Institute of International Relations and Area Studies, Ritsumeikan University

Singapore-China Special Economic Relations:

In Search of Business Opportunities

SHEE Poon Kim*

Abstract

The main thesis of this paper is to argue that Singapores China

policies is based on enlightened economic pragmatism. The
island Republic saw Chinas push for modernization from l978
onwards as a good business opportunity to get a foothold in China
as part of its second wing strategy to expand its markets, region-
ally and globally. Similarly, Chinas policies toward Singapore is
mainly based on economic rationality. Singapores strategic posi-
tion, its populations ethnic Chinese background, its strong and
stable government, plus the success of its economic development
strategy has attracted Chinas interest to learn from Singapores
experience of modern management of its economy, including run-
ning ports, managing the public housing programmes, and social
security. Economic pragmatism and seeking business opportunities
and profits are the main thrusts in pushing both Singapore and
China to widen and deepen their special symbiotic economic rela-
tions in the areas of trade, investments, joint developments and
finally free trade area and economic integration in the 21st century.

Keywords:

Special, pragmatism, trade, investment, model.

RITSUMEIKAN INTERNATIONAL AFFAIRS Vol.3, pp.151-176 (2005).

* Visiting Professor, Faculty of International Relations, Ritsumeikan University. I am grate-
ful to the East Asian Institute, National University of Singapore for providing the research
facilities for writing this paper and to Dr. Lam Peng Er for his valuable comments.
152 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

INTRODUCTION

When Singapore became an independent Republic on 9 August 1965, Lee

Kuan Yew became its first Prime Minister, a post he held until he stepped
down in November 1990. Goh Chok Tong became Singapores second Prime
Minister on 28 November 1990. He resigned on 11 August 2004 so that Lee
Hsien Loong could become its third Prime Minister on 12 August 2004.
The focus of this paper is to analyse Singapores special economic rela-
tions with China mainly from Singapores perspective. Its central theme
can be depicted as Singapores search for business opportunities in China.
The paper is divided into three parts: first, it briefly describes the basic
precepts and principles of Singapores foreign policy; the second section
deals with Singapores economic policies toward China; the third part
analyses the economic issues between Singapore and China and finally,
the conclusion.
Why is it important to study these special economic relations? First,
Singapores special economic relations with China can be an important pil-
lar for China-ASEAN economic relations. Second, the emergence of the
flying dragon model of developmental regionalism1) can be an alternative
flying geese model for economic integration. Third, they offer a possibility
of creating a greater flying dragon model of an economic commonwealth,
including Taiwan, Hong Kong, Macao and the ethnic based Chinese bam-
boo network. Fourth, for Singapore, a Singapore-China economic nexus
will imply an alternative to the western oriented human capital develop-
ment such as from advanced higher-education training in the Ivy Leagues
in the US to Chinese universities in China. In the long run, it will revi-
talise Confucian culture as the core of East Asian civilisation and bring
about the emergence of a Sinic cultural renaissance as happened in the
10th century during the Tang dynasty (AD 618-907).

. BASIC PRINCIPLES OF SINGAPORES POLICIES TOWARD CHINA

Singapores diplomatic interactions with China raises a theoretical

1) Developmental regionalism can be defined as a type of East Asian new regionalism in which
states intervene to promote national agendas. See Nesadurai, Helen, E.S. Globalisation,
Domestic Politics and Regionalism: The ASEAN Free Trade Area, (London: Routledge 2003),
Chapter 1, p.41.
2005 Singapore-China Special Economic RelationsSHEE 153

