Responding to the rise of China: challenges and opportunities for

Singapore

By

Professor Tan Kong Yam

Nanyang Technological University

25 October 2012

Outline of Presentation

• The rise of Xi Jinping: background maneuver and factional balance

• The critical support of military princelings

• The rise of liberal reformists in the new politburo standing committee

• China’s future policy directions and impact on Singapore and ASEAN

• Challenges and opportunities for Singapore

Xi Zhongxun and his son Xi Jinping

Deng Xiaoping: economic opening without political reform

• Open door policy and economic reform

• Four cardinal principles

• The Four Cardinal Principles were stated by Deng Xiaoping in 1979 and are the four issues for which debate was not allowed within the People's Republic of China.

• the principle of upholding the socialist path

• the principle of upholding the people's democratic dictatorship

• the principle of upholding the leadership of the Communist Party of China, and

• the principle of upholding Marxist-Leninist-Maoist thought

Xi Zhongxun was the only leader who dare to stand up to Deng

Xiaoping when he dismissed Hu Yaobang for being too liberal

Hu Yaobang is the spiritual leader of the Communist

Party Youth League

Hu Yaobang with protégés Hu Jintao and Wen Jiabao 1986

Xi Zhongxun was rehabilitated by Jiang Zemin after the death

of Deng in 1999

Jiang Zemin assessing

Xi Jinping’s reliability

Zeng Qinghong gave up his

vice presidency to Xi Jinping

2008 August

Xi Jingpin and Li Keqiang: a stable equilibrium?

Second time lucky? 习近平与彭丽媛

Peng Liyuan: More popular than the husband in the military

张海阳 刘源

罗援 刘晓江 张又侠

吴胜利

马晓天

刘亚洲

Princelings in the Military supporting Xi Jingpin

Ideological Inclination of the 9 Existing Politburo Standing Committee Members

Neo-Maoist/Leftist Liberal/Reformist

Xi Jinping Li Keqiang

Wen Jiabao

Zhou Yongkang

He Guoqiang

Jia Qinglin Wu Bangguo

Li Changchun

Hu Jintao

Ideological Inclination of the Expected Politburo Standing Committee Members

Neo-Maoist/Leftist Liberal/Reformist

Xi Jinping

Li Keqiang Wang Yang

Li Yuanchao Wang Qishan

Bo Xilai (out)

Yu Zhengsheng

Zhang Dejiang

Zhang Gaoli

Liu Yunshan

Liu Yandong

Meng Jianzhu

Note: size of picture represents

the likelihood of entry to the

PSC

Xi-Li New Regime: Key Future Trends

• Succession of top leaders and intra-party democracy

• Xi as the driving force for structural economic and political reform

• Sources of political legitimacy and the new mandate of heaven

Future policy directions and impact

on Singapore and ASEAN

• Rising costs and relocation of factories

• Central and western region development

19 19

China: Declining Number of Younger Population

Source: CEIC

Soaring number of college graduates

Source: CEIC

Declining Supply of Manual Labor: Due to One Child Policy & Rising Number of

College Graduates

Sources: CEIC, UNDP, CS

Rising Wage Increase

Source: CEIC

Share of US Import Market: Textile yarn and fabrics

0%

5%

10%

15%

20%

25%

30%

35%

40%

1981 1986 1991 1996 2001 2006 2011

China

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Share of US Import Market: Machinery (non electrical)

0%

5%

10%

15%

20%

25%

30%

35%

40%

1981 1986 1991 1996 2001 2006 2011

China

Indonesia

Malaysia

Thailand

Source; UN Comtrade

Share of US Import Market: electrical machinery and appliances

0%

5%

10%

15%

20%

25%

30%

35%

40%

1981 1986 1991 1996 2001 2006 2011

China

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Share of US Import Market :Clothing

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1981 1986 1991 1996 2001 2006 2011

China

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Share of US Import Market :Clothing

0%

1%

2%

3%

4%

5%

6%

7%

1981 1986 1991 1996 2001 2006 2011

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Share of US Import Market :Footwear

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1981 1986 1991 1996 2001 2006 2011

China

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Share of US Import Market :Footwear

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1981 1986 1991 1996 2001 2006 2011

Indonesia

Malaysia

Thailand

Source: UN Comtrade

Number of Cities in China

China East Central West

Total 660 287 247 126

Large(> 4 Mil) 15 9 3 3

Large(2-4 Mil) 30 16 10 4

Large(1-2Mil) 64 33 27 4

Medium 225 110 79 36

Small 326 119 128 79

Sources: State Council, NBS

31

REAL INCREASE IN INCOME AND EXPENDITURE

Urban

Source: CEIC, UBS

Rural

Private Consumption Expenditure as a share of GDP in Asia

30%

40%

50%

60%

70%

1980 1985 1990 1995 2000 2005 2010

Titl

e

Malaysia Korea Japan Taiwan China

Source: CEIC

The New Emerging Markets in China: Central and Western Regions

Sources: CEIC, CS

The New Emerging Markets in China: Central and Western Regions

Sources: CEIC, CS

Components of Non-Oil Primary Exports (Indonesia)

Source: UN Comtrade

Source: ESS; Choy Keen Meng

Sources of Volatility

• Global shocks

• Electronic Cycles

• Pharmaceutical production shocks

• China as a source of services exports: tourism, tertiary education, medical services, wealth management

Challenges and opportunities for Singapore

• A more assertive China against US and Japan in the region

• Re-industrialization of ASEAN, especially Indonesia

• Central and western region development in China will sustain ASEAN commodities boom

• Services export to China counter-balance weak growth in EU and US as well as moderate volatility