singapore agreed that the objective of the SIP was

software transfer from Singapore to China. From Singapores perspec-

tive, the aim was to run and manage an administrative system in Suzhou.

It was hoped that the SIP would create a favourable business environ-

ment, attracting high-tech companies from among MNCs, generating more

jobs and finally to improve the economic well-being of the Chinese workers

and employees in the SIP. Although the CSSD works as a commercial prof-

it-oriented entity, like any private business enterprise, Singapore hopedthat the SIP could be a model of a Singaporean success story, which, if suc-

cessfully implemented in Suzhou, can be extended to other Chinese cities.

In other words, from Singapores perspective, Singapore hoped to

Singaporeanize the Chinese in Suzhou, a political vision that cannot be

ignored. Singapore took the SIP very seriously in particular Lee Kuan Yew

himself who had a stake in seeing directly the developing of a successful

industrial park in Suzhou. Initially, the development of the SIP went off

as planned from 1994 to 1997. By July 1998, the first phase of the eight

square kilometre area was already completed with one hundred and three

projects worth US$3.19 billion commitments out of which eighty-six indus-

trial projects were worth US$2.63 billion.46) Sixty companies started pro-

duction and twenty-six companies were under construction. By the end of


45) Asia Times, 22 August 1996. See also Henry Wai-chung Yeung, Local Politics and Foreign

Ventures in Chinas Transitional Economy: The Political Economy of Singaporean

Investments in China, Political Geography,Vol. 19 (2000), p.830.

46) Data presented by Singapores Ministry of Trade and Industry on 8 July 1998 during a

presentation of one of its senior staff to a group of Chinese scholars.


18/26

1998, the contractual commitment by foreign companies amounted to

US$5.8 billion with an actual amount of foreign investment worth

US$2.54 billion. Twenty-five of the worlds top five hundred companiesinvested in the SIP with an average investment each amounting to US$30

million.47) The largest foreign investment company was New Zealand

based, namely the Lion Beer Companies, which invested about US$340

million in the SIP to produce beer.48) By April 2001, Philips became the

largest investor in the SIP with a commitment of US$1 billion.49) By

September 2000, the accumulated contractual foreign investment reached

US$7.383 billion with an utilized capital totalling US$3.888 billion. By the

end of 2002 the total contractual foreign investment is expected to be morethan US$10 billion, with at least US$5 billion utilized foreign

investment.50) By 2003 the SIP successfully attracted more than 1300 pro-

jects with cumulative contractual investments of US$15 billion whereas

the actual foreign investments over the past ten years amounted to

US$7.2 billion.51)

In April 1998, the SIP launched a CPF scheme, the first one in Chinas

industrial relations. There were sixty-nine companies with four thousand

and two hundred and eighty-three employees participating in the CPF

scheme worth RMB41.6 million.52) However the development of the SIPwas not without its problems. By the end of 1997, there were conflicts

between Singapore and the Suzhou local authorities. Apparently, the con-

flicts started mainly due to the local authorities decision to compete with

the SIP from another industrial park set up in the late 1980s at the

Suzhou New District (SND) run by the Municipal government itself. In

November 1998, Suzhous vice-major, Wang Jinhua leading a group of

Suzhou officials visiting Germany, told a group of German investors that


47) Lianhe Zaobao, 28 December 1998.

48) In 1997, the Lion Beer Co. established a regional headquarter in Shanghai and employedabout one thousand four hundred employees. SeeLianhe Zaobao, 28 December 1998.

49) The Business Times, 28 April 2001.50) Synergy, SIP Quarterly July-December 2000, pp.3-4.

51) Data provided in Senior Minister Lee Kuan Yews speech of 10 June 2004 in Suzhou at the

ceremony to mark the achievements of Suzhou Industrial Parks 10th anniversary, at accessed 21 November 2004; see

also China Daily, 18 May 2004, at accessed 21 November 2004, and ,

accessed 21 November 2004.

52) Data presented by the MIT on 8 July 1998, op. cit.