question, i.e. how and why a small state adopts certain policy options vis-
-vis a rising major power in East Asia with the desire to ensure the sur-
vival, economic development and the sustenance of a democratic and
multi-racial nation. The foreign policy outputs of a state cannot be formu-
lated in a vacuum and therefore Singapores foreign policies towards
China can be examined and analysed in the context of the following basic
precepts and principles.2)
From Singapores perspective, the first basic principle is to ensure the
survival and security of its democratic, multi-racial state through econom-
ic development. Thus one of the most important goals of Singapores poli-
cies towards China is to promote economic prosperity and well being for
Singaporeans as a whole.
Second, Singapores foreign policy is not based on any fixed ideology.
Singapore will establish diplomatic relations with any state, whose
national interests coincide with Singapores basic national interests, irre-
spective of differences in ideology and political systems.
Third, Singapore believes in free trade and will trade with any coun-
try based on the principle of mutual benefits.
Fourth, Singapore believes in the principle of peaceful coexistence
with the neighbouring states and operates within the framework of
ASEAN. Due to geographical imperatives, Malaysia and Indonesia are the
top priorities in Singapores foreign policy. The importance of Malaysia
and Indonesia to Singapore can best be described as a lips and teeth
relationship. Singapores future is therefore closely linked with the future
of Malaysia and Indonesia. Geo-strategic considerations are important cal-
culations in Singapores China policies, especially during the earlier years
of Singapores independence. Survival was of paramount concern and
Singapores China policy was a function of both domestic needs and exter-
nal imperatives.
Fifth, Singapore believes in the principle of the balance of power of
international politics in Southeast Asia. Therefore, Singapore supports the
legitimate interests of and the presence of all the major/superpowers in
2) For details of the basic precepts of Singapores foreign policy, see, Michael Leifer,
Singapores Foreign Policy: Coping with Vulnerability, (London: Routledge, 2000), Chapter
1, pp.10-42; see also Bilveer Singh, The Vulnerability of Small States Revisited, A Study of
Singapores Post-Cold War Foreign Policy, (Yogyakarta: Gadjah Mada University Press,
1999), Chapter 2, pp.11-36; Bilveer Singh, Singapore Foreign Policy Imperatives of a Small
State, (Center for Advanced Studies, National University of Singapore, 1988).
154 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

the region, including China, Japan, the U.S. and Russia.

Sixth, Singapore believes in world peace and order and therefore sup-
ports the UN Charter to promote world peace and order. It also believes
that inter-state conflicts should be solved by peaceful means. Singapore
thus condemns using force as an instrument to resolve conflicts, in partic-
ular by a bigger states hegemony against a smaller one.

. ECONOMY IN COMMAND: IN PURSUIT OF BUSINESS OPPORTUNITIES

The hallmark of Singapore-China relations since l965 can best be

described as economy in command. During the period from l965 to l975
and even at the height of the Cultural Revolution (hereafter CR) in China,
for example and despite all the ideological polemics, the mutual suspicion
and hostilities, including the Bank of China crisis in l969, economic inter-
ests were the most important consideration. The trade data on Table 1
show that the volume of trade between Singapore and China ironically
was at its peak during the period from l967 to l969, even at the height of
the CR. In l949, the total amount of trade between the two countries
amounted to S$453.3 million but did reach the S$593.3 million mark in
l969, i.e. the highest in the twenty years period from l949 to l969.3) These
data support the thesis that despite the political turmoil during the CR,
ideology and trade were clearly separated in the diplomatic relations
between the two countries during l965 to l975. In this sense, one can
argue that geo-strategic considerations were not as important in Chinas
Singapore policy as was the case for Vietnam.
Economic rationality was an important factor in Chinas policy formu-
lations towards Singapore, as the latter has historically always been per-
ceived by China as an important gateway to Southeast Asia. This argu-
ment can be supported by the seven great journeys by Zhen He (Cheng
Ho) (1405-1433) to Southeast Asia during the early part of the l5th centu-
ry. In fact, since the l9th century, after the Opium War (1840-1842) and
with the establishment of Hong Kong as a British Colony, Singapore had
increasingly emerged as an important hub in Chinas trade with Southeast

3) See, Table 1, Singapores Trade with China: 1965-1999. See also Shee Poon Kim,
Singapores Foreign Policies Towards the Peoples Republic of China since l965, in ed by
Theresa C. Carino, China ASEAN Relations: Political, Economic and Ethnic Dimensions,
(Manila: De La Salle University, l99l), p.111.
2005 Singapore-China Special Economic RelationsSHEE 155

Asia.4)
From Singapores perspective, being a resourceless entrepot city, it
had historically no choice but to be the middleman of all the trading
nations, including China. Due to its strategic and well-located geographi-
cal position, Singapore had emerged as an important middleman and re-
export centre for natural rubber from Malaya to be exported to China and
a distribution-centre for Chinas goods to Southeast Asia.5)
Singapores economic importance to Chinas economic modernization
can be seen from fact that Singapore has consistently been one of Beijings
top ten economic partners in the areas of trade and investment in China.
Singapore was also Chinas largest overseas labour market and the second
largest overseas contractual engineering market.6)
How does one explain Chinas special interest in Singapore?
First, Singapores strategic location and infrastructure are one of the
important factors. China can make Singapore as a centre for its trading in
Southeast Asia because Singapore has the advantage of being an interna-
tional trading and distribution hub for China. For example, Singapore has
been the second largest oil-refining centre in the world next to Huston,
Texas. With the discovery of oil in the l970s China could gain from
Singapore to upgrade its oil products so that Beijing can meet the require-
ments for its oil products in the international markets. Singapore, with its
sophisticated technology, skills, market and industrial management, can
share its experience with China. The Suzhou Industrial Park project
(SIP), for example, is a good illustration that Singapore can transfer its
modern management skills to China.
China could use Singapore as a stepping stone for a regional opera-
tion centre or a gateway to other markets (530 million people) in Southeast
Asia. This could be seen from the fact that more and more Chinese compa-

