SG in ménage à trois with US and China for next 30 years

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Adjusting to a bigger, more powerful China: SM Lee​

It cannot be business as usual. Rules made decades ago will need to change, and attitudes too.​

Lee Hsien Loong

Senior Minister Lee Hsien Loong with moderator Lee Huay Leng, editor-in-chief of SPH Media’s Chinese Media Group, at the FutureChina Global Forum on Oct 18. PHOTO: LIANHE ZAOBAO

Oct 22, 2024

Given China’s considerable heft, the impact it makes globally as it changes is widely felt and hard to ignore. During a fireside chat at the FutureChina Global Forum on Oct 18, Senior Minister Lee Hsien Loong discussed different aspects of these changes, including the presence of Chinese companies in the region and Singapore. Edited excerpts of his remarks follow:

Adjustment issues​

I think the fundamental issue – I would not say it is a problem – the fundamental issue is that China has changed so much from what it was, to what it is today.
First, the size. When China started its Open Door Policy in 1978, it was a very small part of the world economy and a negligible part of international trade. Today, it is 20 per cent of the world economy and 20 per cent of global trade. So anything which China does, whether it is good or it is bad, the impact on other countries is enormous.
Secondly, China has developed and become much more advanced. In the earlier phase, it was growing, it was exporting. But it was making things which other countries wanted, needed and did not make themselves. You make clothing, you make belts, buttons, you make lower-end electronics products, assemble goods, things which other countries were happy to say: “Well, it is not economic for me to do. China can do.” But now China has moved up. All those products which are labour intensive and which it used to make, are migrating. They are going to Vietnam, they are going to Bangladesh, other Third World countries.
China is making EVs. You are making portable photovoltaic panels. You have got your pharmaceutical industries. You are in industries which are competing with similar advanced industries in the developed economies. It is a more competitive relationship and therefore China’s growth in these markets is not just benefiting the consumers, but also impacting the producers in other countries. And that is difficult. You have to accommodate somehow, but it is difficult.
Thirdly, because China has grown and developed so much, its interests around the world have also grown and developed. You have strategic interests, you have security interests, you have foreign policy interests in very faraway parts of the world. The Belt and Road Initiative includes countries in South America. And in Africa, China is very active. China’s interface with the rest of the world is multifaceted. And then the question comes: “Who is No. 1? Who is No. 2? How do No 1. and No. 2 work together? Can you work together?”
There is no doubt that for the world, we are much better off with China like it is today, than with China as it was 30 or 40 years ago or 50 years ago. But it means that there has to be an adjustment. It is not a matter of right and wrong. But it is in China’s interest, and it is in the world’s interest that this adjustment has to be made. What is the adjustment? It is to acknowledge that the situation has changed, that China’s heft, its influence, its impact on the world are on a different scale. And you have to make accommodations and adjustments to the rules, which were set up at a time when China was much smaller.

If you are a small economy and your exports actually do not threaten any of my industries, I am prepared to cut you a lot of slack. You can subsidise them, you can protect your own market. You can have all sorts of different privileges, which the more developed economies have decided not to have amongst themselves. But when you are now not so underdeveloped, and when you are huge, and when your exports can be maybe 80 per cent of the global manufacturing of photovoltaic panels, for example, then those concessions are no longer politically tenable. And it has to be worked out. It has to be re-negotiated so that you can have a good basis to do those things. I think that is very hard. That is one thing China has to do.
On the other side, on the part of the other countries in the world, you have to get used to the fact that there is going to be a very powerful and developed China in this world, a China which has advanced technologies, which is going to be world class in many areas and world leading in some. And we have to have some way to induct them into the global system and to accommodate their legitimate concerns and interests.
And if you do not do that, and you say, “No, I do not want China to be strong. I want it to remain always No. 2 or better still, No. 2.5”, I think that is going to head for a lot of mutual distrust and difficulties. But it is a very difficult adjustment to make, because if you are at 2.5, you wish to become 2. And when you reach 2, you may wish to become 1.5. And so how to have that balance and wisdom to maintain a cooperative relationship which will benefit both sides? I think that takes statesmanship of a very high order on the part of the major powers.