19/26

they should put their money in the SND which has the full support from

the local authorities.53) What was disturbing to Singapore was that the

Suzhou delegation advised the German investors to invest in the SDNdirectly and not via Singapore.54) Another example to show that the local

authorities tried to use Singapores brand name for its benefit, was the

naming of the SND website as CS-SND, very similar to the CS-SIP. The

CS was an abbreviation of China-Singapore whereas the other CS

stands for the local authorities as China-Suzhou.55) In Singapores view,

this is an unfair practice on the part of the Suzhou local authorities.

Furthermore, these incidents, together with other difficulties encountered

with the Chinese counterparts prompted Singapore to bring up this con-flict openly to the highest authorities in Beijing when Lee Kuan Yew met

Jiang Zemin in December 1997. While there, Lee Kuan Yew explained

why Singapore decided to bring the SIP conflict versus the rival park into

the open. I have decided that this is an impossible situation and should

be resolved once and for all. Otherwise, I will be here every four months,

trying to sort things out, and thats not my job. My job is to get it started,

come here once a year, read reports in between, give it an extra push, an

added impetus now and then, but not to come fire-fighting every few

months.56) Singapore, in particular Lee Kuan Yew felt that the rivalrybetween SIP and SNP was unnecessary and wasting time and efforts.

Since the central government has openly expressed full support for the

SIP, there was no need to have two industrial parks. In Lee Kuan Yews

view, to have two industrial parks in Suzhou is like having two soccer

teams competing for each other instead of playing together as one team,

which has better chance to achieve maximum results.57) Lee Kuan Yew

was right. The SIPs performance improved and generated profits by the

end of 2001 after Suzhou Vice-Mayor Wang Jinghua became the CEO from

January 2001 onwards. Wang decided to terminate all links with the SIPs

rival SND industrial park and to make CSSD a profitable company under

his stewardship.58)

How can the conflict between the SIP and the SND industrial park be


53) The Sunday Times, 14 December 1997.

54) The Sunday Times, 14 December 1997.

55) The Straits Times, 10 December 1997.


57) The Business Times, 5 December 1997.



20/26

explained?

First, the difference between Singaporean political values and atti-

tudes and the local authorities in Suzhou was one of the causes. Inessence, Singaporean political culture is different from Chinese political

culture. Singapore is ruled by law whereas China is ruled by men.

Since politicians are fallible, especially at the local level and are paid mea-

gre salaries, there are always some irresistible temptations to be corrupt.

As Michael Leifer observed, In the case of the Suzhou project, the impedi-

ment to fruitful economic cooperation had been a culture of corruption at

the local level that had not been overcome by a common culture in the tra-

ditional sense.

59)

Lee Kuan Yew admitted that there was no meeting ofminds between the two sides. Furthermore the subtleties of the Chinese

language could be another cultural factor contributing to the difficulties.

Probably because I spoke in English rather than in Mandarin, he

(Jiangsu province governor Zheng Silin) understood perfectly what I

meant, that we should be in the same team, wearing the same jerseys,

not in two teams kicking in each others goals. It was a different story

with Jiangsu Party Secretary Chen Huanyou however.

Lee Kuan Yew said,

I made the mistake of speaking in Mandarin. My mandarin is not

good enough to convey the intricacies of international economics.60)

Furthermore, part of the difficulties was also due to the inability of the

local authorities in Suzhou to understand the intricacies of international

economics as Lee Kuan Yew said,

I dont think they understand the intricacies of international marketing.If they did, they would not be in the position contrary to their interests.61)

Is the inability to know the Chinese language a liability in doing business

with China? Initially, it can be a problem, which can be overcome.

However, language is more than an instrument of communication.

Language connotes cultural values, attitudes and expectations. There was


59) Michael Leifer, supra note 2, p.121.




21/26

clearly a conflict of goals and expectations on both sides. As former CSSD

chief executive officer Lim Neo Chian (a Singaporean) admitted: The

issue is really that there are these differences of one side having certainexpectations and we, on our side, having certain expectations.62) However,

the local authorities in Suzhou expected Singaporeans to know about the

cultural differences in China as Chen Seming, mayor of Suzhou said,

When you (Singaporean) or your joint-venture partner decided to invest

in China, you must take into account our cultural differences.63)

Although both Singapore and the central government in Beijing want-

ed Singapore to transfer the software to Suzhou, the local government

was mainly interested in hardware transfer. The local government want-ed Singapore to build more factories, which could provide more jobs, earn-

ing more money and more collection of revenues for the local government.

