Speech by Deputy Prime Minister and Minister for Finance Lawrence Wong at the FutureChina Global Forum on 7 October 2022.
Chairman and CEO of Business China, Mr Lee Yi Shyan and Ms Tin Pei Ling,
Excellencies and Distinguished Guests,
Ladies and Gentlemen,
I am very happy to join you at this year’s FutureChina Global Forum. The theme of the forum this year as Mr Lee Yi Shyan mentioned earlier is, “Stability amidst Turbulence”. I think we could not have chosen a better theme, because it is hard to think of a time in recent history where the world has faced so much uncertainty and turbulence.
I have been in public service for 25 years. During that time, I have seen all sorts of challenges, from the Asian Financial Crisis, 911, and SARS, to the Global Financial Crisis, but nothing compares to what we are going through now. It almost feels like we are moving from crisis to crisis. Before one crisis has ended, another one comes along, and we are faced with multiple threats. For one, we have yet to recover fully from the COVID-19 pandemic. Yes, the situation in Singapore and many countries is better than before, and we hope that the worst is behind us, but the pandemic is not over, and no one really knows how the virus will mutate in the coming months.
Remember when we started, we had all sorts of different Greek alphabets for the variants: Alpha, Beta, Delta, and now Omicron. But why is it when it comes to the Omicron variant, suddenly there are so many variant numbers – 1, 2, 4, 5, now 2.75? That is because all the recent variants are of the similar lineage to Omicron. But how do we know if the next variant will be different? When will the Pi variant come about? Pi is the next alphabet after Omicron in the Greek alphabet. And if there is a new variant, will it have different characteristics? Higher chances of vaccine escape and reinfection? Maybe even more dangerous? No one really knows. So, the COVID-19 pandemic is certainly not over.
All of these uncertainties are compounded by Russia’s invasion of Ukraine, which has impacted energy and food supplies worldwide, exacerbated inflationary pressures, and imposed hardships on businesses and households everywhere. Unfortunately, there are no signs of a diplomatic solution to end the war anytime soon – we are likely to face a long and grinding “war of attrition”, which means we have to brace ourselves for continued uncertainties, potential supply disruptions, and prices are likely to stay high for longer.
Indeed, for the first time in the post-Cold War era, we are facing significant and widespread inflation around the world. That is also why we are now in the midst of perhaps the most comprehensive tightening of monetary policy the world has seen in decades – US Federal Reserve and many central banks around the world are all raising interest rates or tightening monetary policy. Will this help to bring down inflation? Eventually the answer is yes – monetary tightening is the right posture to take, and will be needed to ensure inflation does not become entrenched and widespread, but containment comes at a price – nothing is for free. All this tightening will inevitably slow down the global economy, and may even lead us to recession.
We have to be very careful about managing the risks of both economic slowdown and higher prices at the same time. Amidst all these economic uncertainties, there is also a more fundamental change in the international order.
The golden age of globalisation that we enjoyed for more than 30 years is over. Previously, we all saw companies going for Just-in-Time efficiencies and lowest cost; now everyone talks about Just-in-Case precautions and greater resilience. Previously, we all thought that countries did not have to be friends to do business. In fact, having more trade and investments was a very good thing, because it would tamp down geopolitical rivalry; But now, there is a new logic is at work: geopolitical forces are shaping economics, trade and finance.
So we are entering a new era of geo-political contestation, which will bring about more economic decoupling and fragmentation. What kind of world order will this be? No one can tell. No one has a crystal ball that will say what the world will be like in 10, 20, 30 years. We are all still trying to figure out. But what is clear is that US-China relations are consequential and will set the tone for global affairs.
