TRENDS AND PATTERNS IN CHINA-SINGAPORE ECONOMIC RELATIONS

Abstract

China's recent open door policy has generated worldwide attention, both in terms of the economic implication of China as a huge market and a vast reservoir of cheap industrial labour. For Singapore, the open door policy had come at a time when Singapore's highly trade dependent economy is facing growing protectionism in traditional markets. In spite of the continuing absence of diplomatic ties, Singapore has maintained close economic relations with China through a stable bilateral trade. Economic relations between Singapore and China are distinguished by two features. First, is the contrast between a huge centrally planned autarkic economy and a city-state market-oriented open economy. Second, is the common ethnic, cultural and linguistic background. While the first factor has served to impose barriers on bilateral trade, the second factor has served to facilitate the intensification of bilateral economic relations once China has decided to adopt a more outward-looking and market-oriented development strategy. Intensified bilateral economic relations have occurred not only in merchandise trade but also in service trade and joint venture enterprises. In trade, Singapore imports from China essentially foodstuffs, crude petroleum, and some light machinery. Singapore exports to China mainly consumer durables such as radios and television receivers, as well as oil rigs and other machinery and equipment. There is a fairly strong complementarity in the bilateral trade, with the trade intensity supported by geographical proximity and ethnic/ cultural ties. In addition, China uses Singapore as an entrepot for exports to the rest of Southeast Asia. However, trade is imbalanced, mainly in favour of China. Singapore is a well developed service economy and has in recent years also embarked on outward investment. Singapore is able to offer China on very competitive terms a wide range of professional, managerial and technical consultancy services to facilitate China's modernisation efforts. Singapore investments in China typifies those undertaken by a more advanced in a less advanced economy; Singapore investors in China enjoy advantages of managerial and technological knowhow which the Chinese are in need of to develop their infrastruture and industries. Currently, Singapore investors are widely involved in various joint ventures, largely in hotels, textiles, shipbuilding and food processing. These are areas in which Singapore entrepreneurs have the expertise, and the China market provide an outlet for Singapore's excess capacity. Issues in China-Singapore economic relations are in some ways more complex than those arising from Singapore's other bilateral economic relations. At issue is the question of resumption of diplomatic ties with China, political relations between China and Singapore's ASEAN neighbours, and the future role of Singapore as an entrepot in China-ASEAN trade. Bilateral economic relations with China must also be examined in the context of Singapore's objective of a global city and trade with all and sundry.