Speech By George Yeo, Minister for Foreign Affairs, at the 35th Anniversary Dinner of the S'pore-China Business Association, on 29 Dec 05 at 7.30 pm

1. When the Singapore-China Business Association was established in 1970, the world was very different from what it is today. At that time, the Cold War divided Southeast Asia. I could still remember as a schoolboy receiving AM radio broadcasts from the US Army in South Vietnam. China was still in the throes of the Cultural Revolution. Singapore businessmen who participated in the "China Export Commodities Fair" in Guangzhou had to study "Quotations from Chairman Mao Zedong" before commencing daily business sessions. Bilateral trade between Singapore and China at that time was only $45m dollars.

2. In 1973, US forces left South Vietnam. Two years later, the North took over the South and reunited the country. In 1976, Chairman Mao passed away. In 1978, Deng Xiaoping emerged as China's leader after a fierce power struggle. 1978 was a critical year. Under Deng's leadership, China embarked on a new policy of reform and opening-up. That was also the year when Vietnamese forces crossed the Mekong to get rid of the Khmer Rouge government in Cambodia, becoming a threat to Thailand and the rest of Southeast Asia. Late that year, Deng Xiaoping visited Singapore and asked Lee Kuan Yew how China could work with ASEAN countries against Vietnamese aggression.

3. Changes in China's domestic and foreign policy opened a new chapter in the relationship between Singapore and China. In 1985, China State Councillor Gu Mu invited Dr Goh Keng Swee to be a special advisor to the four Special Economic Zones. In September 1985, the Plaza Accord led to a steep rise in the value of the Japanese Yen, the Korean Won and the New Taiwanese Dollar. Within 8 months, the Japanese Yen went up from 240 yen to a dollar to 150 yen to a dollar. This resulted in a huge outflow of foreign direct investment to Southeast Asia sparking off a long boom in Malaysia, Thailand and Indonesia. In 1989, the June 4th Incident interrupted China's economic development. In Jan-Feb 1992, Deng Xiaoping gave a fresh push and made his famous Southern Tour when he cited Singapore as a social model for China. In the early 90's, overseas Chinese capital from Taiwan, Hongkong, Singapore and other countries in Southeast Asia helped to generate a new spurt of growth, starting in Southern China and spreading a few years later to the Yangtze Delta. While Southeast Asia was badly hit by the financial crisis in 1997, China maintained the value of the RMB and stepped up domestic spending especially on critical infrastructure. After many years, Southeast Asia has recovered from the crisis. In the meantime, China has surged on to become the world's sixth biggest economy. By the end of this year, China will probably be the world's fourth largest economy after the US, Japan and Germany.

4. Singapore's relationship with China has to be seen against this larger backdrop of historical change in the region. With a population that is three-quarter Chinese, Singapore was the second last in Southeast Asia to establish diplomatic relations with China in 1990. Politically, our strategic interests converged once China abandoned its policy of exporting revolution. Economically, we benefited from trading with China and investing in China. In fact, it became in our strategic interest to help China succeed in its policy of economic reform. In Feb 1994, the Suzhou Township project was started which raised bilateral relationship to a new level. In 1997, China overtook Malaysia as the most important destination of Singapore's external direct investment in cumulative terms. In terms of cumulative utilised FDI in China till 2004, Singapore is China's 7th most important foreign investor, which is remarkable in per capita terms. Our bilateral trade is expected to exceed S$60b by the end of this year, more than a thousand times what it was 35 years ago. In recent years, China's investments in Singapore have also been growing. There are now some 1500 Chinese companies in Singapore with about 86 listed on our stock exchange.

5. Singapore's policy all along has been to help China establish enduring good relations with all of ASEAN because such good relations are very important not only to Singapore, but also to the entire region. When Premier Zhu Rongji proposed a free trade area between China and ASEAN in Nov 2000, Singapore was an early supporter. Singapore also decided to recognise China as a market economy last year to encourage the rest of ASEAN to do so. Singapore and China have also been working closely together to advance the ASEAN+3 agenda and establish the East Asia Summit which was successfully launched in Kuala Lumpur two weeks ago.

6. The future of our bilateral relationship is very bright. It is a relationship which spans a broad spectrum, not only government-to-government. Our people-to-people links, including links between young people, have become stronger. Our business connections are also growing year by year. The contribution of organisations like Singapore-China Business Association has been important.

7. On this 35th Anniversary of the Association, I congratulate the leaders and members for your good work and wish you even greater success in the future as we look forward to ever closer relations between Singapore and China.
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