Unfortunately, relations between both countries have worsened over the past few years. We have seen an impact on trade, investment, and finance – not just between the two countries, but across the rest of the world too. If relations between the US and China continue to be fraught, we could witness further bifurcation of technology, splitting of supply chains, or even other unintended consequences. The reality is that both China and US are highly interdependent and interlinked in the global economy – just look at our smartphones, our iPhones that we have today. I think something like 25% of the value of the iPhone is made in China, and it is very hard for Apple to consider how to diversify away from China, because of the high level of efficiency and automation in the entire Chinese economy. Even selective decoupling will come at great costs for companies everywhere, and certainly for our region and the world.
This state of affairs has serious implications for all countries. Certainly for Asia, it is a big change. We have all enjoyed peace and stability in Asia for so long – it has been more than 50 years since the end of the Vietnam War. So sometimes it is hard for all of us here in Asia to imagine how things may be different, but look at how quickly and suddenly things have changed in Europe. Of course, the circumstances and issues that we have in Asia is different from Europe, so the parallels are not exactly the same, but we are subject to the same underlying forces of geopolitical contestation. How sure are we that things cannot go wrong in Asia too? I have outlined some of the factors behind possible dangers and turbulence in Asia.
This is only one part of your theme this morning – turbulence. As theme of the Forum rightly suggests, we should not just resign ourselves to these external challenges. Instead, we should do whatever we can to find stability and to steer trajectory of developments in the region towards peace and stability.
One important factor, of course, is how the US-China relationship unfolds. Unfortunately, between both sides, tensions seem likely to continue for some time. Neither side expects relations to improve any time soon, but we must all hope that relations do not worsen, and that there are no accidents or miscalculations that can make things much worse very quickly.
We understand that leaders of both countries will be meeting in person soon. And we hope that both sides will be able to reach a modus vivendi – one where they may compete vigorously in many areas, but will also find ways to expand the common ground and cooperate on areas of mutual interest. In fact, there are indeed many global challenges which require joint US-China leadership to overcome – such as strengthening our global pandemic preparedness and marshalling global support to address the effects of climate change.
While US-China relations are important, we should also recognise that the future of the global order will not be defined by these two countries alone. We are moving from a uni-polar world, a world dominated by one superpower, not to a bi-polar world with two superpowers, but to a multi-polar world, a world where there will be more than one or two economic centres. There are other players in this evolving configuration. For example, in Asia we have India, a rapidly emerging economic engine for the world. India is seeing the fruits of its digitalisation and reform efforts, and set to become the world’s third largest economy by 2030. With its growing economic weight, India will play a larger role in regional and international affairs, and will make its own calculations independently on how to advance India’s interests in this world.
Closer to home we have the Southeast Asian countries of ASEAN, which is becoming a growth centre in Asia in our own right – we have a combined population of 660 million, larger than the EU, and a combined GDP of US$3 trillion, which we expect to double, if not quadruple over the next two decades. Because ASEAN has sound economic fundamentals, we have a relatively young population, and that means the demographic dividend to be harvested and tremendous economic potential if things go right.
We are still in transition, and there will be considerable uncertainties as we move toward a new equilibrium in this multi-polar world. That also means we are not just passive bystanders – we have agency in shaping developments in the region. What can we do?
For Singapore, first, we must always stand firm on fundamental principles of international law. And that is the reason why we took the stance we took when Russia invaded Ukraine. Because nothing can justify such an egregious breach of international law, the United Nations Charter and territorial integrity and sovereignty. Nothing can justify such an egregious breach of international law. After all, if countries can go around invading another country on the basis of historical errors and crazy decisions, as used by Mr Putin to justify the invasion, then the world will be a much more unsafe place. All of us will feel highly insecure.
Second, we must work with others to strengthen multi-lateralism and uphold the rules-based order. That is why Singapore is an active participant across all of these different global forums, including the United Nations, WTO, or the G20. Across these forums, we are consistently an advocate and champion for stronger global cooperation. Especially in tackling issues related to global public goods. Issues like pandemic response, climate change, issues that can only be solved when all countries big and small work together.