These conflicts show that the Chinese political system is much more com-

plicated than its Singaporean counterpart as they are more levels of

authorities, including the provincial, municipal, district and the central

government which are involved in the joint venture of the SIP. The conflict

of interests is an institutional outcome of fiscal politics in a shifting cen-

tral-local relationship during an era of decentralization and local autono-

my in China.64) Thus the SIP shows the conflicts of the priorities of inter-ests between the central and the local governments in China. The top

leadership in Beijing may not necessarily be informed what has happened

at the grass root level. While the SIP is a joint venture project endorsed by

both Singapore and China, it however appears that the Central govern-

ment in Beijing has little inputs in the implementation of the SIP, as most

of the decision-making was made at the local level.

Second, the main reason for the conflict was the continuing losses

incurred by the SIP. By September 1999, it was reported that the SIP pro-

ject would have accumulated losses of US$60 million by the end of the

year 2000; the incurred financial loss would be about US$77 millions.65)

From Singapores perspective, the main reason for the SIP loss was the

fierce competition and undercutting of prices on the part of SND, besides


62) The Straits Times, 30 June 1999.


64) Henry Wai-Chung Yeung, supra note 45, p.831.

65) Business China, 17 January 2000, p.8;International Herald Tribune, 10 October 1999; The

Straits Times, 27 May 2001.


22/26

aggressive marketing by the local authorities for the SND. However, the

SND municipal authorities denied any attempt at undercutting the SIP

joint venture. As a Chinese official from Suzhous Foreign EconomicRelations and Trade Commission said,

We have treated both zones fairly. In fact, common consensus within

the government agrees that the SIP has received more preferential

policies than the SND [The two zones] are both sons of our city; we

would likely to see both of them grow up and prosper.66)

Despite Singapores efforts to persuade the local authorities of Suzhou to

only focus on the SIP for developments, they refused to comply. ThusSingapore decided to scale down its further commitment to the develop-

ment of the SIP in order to minimize further loss of money. As a face-sav-

ing arrangement, both the Singaporean and the Chinese counterparts

signed a memorandum of understanding in June 1999 in which Singapore

reduced its equity from 65% to 35%, whereas the Chinese counterpart

increased its share from 35% to 65%, thus becoming the major developer

of the SIP. Both sides agreed that upon completion of the eight square

kilometres park, it would be handed over to the Chinese partner by the

beginning of January 2001.

After Singapore transferred the SIP to China on 1 January 2001, Suzhous

vice-major, Wang Jinghua took over the position of the CEO from

Singapores Lim Neo Chian. Wang decided to relinquish all ties with the

SIPs rival, the SND industrial park and concentrate all energy to turn

around the CSSD from a loss making into a profit generating company as

the most important goal of his administration. By 7 May 2001, when the

SIP celebrated its 7th anniversary, it was reported that for the first time

since its operation in 1994, the SIP will be able to make a projected profit

of US$7.5 million (S$13.5 million) to US$10million for 2001 and 2002

respectively, a reversal of the previously accumulated loss of US$77 mil-

lion at the end of 2000.67) The SIP has become so successful that it con-

tributes 10% of Suzhous GDP.68) By the end of April 2001, the SIP was


66) Business China, 17 January 2000, p.8;International Herald Tribune, 10 October 1999.

67) This data was disclosed by Chinas Ambassador to Singapore, Zhang Jiuhuan, The Straits

Times, 27 May 2001.

68) The per capital GDP in the SIP is around US$9200. (year 2000 data), compared to


23/26

able to attract about US$8 billion of investment funds with about 37 of

Fortunes 500 multinational companies investing in the SIP.69)

What is the explanation for SIPs turning around from loss to profit?First, the main reason is the local Suzhou authorities decision to elimi-

nate competition from the SND, which was the main reason for the losses

the CSSD incurred. As mentioned earlier, Lee Kuan Yew publicly took

issue in 1997 with Wang Jinhua for making unfair remarks about the SIP

to German investors.70) With China now having 65% of the equity stake in

the SIP, Wang has vested interests not to send any promotion teams

abroad for the SND to compete with the CSSD as he did previously.

