SPEECH BY MR RAYMOND LIM, MINISTER OF STATE FOR FOREIGN AFFAIRS AND TRADE & INDUSTRY, AT THE FOURTH SINGAPORE INTERNATIONAL FOUNDATION OVERSEAS CONFERENCE, SATURDAY 28th FEBRUARY 2004, AT 9.25 AM, PUDONG SHANGRI-LA HOTEL, SHANGHAI
New Asia and Emerging China: Opportunities and Strategies
1 It gives me great pleasure to speak to you this morning at the 4th Singapore International Foundation Overseas Conference. I am happy to see such a large gathering of Chinese and Singapore businessmen here at the Conference. It shows the great interest of both Chinese and Singapore businessmen in working together, both in the China market and beyond.
2 In line with this conference's theme, I would like to share with you my thoughts on not just the realities of today, but also the possibilities of tomorrow. We must be careful not to let our fascination with daily headlines cause us to overlook the underlying trends of the region. In the past two decades, Asia has become one of the world's fastest-growing regions. As we enter the 21st century, we see 3 major developments shaping the destiny of Asia and transforming the continent.
3 Firstly, we are witnessing the gradual embrace of market forces by countries across Asia - China, India and Indo-China. All have embarked on the route of opening their markets and liberalising their domestic economies to varying degrees. It was only two decades ago when state-directed economies were widely celebrated. To survive in this new era, we have to transform ourselves into knowledge-intensive market economies, which are propelled by the innovative spirit, creative energies and entrepreneurial verve of our people.
4 Secondly, there is growing intra-regional trade among Asian countries, with China as a principal catalyst. In 2003, China's trade with Japan, ROK and ASEAN have grown in the order of 30-40% a year. China's trade with the US grew by 30% during the same period. China's trade with India is expected to surge to US$10 billion in 2005, from US$2 billion just 3 years ago. China has now become South Korea's second largest trading partner. Japan's current rebound is being driven by a surge in exports to China. Singapore's trade with China has grown from US$8.9 billion in 1998 to US$21.2 billion last year. Premier Wen Jiabao has predicted that China's trade with ASEAN would exceed US$100 billion a year by 2005, a figure more than twice the volume three years ago. With the conclusion of the ASEAN-China FTA agreement on goods this year, this target is definitely achievable. As we can see, China's "prosper thy neighbour" thinking is not only forward-looking but also contributes to regional integration, stability and prosperity.
5 Thirdly, Asia will see a rising middle class . This youthful and well-educated population will be a massive consumer market, unprecedented in human history. The youth of Asia today will be the new yuppies of tomorrow's Asia. Marketing and advertising will turn Asia's yuppies into avid consumers, eager to try the latest gadgets and lifestyles. As their income rises, so will their spending. In addition, with the Asian emphasis on education in the last two decades, a pool of well-educated and productive workers has been created, which will play a pivotal role in taking Asia to the next stage of development.
China
6 At the centre of all these trends is China. China's emergence embodies these three major developments. Its emergence can be attributed to the following factors.
7 Firstly, China currently enjoys an excellent leadership, which has articulated a clear vision for China. China's leaders have taken the long view and acted decisively to tackle domestic problems, ranging from SARS to recapitalisation of their banks. They have also clearly shown clear commitment to economic development not only for China, but also for the region as a whole. China has also played a vital role in maintaining regional stability by bringing North Korea and the US together for the six-party talks which is ongoing now and working with the US on counter-terrorism, and in other ways engaging ASEAN and its neighbours.
8 Secondly, the drive of the Chinese people. After decades of central planning and inward-looking policies, as China embraces the market economy and opens up, the pent-up energy and creativity of millions of Chinese have been unleashed. Having tasted the fruits of market reforms, the Chinese people are even more determined to work harder for a better life, not only for themselves, but for their children as well. This will to succeed is the principal force that will drive China forward.
9 Thirdly, the resolve of China's leaders to maintain social stability. The Chinese leaders have placed great emphasis on maintaining domestic stability, in order to create a conducive environment for sustained economic development. While the economic boom has brought about major population shifts within China and new social problems, her leaders have so far done well in coping with them.
Opportunities
10 The Chinese leaders are committed to continuing Deng Xiaoping's path of opening up and economic reform. There may be ups-and-downs, but there is no turning back. China's growth poses immense challenges, but overall it is a plus for Asia. China's emergence, coupled with its role as a catalyst for economic change throughout East Asia, has brought about many opportunities for all of us. According to a New York Times report last December, the Chinese Ambassador to Indonesia had said that, whatever Southeast Asia sells, China will buy. China's rapidly increasing imports, which jumped 40% to US$413 billion last year, reflect a voracious appetite. This has also made China the world's third largest importer, after the US and Germany. Last year, China saw a 39% increase in contractual FDI, reaching US$115 billion. Because of the decline of international business travel due to SARS, utilised FDI rose just 1.4% to US$53.5 billion. Nonetheless, exports rose by 35% to reach US$438 billion. These exports, which range from household items to computer software, provide the region with cheaper goods and services. This is made possible not only because of its competitive labour costs, but also from productivity gains.