Does it help if China can explain itself better?​

Talking is always useful. But at the same time, there has to be an acknowledgement of the real issues, the hard points: why there are differences with one another, and how we are prepared to accommodate one another. Because if I am not, if all my claims are indubitable and beyond question, and the other side says all my entitlements are also beyond doubt, then there is nothing to talk about. I make you a speech, and you make me a speech, and at the end we go away, both unhappy. So, it is necessary to have conversation, but it is also necessary to be able to make the accommodations and to take steps together, which can gradually build trust and resolve difficulties.
Because of China’s size, sometimes China will feel: “But the other countries are doing it, why can I not?” And the answer is, well: “What to do? They are small, you are big.” When you are big, you have greater influence; but at the same time, there comes with it greater responsibilities and the need for restraint. Because in a world without an international order... it is the law of the jungle.
As Thucydides said: “The powerful do what they will, and the weak suffer what they must.” But if the world were like that, everybody is worse off, including the powerful ones, because they will fight each other to the death. So, the great countries, the big countries, have to have a certain self-awareness and restraint and say: “Well, I am entitled to this, if you consult your lawyers and international law. But I restrain myself. I am not only aiming to be stronger than others, but also to be accepted, respected, and if possible, to have others also admire me and want to have me as their friend.”

Stimulus packages and effect on growth​

I think that the stimulus packages will be helpful in boosting confidence and then perhaps simulating demand to the extent that the money will be spent, and then there will be some multiplier. But I think inherently, at this phase, China’s economy will grow slower than it used to. It used to grow 8 per cent to 10 per cent a year, sometimes even more than that. Now, if you can sustain 5 per cent per year for another 10 years, I think you are doing well, and there are fundamental reasons for that.
First of all, you are already more mature. It is not so easy to keep on just transforming yourself. Secondly, the labour force is not expanding anymore. The total population has peaked, the working age population has also peaked. It has levelled off, probably starting to come down already, slowly. And so, you can no longer just have a natural expansion of the economy. Thirdly, I think, with the external environment having turned less favourable, there are geostrategic tensions between China and America, even China and Europe. And so that external environment is not as favourable as before. The foreign investments need more encouragement to come into China. The export markets are not as open as they used to be. So that is another factor which influences China – not just the growth, but also the upgrading and transformation.
Fourth, partly in response to this external environment, but also for domestic reasons – I think the Chinese government’s priorities have shifted some. During an earlier phase, the slogan was “发展是硬道理” – Economic development is the top-most priority, is the hard truth. But now, economic development is very important, but trumping that is national security. And I think equalling that, at least, are domestic political considerations. In that situation, I think the environment for people to spend, for companies to start up, or for big companies to build new businesses... will be more cautious. It is inevitable.
The government will give reassurances that they do want the private sector to have an important role. They do want entrepreneurs to have confidence. But the national security considerations are important. The political considerations cannot be ignored. And that has an impact.

Underestimating China – and the West​

I think it is very unwise to write off China. This works in both directions. The Westerners say: “We will do this and the other, and China will stay down.” I tell them they are wrong. They do not fully believe me. When I go to China, and sometimes, the confidence with which my hosts expound their views causes me to tell them: “You know, the Americans have a lot of problems. You can see all of the problems, but they have a lot of strengths, and sometimes you cannot see all of their strengths. And they are not going to disappear, and they will be there and formidable, I think, for a very long time to come.” And I am not sure whether they fully understand why I am saying this, so I think both sides have this danger of underestimating the other.

Impact of Chinese companies on South-east Asia​

China is huge. Its impact on South-east Asia is very large. When their companies come, it means that they provide good products, good services, fierce competition for our companies, for our industries, for our economies. In fact, we send our trade unionists and trade union leaders to China, to visit Shenzhen, to visit Yangshan, to visit your high-tech centres, to visit, to see the factory lines – Fosun – to understand the drive, the hunger, the transformation which is taking place and how advanced China is already. And they come back and they understand why we have to work hard, and work harder.
I think the answer should be: you have to work harder. It will be an impetus for us to upgrade, transform our companies, train our people, retrain our people, be competitive and meet the best in the world. And I think we can do that.