4) Wong, John, The Political Economy of Chinas Changing Relations with Southeast Asia,
(London: MacMillan Press, l984), p.66-68.
5) For details of Singapores and Malaysias trade with China, see John Wong, The Political
Economy of Chinas Changing Relations with Southeast Asia, (London: MacMillan Press,
1984), p.65-91.
6) See, Xiao Zhengrong, Sino-Singapore Relations: Its Present and Future, unpublished
Conference Paper, 11 August l998, Joint Seminar Between Singapore and The Peoples
Republic of China Research Institutes, (Singapore: East Asian Institute, National
University of Singapore, 11 August l998), p.2; see also i.e. journal (international enterprise,
a Journal published in Singapore), Issue 15 August 2004, at <http://www.iesingapore.
gov.sg/iejournal/aug2004/iej_22.jsp> accessed 15 November 2004.
156 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

nies are operating in Singapore. Singapore can act as a middleman and

regional representative to help China to get more markets and invest-
ments. Furthermore, China can use Singapore as an area from which
sophisticated technology from Multi-National Cooperations (MNCs) oper-
ating in Singapore can be transferred to China.
Second, the dynamic growth of Singapores economy for more than thir-
ty years, with the exception of the recession in 1985 and l986 and the slow
growth in 1997 and 1998, impressed China. The small flying dragon can be
a limited model for the big flying dragon to gain inspiration and experience.
Third, the ethnic bond and the cultural ties between Singapore and
China added to the closer economic ties between the two countries.
Singaporean Chinese businessmen have the ability to speak Mandarin and
skilfully cultivate kuanxi (connections) with their Chinese counterparts
which may give them some advantage in doing business in China vis--vis
other non-Mandarin speaking competitors like Malays, Indonesians, etc. It
is easier for Chinese to communicate with Chinese speaking Singaporeans
than with non-Chinese speaking foreign investors.
Fourth, Singapore can be a useful place for China to raise international
funds for its huge financial appetite for economic modernization. By 2004,
there were 46 Chinese companies listed on the Singapore Stock Exchange.7)
Fifth, Singapores political stability is an attraction to China to do
business in the Island Republic. It was no coincidence that Deng Xiaoping
visited Singapore twice that is in 1978 and 1981. Unlike other countries in
Southeast Asia, domestic political inputs, such as pressure groups do not
come into play in Singapores China policy. In Indonesia, for example,
direct trade was suspended after the unsuccessful communist coup in
l965, until Indonesia signed a Memorandum Of Understanding with
China in July, l985.8) Domestic political considerations were one of the
main reasons for Indonesia to suspend its diplomatic relations in l967
until August, l990.9)

7) See i.e. journal, Issue 15 August 2004 at <http://www.iesingapore.gov.sg> accessed 15

November 2004.
8) Prior to l990, Indonesia engaged from time to time in pro and anti-China debates within
Suhartos military dominated government. The ABRI was the most important political
group to set Indonesias China policies from l966 to l990. The Straits Times, (Singapore), 5
July l985.
9) See, Leo Suryadinata, Indonesias Foreign Policy Under Suharto, (Singapore: Times
Academic Press, l996), p.121.
2005 Singapore-China Special Economic RelationsSHEE 157