Second, with credit to Singapore, the Singaporean team has built a firstclass, competitive and high quality industrial park which is able to attract

transnational companies, such as Hitachi, Samsung, Solectron (electronic

components), Philips, Advanced Micro Devices, Volex and Bosch, etc.71)

Furthermore, the SIP has the advantage of transparency, no hidden cost,

quality and reliable infrastructure and good customer support for expan-

sion in the park.72)

In June 2001, Lee Kuan Yew made a trip to Suzhou in connection

with the celebration of the seventh anniversary of the development of the

SIP. He met Jiang Zemin on 8 June in Suzhou and was assured by him ofChinas interest to upgrade cooperation with Singapore on the SIP. Jiang

Zemin praised Lee Kuan Yew for his contribution to the development of

the SIP when he told the Singaporean leader: In coming to the Suzhou

Industrial Park, one would inevitably think of you. You are the pioneer

who initiated the idea for the Suzhou Industrial Park.73) This time, Lee

Kuan Yew was optimistic about the SIPs future, as in his assessment, the

SIP has a good chance to reverse its past financial loss into profit. Lee

Kuan Yew assured China that Singapore would continue to transfer soft-

ware programs to Suzhou as long as China finds it useful.74) It is impor-


US$3200.for the whole of Suzhou and over US$800. for the whole of China. The

Straits Times, 27 May 2001.



71) Boschs managing director, Helmuth Kuklinski explained that Bosch decided to invest in

the SIP because of the Parks Institute of Vocational Technology, which provides for train-

ing high school graduates for the training floor. The Straits Times, 27 May 2001.



74) The Straits Times, 9 June andLianhe Zaobao,14 June 2001.


24/26

tant for the SIP to preserve its uniqueness, to be a useful point of reference

for officials in other parts of China, said Lee Kuan Yew about lessons

learned from the experience of his involvement in the SIP project.75)

The above case study shows that the claim the ethnic Chinese

Singaporean shared part of the cultural heritage with China may not

guarantee them a major advantage in doing business in China. There is a

fundamental difference in the culture of the political economy between

Singapore and China. Singapore failed to understand adequately the intri-

cacies of politics and culture at the local level affecting the joint venture of

the SIP. The politics of business management in China is very different

from Singapores experience. The implication of the SIP software transfershowed that to implant Singaporean ways and values into the minds of

their Chinese counterparts proved to be difficult if not impossible.

In order to boost the confidence of foreign investors, the Suzhou

authorities declared that they will adhere to the four nos policy: 1) no

change in the essence of the joint venture project; 2) no change of the joint

venture cooperation framework; 3) no change in the goal of developing the

park; 4) no change in the guarantees undertaken by the Suzhou authori-

ties to the foreign investors.76) Meanwhile, Singapore continues to pledge

its support for the SIP, in particular to the transfer of software to China,such as the training for its Chinese counterparts to manage the industrial

park after January 2001. The SIP continues to be a government-to-govern-

ment joint project between Singapore and China despite the initial set-

backs for Singapore.

In short, by 2004, the SIP has emerged as Chinas Silicon Valley, a

high tech city with modern vibrant industrial, commercial facilities and

amenities like Singapore.

CONCLUSION

What observations can be made from this study? The overriding con-

siderations in Singapores China policy are based on enlightened eco-

nomic pragmatism. The island Republic saw Chinas push for moderniza-

tion from l978 onwards as a good business opportunity to get a foothold in

China as part of its second wing strategy to expand its markets, region-



76) SCMC, 15 May 2000.


25/26

ally and globally.

From Chinas perspective, Singapores strategic position, its popula-

tions ethnic Chinese background, its strong and stable government, plusthe success of its economic development strategy has attracted Chinas

interest to learn from Singapores experience of modern management of its

economy, including running the port, managing the public housing pro-

gramme, social security, etc.