Is the Government concerned about talk of ‘Singapore washing’?​

Well, we do not usually use labels like that. We have companies in Singapore from all over the world. We welcome reputable companies to come here and to make use of our business environment, our pro-business climate, our infrastructure, our networks, and to contribute to Singapore’s prosperity and link us to all parts of the world. So if the Chinese come, they are good companies – they create jobs, they pay well, they bring technology, they bring markets – I say “come”. The Americans come, I say the same; the British come, I say the same; the Japanese come, they are all here.
But nobody believes that just because the company is in Singapore, that means it is a Singapore-owned company. We have got Dyson here. We have got General Electric here. We have got Citibank here. We have got all the major Japanese multinationals here. Everybody knows that they are Japanese, American, British companies.
So when TikTok is in Singapore, everybody knows that TikTok’s parent is ByteDance and TikTok’s origins are in China. The CEO may be a Singaporean, but Singaporeans work for companies belonging to all kinds of shareholders. So on that basis, you are welcomed in Singapore. But of course, we would like to know where you come from and what your antecedents are. Because if it turns out that you are not the one we think you are, we also would like to make a few more inquiries.

What considerations does Singapore have in attracting Chinese entrepreneurs and talent headed abroad?​

I think first of all, we are open to everybody, to people from around the world. If you are an entrepreneur, if you are a business person, if you can make a contribution to the Singapore economy, we welcome you to come to Singapore. But you have to abide by our laws. You have to follow our rules. You also have to understand how our society works, and fit in as a member of the Singaporean society. For example, we may not be as poorly off as we used to be, but we try very hard not to flaunt wealth, and success. If you have a big car, please do not drive it at high speed down Orchard Road in the middle of the night, for example. These are some of the considerations. So when you come to Singapore, we ask, can you fit in? Can you make a contribution?

 

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It’s all about China: The key to future US ties with South-east Asia​

Whether the next US president is Harris or Trump, that is the prism through which Washington will calibrate its ties. Three countries, including Singapore, stand out.​

Tan See Seng

President Xi Jinping’s China is a risen and assertive great power, one done with playing second fiddle to the United States. PHOTO: REUTERS

Nov 01, 2024

On Nov 5, Americans will pick their 47th president. For countries in South-east Asia, while it is unclear at this point who will emerge the winner, there’s one thing they can be certain of: whoever becomes president, China will be the prism through which Washington will view and engage with Asean and its constituent members.
Mr Xi Jinping’s China is a risen and assertive great power, one done with playing second fiddle to the United States. Mr Xi’s willingness to push back on several fronts is visibly evident, say, in his strategy to deny America access to the South China Sea, which Beijing proprietarily views as a Chinese lake.
The contention that the US should pursue ties with South-east Asia as a standalone good by itself no longer merits as much attention in US policy circles as it once did. Americans on both sides of the political aisle today are convinced that the US must necessarily counter Chinese power and influence. But what Americans have yet to achieve agreement on is how to go about it.
If Donald Trump regains the White House, he will likely reprise his protectionist-minded “America First” focus and resume his tariff war on China. For the record, Trump has expressed his belief that America does not need China for the former to remain the world’s top economy. But any viable strategy on China will require the broad support of US allies and partners and even international organisations. How the next Trump administration can successfully pull that off given his visceral dislike for, and continual disparagement of allies and institutions will be key.
If Vice-President Kamala Harris becomes president, she will continue President Joe Biden’s policy of keeping the United States at the forefront of global leadership and multilateral diplomacy. Further, she will work to keep the global commons free and open by opposing China’s efforts at building exclusive economic and technological blocs. Ms Harris is adamant that the United States must do all in its power to remain the principal rule-setter of the global system – a goal that China is unlikely to accept without a fight.
She is also expected to continue the policy of de-risking from China, that is, mitigating risks by diversifying supply chains. While less disruptive than the massive tariffs likely to emanate from a second Trump administration, this nuanced approach to trade relations could nonetheless hurt some Asean members such as Cambodia, Thailand and Vietnam as the US steps up efforts to stop third-party countries from being conduits of Chinese goods.
On geopolitical matters, what will a China-focused America mean for Asean?