Third, we will continue to work with our fellow ASEAN member states to strengthen ASEAN integration and develop an open and inclusive architecture of cooperation for the region. Singapore and ASEAN may not be able to do much to influence the course of US-China relations, but we will do all that we can to keep the region open and inclusive and encourage all major partners to build stakes in the region – because we want to have that diversification in ASEAN for greater resilience.
We will encourage all the major powers to come to the region to build stakes here, not just US and China, but also the EU, Japan and India, and other key partners. We want to foster greater economic interdependence and integration here in ASEAN, so that everyone can grow their economic ties with one another and develop overlapping circles of friends. We think that is better than having a hard line, or worse, a new wall that will force regional countries into two camps. Because for all of us in Singapore and ASEAN – this is not a matter of choosing sides; but it’s about making choices for ourselves, advancing our own collective interests, and doing what is best for our peoples.
On Singapore’s part, we have long supported China’s engagement of Southeast Asia in this broader context. That is why we supported the Regional Comprehensive Economic Partnership (RCEP). We are also very happy that China has also signalled its intent to do more with ASEAN by upgrading the ASEAN-China Free Trade Area (ACFTA).
Undergirding this is a longstanding relationship between Singapore and China, built on very close people-to-people ties, a strong foundation of mutual trust established over decades, and our steadfast support for each other’s development and growth. Indeed, Singapore has consistently participated in and supported China’s “reform and opening up” over the past four decades. For example, we established major Government-to-Government projects to support China’s economic development through its different phases: We had the Suzhou Industrial Park in the early 1990s, when China was industrialising; Tianjin Eco-City in the 2000s when China wanted to focus on sustainability; and the Chongqing Connectivity Initiative in the 2010s, to help strengthen China’s connectivity with the world. We were the first Asian country to sign a free trade agreement with China.
Partly because of all these efforts, Singapore-China ties have grown from strength to strength over the years – China is Singapore’s largest trading partner, and Singapore has been China’s largest foreign investor. This is quite remarkable because Singapore is just a tiny red dot, and China is such a huge market – yet we are China’s largest investor. This reflects not just our economic ties, but the close links between our businesses and people. And we are not standing still. Both countries continue to build on this strong foundation by collaborating in emerging areas of the new economy, such as the digital economy and the green economy. This will open up new opportunities for businesses in both our countries in areas such as digital trade, digitally-enabled services, renewable energy, green financing, as well as environmental services.
We can and will also do more to foster deeper people-to-people links between our two countries. Because as the many business leaders in this room can attest to, any real sustainable relationship must be based on mutual understanding and trust, and that depends on us coming together frequently to meet with one another. That is why I am sure many of you in this room are eager for China to open up, so you can book your plane tickets, and make your visits to China.
This is where organisations like Business China play an important role. This year is Business China’s 15th Anniversary. Through programmes such as its Advanced Leaders Programme, you have brought business leaders between Singapore and China together, and helped forge new partnerships not just between Singapore and China, but between ASEAN and China as well.
You have also harnessed your links with public and private sector stakeholders to facilitate cooperation and dialogue, such as through forums like the one today. So I would like to congratulate Business China on this important milestone, and I encourage you to continue nurturing “China-ready” skills in younger Singaporeans, especially amongst our next generation today.
Allow me to speak a few words in Mandarin before I conclude my speech.
世界各地继续面对各种各样的挑战 — 包括冠病疫情、经济前景不明朗、中美关系等等。这些课题影响着全世界。
Let me conclude. Singapore values the long-standing partnership that we have with China. In this time of great uncertainty and turbulence, we will continue to deepen cooperation between both our countries, and strive for stability and peace in the region. We will continue to facilitate China’s engagement of our region, and help foster a peaceful and stable region where all countries can prosper together. In all these endeavours, close people-to-people ties will be crucial. And I have every confidence that Business China will continue to play an important role in this endeavour.
On this note, I wish everyone a very fruitful conference, and I wish this year’s FutureChina Global Forum a great success.
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