In short, economic rationality is the main thinking in Chinas Singapore

policies. Since both countries emphasize more on economic interactions,

non-economic variables have become secondary in shaping Singapore-

China relations. The trade data consistently and clearly show that thetrade volumes between Singapore and China gradually increased over

time, despite political distrust from 1965 to 1975. There was no negative

correlation between political suspicion, hostility and trade. Although

Singapore continues to suffer from a trade deficit, it does not have adverse

effect on political cooperation between the two states. Singapore and

Chinas economic ties represent a unique example whereby China was

willing to learn from Singapores build, manage and transfer model of

managing a modern industrial park.

From Singapores perspective, the ethnic Chinese factor could be adouble-edged sword, i.e. a political liability and an economic asset. In the

1960s and 1970s, the ethnic Chinese factor was a sensitive issue in

Singapore-China political ties. Singapore was wary, premature diplomatic

links with China could have adverse effects on the political relations with

its neighbouring states, that is Malaysia and Indonesia. There was clearly

a strong feeling of anti-Chinese and anti-China sentiments in Indonesia

from l965 to l970. Thus Singapore could not associate itself closely with

China otherwise it would be perceived by the neighbouring states as

third China. In conclusion, economic pragmatism and seeking business

opportunities and profits are the main thrusts in pushing both Singapore

and China to widen and deepen their special economic relations in the

areas of trade, investments, joint developments and finally free trade area

and economic integration in the 21st century.



26/26


Table 1 Singapores Trade with China: 1965-2003 (in S$ million)

Year Total volume Imports Exports Balance

1965 246.9 224.5 22.6 - 201.91966 408.9 271.7 137.2 - 134.51967 481.6 385.8 95.8 - 290.01968 541.2 460.0 81.2 - 378.81969 593.3 418.5 174.8 - 243.71970 454.9 385.5 69.4 - 316.11971 453.3 406.7 46.6 - 360.11972 456.5 399.1 57.4 - 341.71973 701.6 573.2 128.4 - 444.81974 769.7 643.9 125.8 - 518.11975 780.5 682.0 98.5 - 583.5

1976 754.4 659.0 95.4 - 563.61977 815.1 670.4 144.7 - 525.71978 906.2 775.5 130.7 - 644.81979 1,263.7 894.1 369.6 - 524.51980 1,990.0 1,332.1 657.9 - 674.21981 2,007.1 1,629.8 377.3 - 1,252.51982 2,397.0 1,881.0 516.7 - 1,364.31983 2,197.0 1,747.2 449.8 - 1,297.41984 3,400.4 2,881.1 519.3 - 2,361.81985 5,701.8 4,971.7 730.2 - 4,241.51986 4,353.4 3,109.6 1,243.8 - 1,865.8

1987 4,522.6 2,975.8 1,546.8 - 1,429.01988 5,754.2 3,385.6 2,368.6 - 1,017.01989 5,645.3 3,310.8 2,334.5 - 976.31990 5,216.8 3,773.4 1,443.4 - 2,330.01991 5,323.5 3,838.8 1,484.7 - 2,354.11992 5,479.0 2,976.0 1,811.0 - 1,165.01993 6,945.0 3,668.0 3,068.0 - 600.01994 7,619.0 3,877.0 3,207.0 - 670.01995 9,640.0 4,412.0 3,911.0 - 501.01996 11,043.0 5,730.0 4,784.0 - 946.01997 14,484.0 6,259.0 6,038.0 - 221.0

1998 14,196.9 8,122.6 6,794.3 - 1,328.31999 16,291.6 9,648.9 6,642.7 - 3,006.22000 21,563.7 12,278.7 9,285.0 - 2,993.72001 22,445.3 12,900.3 9,545.0 - 3,355.32002 28,121.5 15,853.4 12,268.1 - 3,585.32003 36,914.5 19,276.3 17,638.2 - 1,638.1

Source: For 1960 to 1980 date see John Wong, The Political Economy of Chinas Changing

Relations with Southeast Asia, (London: Macmillan Press, 1984), pp.65-91; see also

Yearbook of Statistics, Singapore, Department of Statistics, 1965-1999.Yearbook of Statistics, Singapore 2000, Department of Statistics, Ministry ofTrade and Industry, Republic of Singapore.

Data for 2001-2003 fromEconomic Survey of Singapore 2003, pp.142, 146 and 156at

china singapore

Documents