Washington will unlikely do more with Asean than it is already doing because Asean’s neutrality offers little to its aims. Trump will personally ignore Asean as he did most multilateral organisations during his first term. Ms Harris will engage deeply but selectively with Asean. At the very least, Ms Harris is more likely to show up for Asean meetings in person – the high mark of Asean summitry success – than Trump ever did or would.
Both potential leaders – Trump more by default and Ms Harris by design – will focus on strengthening alliances and partnerships with specific South-east Asian countries that the US regards as critical to its China strategy. In this regard, three countries – the Philippines, Vietnam and Singapore – have emerged as the likeliest candidates.
This does not mean that the US will avoid other Asean countries, especially Indonesia, whose sheer size and de facto leadership in the region make it hard to ignore. To be clear, Washington will continue to cooperate to varying extents with all South-east Asian nations and Asean over a host of different areas. But Manila, Hanoi and Singapore stand out for their perceived relevance and responsiveness.
Indeed, the combined recent visits of US leaders to South-east Asia – Ms Harris in her vice-presidential capacity, Secretary of State Antony Blinken and Defence Secretary Lloyd Austin – have predominantly focused on those three countries. Manila, which hosted the largest-ever edition of the annual Balikatan military drills with the Americans this summer, is the recipient of a US$500 million (S$661 million) pledge in military aid from Washington.
Hanoi’s shared concern over Chinese assertiveness in the South China Sea led it and Washington to upgrade their bilateral ties to a “comprehensive strategic partnership”. Singapore is not a South China Sea claimant, but it has long been an active security partner of the US and seeks, amid concerns over China’s revisionist ambitions, to maintain a stable balance of power in the Indo-Pacific.
These developments underscore America’s emphasis on ties with selected South-east Asian partners on whom it could rely in its efforts to counter China. The key challenge for those states, whose default preference is to hedge rather than take sides in the US-China rivalry, will be on building and strengthening bilateral ties with either a Trump-led or Harris-led America without unnecessarily antagonising China.
Whether led by Trump or Ms Harris, there is no question that the United States will proactively take on China but in slightly different ways depending on who ends up in the White House. In either instance, South-east Asia stands to benefit if the Asean countries play their cards right, but it will be in terms of their perceived usefulness to America’s effort to counter China.

• Dr Tan See Seng is the president and chief executive of International Students Inc in the United States and concurrently research adviser at the S. Rajaratnam School of International Studies and senior associate at the Centre for Liberal Arts and Social Sciences at Nanyang Technological University.

 

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Is South-east Asia ready for Trump 2.0? Brace for much bigger economic impact​

No matter who wins the US election, the policy shifts could rewrite the rules for Asean. But the potential return of Donald Trump could compound this disruption.​

Deborah Kay Elms

The impact on South-east Asia will be stronger and sharper under a potential return of Donald Trump to the White House than under a President Kamala Harris. PHOTO: REUTERS

Nov 01, 2024

In the past, the contest to determine who sits in the White House was less relevant to policymakers or companies in Asean. Although the two American political parties – the Democrats and the Republicans – had policy differences, the overall approach to foreign and economic policymaking had been broadly consistent for decades.
In general, both sides looked to free markets and open trade. Both encouraged the spread of US business interests around the globe as another mechanism for supporting US policy objectives.
However, the upcoming US presidential election on Nov 5 is set to usher in a markedly different landscape, one that will impact economic and fiscal policy across South-east Asia. Regardless of who wins, the consequences will leave a lasting mark on this region, although the impact will be stronger and sharper under a potential return of Donald Trump to the White House than under a President Kamala Harris.
One has to go back to the 2016 election of Trump which changed the position of the US in important ways. The US became much more concerned about its own status than about ensuring that the economic and financial systems worked well for everyone. The Americans allowed a key part of the global trade regime at the World Trade Organisation, the system for handling disputes over trade rules, to wither away. Once the system for maintaining global trade rules was damaged, it became much easier to implement protectionist policies.
Trump then used a variety of domestic trade laws for managing national security and unfair trade practices against a wide array of countries, including against friends and allies. Many of these rules, drafted to manage trade during the Cold War, lay dormant for decades. Trump famously hiked US tariff rates, particularly against imports from China, by up to 25 per cent. The net result was a radically altered trade landscape by the time he left office.
Firms in Asia managed challenges arising from sudden shifts in US policies, and even found opportunities to land new investment from companies looking to avoid higher duties on goods destined for the US market.
The adjustment in policy to become more domestic oriented was not substantially altered by Trump’s successor, President Joe Biden. Although changes were less sudden, Mr Biden’s team pursued economic policies increasingly mingled with national security rationales under a “small yard, high fence” rubric.

As the Biden administration comes to a close, the yard has continued to expand in important ways, including new rules just in the last few weeks covering everything from outbound investment to connected cars.
Indeed, members of Congress from both parties have also provided increasingly strident support for a range of policies aimed at curbing China. Almost no one has offered up arguments for a return to free trade or open markets. Even the business community in Washington has gone largely silent about the consequences of new policy directions on overseas opportunities.
Partly as a result, no matter who wins the US election for president next week and under any configuration of Congress, US economic policy will continue to be focused on domestic issues with firms urged to reshore, onshore, or nearshore production; support US jobs; and encourage domestic manufacturing. There are few policy suggestions to further punish China, in particular, that would be viewed as a “step too far”.