11 With China's entry into the WTO, we are beginning to see an increase in the deregulation of her industries. In line with her WTO commitments, China has gradually opened its domestic market to overseas companies, in sectors such as energy, environment protection, education and logistics. Singapore companies should seize these opportunities to carve out a niche for ourselves. Besides capital investment, we can also offer to share our management expertise and organisational experience.
12 China's leaders have publicly encouraged Chinese companies to go global, to venture out into the international market. In this aspect, Singapore has something to offer. Singapore companies are currently looking into ways to cooperate with Chinese companies to help them go global. The Singapore Stock Exchange (SGX) has to date listed 33 Chinese companies and is optimistic that they would surpass Prime Minister Goh's target of "50 in a few years' time" sometime this year. It is encouraging to note that Chinese companies increasingly value Singapore as a hub for attracting capital and financial management expertise.
13 But that is not enough. We should continue to expand our cooperation with Chinese companies in new areas like marketing, brand management, intellectual property rights and legal certification. According to some business experts, the tag "Made in China" is already evolving into a sign of quality. We can go even further by working with the Chinese companies to make it a sign of both quality and innovation.
14 As a cosmopolitan city in Southeast Asia, we can leverage on our knowledge of regional and international markets to position ourselves as a valuable partner for Chinese companies as they go global. We have the advantage of knowing our region well. In multiracial Singapore, we have besides the Chinese; Malays and Indians, who have the language and close kinship ties to Malaysia, Indonesia, parts of Thailand and India. On one hand, we can reach out to the Chinese. On the other, we can reach out to the world, where English is the lingua franca and Common Law is widely adopted. In the post-Enron era, where corporate governance has been called into question, our stringent financial standards and reputation as a financial hub can enable us to work with the Chinese companies in their foray into the international market.
The challenges for Singapore
15 Returning to Singapore, Singaporeans and friends know that we face a new challenge posed by the changing global political and economic landscape. The Economic Review Committee has fundamentally reviewed Singapore's development strategy and formulated a blueprint to upgrade, transform and revitalise the Singapore economy, as well as to bring our country into the next phase of growth.
16 China has a major role to play in our new strategy. Cooperation and access to the Chinese market is important. To achieve this, we have taken a pro-active approach in three areas. Firstly, at the governmental level, we now have the Joint Council for Bilateral Cooperation (JCBC) to be chaired by the DPMs and directed by the two Prime Ministers to oversee the entire range of bilateral cooperation. Leveraging on the Suzhou Industrial Park (SIP) experience, the JCBC will not only allow us to deepen our bilateral cooperation, but enable us to identify new opportunities to work together - such as in Info-technology (IT), education and healthcare. To facilitate networking links between our businessmen, we have also established business councils in various Chinese provinces.
17 Secondly, we are looking forward to working with the Chinese on a bilateral free trade agreement (FTA), upon the scheduled completion of the ASEAN-China FTA negotiations on goods this year. The bilateral FTA will not only institutionalise our access to the Chinese market, but also give our businessmen a leg up in their dealings in China. Similarly, Chinese businessmen will be able to use Singapore as a base to venture into Southeast Asia. As China continues her phenomenal growth, ASEAN countries are now acutely aware of their need to integrate their economies in order to stay competitive. With a population of 530 million people and a total GDP of US$610 billion, ASEAN as a group is an attractive market and destination for investment. In the wake of the collapse of the WTO talks in Cancun, this forward-looking mindset has distinguished Southeast Asia in the eyes of foreign investors. In addition, the FTA with China will complement our access to other major markets in the US, Japan, Australia and in the near future, India.
18 Thirdly, we have worked hard to reduce the physical proximity between Singapore and China. There are now direct flights between Singapore and 10 cities in China. In addition, China has granted visa-free travel for Singaporeans coming to China for up to a two-week stay. On our part, we have simplified the visa application procedure for Chinese businessmen, tourists and students. Business travellers from China can apply for long-term Multiple Journey Visas (MJV) with a validity period of up to 5 years. From this year, free and independent travellers can now apply for their visas in over 300 locations in major cities in China. Last year, Chinese tourists have become the second biggest arrivals (excluding Malaysia land arrivals), reaching more than half a million.
CONCLUSION
19 We hope that our effort would support your private initiatives. There is great potential for cooperation in Asia, where countries are at different stages of development. The emergence of China has unavoidably led to short-term disruptions in the economies of many countries. Hence, it is important that China actively continue her trade and economic cooperation with her neighbours, which would benefit both China and the region. China's offer of an FTA with ASEAN is a step in the right direction. Competition is inevitable. But it does not have to be destructive. What is important is for the competition to be embedded in an East Asian community.
20 In this regard, the SIF has a role to play. The SIF not only can help Singaporeans maintain their links with Singapore, but also provide a better understanding of Singapore in China, and improve people-to-people ties. The task of strengthening relations between nations cannot be left to government officials alone. The bonds of friendship can often be stronger when they are built at the people-to-people level. Closer rapport between the people of Singapore and China is one step towards the East Asian community.
21 And on this note, I wish you all a successful and fruitful conference. Thank you.