Sixth, the economies of both Singapore and China are more comple-
mentary than competitive. Singapores open, modern, sophisticated urban
economy can be complementary to China, which has vast and abundant
labour and is rich in natural resources. China needs high-value added
technology-based goods and services that Singapore can offer. Singapore
requires Chinas resource-based materials, which include among others
such items as energy, industrial and agricultural raw materials and food-
stuffs, etc. The bulk of Chinas imports from Singapore mainly consists of
electronic components, plastic resins, computers and computer peripherals
and other industrial products. Thus the trade structure shows that there
is a complementary need for each others economies. The comparative
advantages and international specialization of both economies augur well
for sound and stronger economic cooperation.
Why does Singapore have special economic interests in China?
From Singapores perspective, China with a huge population of close
to 1.3 billion people is a very attractive market for Singapores second-
wing strategy of regionalization and globalisation of its economy. China is
an important partner for Singapores push for the free trade area zone in
East Asia. As an clairvoyant and futuristic-oriented state, Singapore will
benefit most by adopting a bandwagon strategy to fly together with the
rising big dragon in the 21st century. As a small dragon, Singapore in fact
has shown the big dragon how to modernize its economy by transferring
its management and governance skills to China. Not surprisingly,
Singapore has been keen in promoting a bilateral free trade area with
China besides actively pushing for multi-lateral free trade areas in the
Asia-Pacific. The most recent attempt is to conclude a free trade area
agreement between Singapore and China.10)
As China has opened up since the late l970s Chinese Singaporeans
(particularly Mandarin speaking Chinese businessmen) have been active-
ly pursuing economic opportunities in China. When Deng Xiaoping
embarked upon Chinas economic modernization in the 1970s and early
1980s, the Chinese-speaking graduates from Nanyang University were
the first batch of ethnic Chinese from Singapore who went to China in
search for business opportunities. Singapores investments have been
growing steadily, more so after the diplomatic normalization of relations
10) See <http://www.channelnewsasia.com/cna/analysis/031121_sg_china.htm> accessed 13
November 2004.
158 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

on 3 October, l990. From l990 to June, l994, for example, Singapore has
invested in more than three thousand eight hundred and thirty-four pro-
jects in China amounting to a total contract volume of US$6.8l billion,11)
and by the end of l997, Singapores actual investment increased to
US$8.78 billion.12) By the end of 1999, the total contracted amount went
up to US$34.3 billion with the actual amount being US$14.8 billion.13)
From the ASEAN grouping, the Republic is the largest direct foreign
investor in China. More than eighty percent of Singapores investments in
China are in real estate, tourism and industrial parts. Among Singapores
major investment projects is the SIP, the Wuxi Industrial Park, Shanghai
Sanlin Housing Development, Beijing Xiangjian Garden, the Dalian
Container Terminal, etc. Most of the investments are concentrated in
southern China, mainly in the provinces of Fujian and Guangdong from
where their ancestors came from.14) In 1996 alone, for instance, Chinese
Singaporeans invested about US$418 million in Guangdong (about 3% of
Chinas FDI, and US$529 million (about 3.8% of Chinas FDI) in Fujian
Province.15) Over all, Singapore was the third largest foreign investor in
Xiamen (Fujian Province)16) and the fourth largest in China in 2000.17) By
the end of March 2000, Singapore became Chinas seventh largest trading
partner, whereas China was Singapores sixth.18) In 2004, China became
Singapores fifth largest trading partner, whereas Singapore was Chinas
seventh largest foreign investor with more than 12000 projects and a

11) Lianhe Zaobao, (Singapore), 6 October l994.

12) See, Xiao Zhengrong, Supra note 6, p.2. See also Business Times, (Singapore), 28 May l998.
13) Data provided by Chinas Ambassador to Singapore, Her Excellency, Chen Baoliu, on 15
March 2000.
14) See John Wong, Southeast Asian Ethnic Chinese Investment in China, Institute of East
Asian Studies (EAI), National University of Singapore (NUS) Working Paper No. 15, 23
October 1998, p.16.
15) See John Wong, Southeast Asian Ethnic Chinese Investment in China, October 1998,
ibid., pp.27-28.
16) Lianhe Zaobao, 6 December 1997.
17) John Wong, Sino-Singapore Relations: Looking Back and Looking Forward, in Singapore
China: 1990-2000, Commemorative Souvenir in Celebration of the 10th Anniversary of the
Establishment of Diplomatic Relations Between The Republic of Singapore and The
Peoples Republic of China, (World Scientific Publishing Co. Pte. Ltd., 2000), p.75.
18) Data provided by Chinas Ambassador to Singapore, Chen Baoliu, on 15 March 2000. See
also John Wong, Sino-Singapore Relations: Looking Back and Looking Forward, in
Singapore-China 1990-2000, Commemorative Souvenir in Celebration of the 10 th
Anniversary of the Establishment of Diplomatic Relations Between The Republic of
Singapore and The Peoples Republic of China, (World Scientific Publishing Co. Pte. Ltd.,
200), p.76.
2005 Singapore-China Special Economic RelationsSHEE 159

cumulative contractual FDI value of about US$43.5 billion.19)