Less favourable environment​

This overall setting means that the export-oriented economies across South-east Asia will face a less favourable environment going forward. There are likely to be plenty of opportunities, but the easy trade that powered regional growth and development will be harder to manage with significantly higher costs.
Firms will have to spend more on ensuring compliance with new and inconsistent obligations of all sorts. The decay of international rules and norms governing global trade means that governments will increasingly take actions that would have been off limits a few years ago. This includes a widening of protectionist policy actions under the guise of national security.
These actions will not just be limited to the United States. Indeed, once the rules of the road, so to speak, have been undermined by some of the most powerful players in the system, it is much easier for all participants to enact a wide range of previously unthinkable policies. Expect more justifications for closing markets related to security or climate change in the near term. Less global cooperation means more regulatory and legal conflict ahead.
While these trends are likely under both US presidential candidates, the potential return of Trump to the White House compounds the level of disruption for South-east Asia. His first administration was erratic, but many of the actual actions were comparatively restrained.

In a second term, he is preparing to implement fully his original agenda, which includes substantially increased tariffs against every country and at eye-watering levels against Chinese imports. He intends to run economic and fiscal policies directly out of the Oval Office, with little resistance from Congress or the Courts.
There seems to be a high level of complacency across much of this region about a Trump 2.0 administration. This is driven by the perception that he is “transactional” and that governments can simply make deals or engage in flattery to avoid the worst consequences of his economic policies.
This is a mistake. Trump has been completely consistent – over decades – about his protectionist instincts. In his view, he was constrained the last time in office from doing what he wanted by obstructionist officials at various levels of government. He will not be held back a second time.
Of course, some governments will try to make deals and may be successful. Trump cannot run for office again, so he is not looking to showcase his dealmaking. He has been extremely consistent in his own rallies about what he intends to do. He has repeatedly argued that tariffs are the “most beautiful word” precisely because he plans to use them often as a policy solution for nearly every kind of challenge.
Behind the scenes, Trump’s allies have been working on a range of new policy initiatives, including from the America First Policy Institute and the (currently discredited) Project 2025 from the Heritage Foundation. The set of proposed policies goes far beyond the application of tariffs and includes fiscal policies like dramatic changes to the Federal Reserve. These initiatives are meant to be implemented by a large cadre of officials drawn from outside the current systems, who are meant to show more loyalty to Trump.

Extremely challenging​

Erratic and uncertain policies from Washington will make it extremely challenging for firms and governments in South-east Asia. While the US does not represent the only market, it remains the destination of choice for a large proportion of goods and services exports from South-east Asia. Firms across the region are also reliant on a range of services and digital platforms from the US to power their local operations.
Companies that are hoping to somehow balance between the US and China and present a neutral location for investment or production may quickly be caught by impossible demands. To see what this might look like, consider the recent challenges faced by PVH Corporation, manufacturer of brands like Tommy Hilfiger and Calvin Klein. Under current US laws, firms are prohibited from using cotton from the Chinese province of Xinjiang over accusations of forced labour practices. However, China’s government recently launched an investigation into PVH for boycotting cotton from the region.
Firms in South-east Asia could be caught by similarly conflicting requirements, even if they are not currently producing or selling directly to either the US or China. The complicated sourcing, production, and distribution of goods and services across the region means that most companies are likely to draw on materials and services from one or both sides. The damage is likely to be felt by firms of all types and sizes, rather than being concentrated in a handful of sectors or industries.
Uncertainty emanating from the US will require the region to step up its own integration efforts to help mitigate some of the damage. While Asean has an admirable track record for pursuing ever closer cooperation, many of the commitments remain more theoretical. Managing chaos and disruption will require commitments to be implemented as intended, with genuine benefits to companies around the region. Given the high percentage of smaller firms that cannot easily manage rising costs of complexity, it is especially critical to ensure consistent application of trade and economic rules in the region.

• Deborah Kay Elms is head of trade policy at the Hinrich Foundation in Singapore. The foundation is an Asia-based philanthropic organisation that works to advance sustainable global trade.

 

[congo9]

Loong is no LKY calibre.
Looks like leaders of Singapore is looking foward to a 1st Female President.
But Reality is that Trump is winning the race.