China is complementary to Singapore as Beijing has the worlds
largest relatively cheap labour force, which can be an attractive alterna-
tive labour force to substitute the increasingly high labour and land costs
of doing business in Singapore. Thus it is logical to transfer labour inten-
sive light industries from Singapore to a developing economy like China.
Singapore can also depend on Chinas abundant semi-skilled labour-force
to minimize its labour shortage problem. Finally, the new wave of Chinese
migrants20) from China (mainly professional, semi-skilled and skilled
workers) are important to sustain the continued growth in Singapores
economy, especially in the areas of sophisticated technologies, like the life
sciences, information technology, communication, etc.
China can be an important alternative to minimize Singapores trade
dependencies on advanced industrialized economies such as the U.S. and
Japan. In the past, Singapores economy has been vulnerable to the oscil-
lation of the economic health of the advanced industrialized economies,
such as Japan and the U.S. It is mainly dependent on the MNCs.21) China
can therefore be an important market to cushion off, to some extent, its
lopsided trade dependency. Since the late 1970s Singapore has emerged as
one of the leading trading partners for China. Table 1 shows that the
trade volume between the two countries has increased steadily since the
beginning of the l980s. In 1992, the total trade volume amounted to about
S$5.48 billion (US$3.22 billion) and it increased to about S$ 6.95 billion
(US4.27 billion) in l993. In l997, the total amount was about S$14.5 billion
(US$9.14 billion), making Singapore Chinas largest trading partner
among the ASEAN states.22) In 1998, the total two-way trade increased to
US$8.2 billion and rose to US$8.60 billion in 1999.23) Chinas share of
Singapores total trade was 4.2% (1998 data), whereas Singapores share of

19) Xinhua News, 2 November 2004, at <http://english.sina.com/news/china/aseanhelp.shtml.>,

accessed 13 November 2004.
20) There are between 200,000 + 300,000. See Sin Chew Jit Poh, (Malaysia) 24 April 2004.
21) See, Shee Poon Kim, Singapore in l99l: Endorsement of the New Administration, Asian
Survey, Vol. 32, No. 2, February l992, p.121.
22) See, Yearbook of Statistics, Singapore, 1993, l995 and l997, (Singapore: Department of
Statistics).
23) Chinas Ambassador to Singapore Chen Baolius speech to NUS on 15 March 2000 enti-
tled: China-Singapore Relations in the 21st Century. Goh Chok Tong disclosed that the
total trade for 1999 was US$9.5 billion as compared to US$3 billion in 1990, an increase of
12% for each year. See The Daily Yomiuri, 4 October 2000.
160 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

Chinas total trade was 7.5%.24) In 2003, the total two-way trade jumped to
S$36.9 billion. 25) From January to September 2004 alone it already
amounted to about US$22 billion (about S$36.1 billion)26) and by the end
of the year, is likely to pass the S$40 billion mark.

. ECONOMIC ISSUES

The following sections deal with a) the trade deficit; b) the competi-
tion over foreign investment funds; c) the changing roles of middlemen; d)
whether Singapore can be a model for Chinas economic modernization
and finally a case study of the SIP.

1. Trade Deficit

Since l949, but with the exception of l950, Singapore has been consis-
tently suffering a trade deficit with China.27) Has this persistent trade
deficit adversely affected political relations with China? From Singapores
perspective, the trade deficit does not politically affect Singapores diplo-
matic relations with China, as the problem has not been a serious political
and economic issue. Imports from China to Singapore could be for re-
export to Malaysia and Indonesia.28) Singapore benefited economically
from the Suharto governments suspension of diplomatic relations from
l967 to l989, as there was no direct trade between Indonesia and China.
Thus, Singapore and Hong Kong became the two destinations for the
ongoing trade between Indonesia and China.
The trade deficit did not lead to deterioration of diplomatic relations
and to serious political conflicts, partly also due to Chinas flexibility. From
time to time, China offered special discount prices below those in the inter-
national markets on its exports to the Southeast Asian countries so as to
win their political friendship.29) In other words, China can be sensitive and

24) John Wong, supra note 17, p.78.

25) See Table 1 for trade data.
26) Xinhua English 2 November 2004, at <http://english.sina.com/news/china/aseanhelp.shtml>
accessed 13 November 2004.
27) See, Yearbook of Statistics, Singapore, from l950 to l997. See also Table 1, Singapores
Trade with China: l965-1999.
28) Wong, John, supra note 4, p.117.
29) Shee Poon Kim, The Politics of Thailands Trade Relations with the Peoples Republic of
China, Asian Survey, Vol. 2l, No. 3, 1981, pp.310-24.
2005 Singapore-China Special Economic RelationsSHEE 161

take certain measures to minimize the trade deficit between its trading
partners so as to safeguard larger political and strategic relations with the
ASEAN states, especially, for example, with Thailand. China could do the
same, if necessary to minimize Singapores trade deficit vis--vis China.

2. Competition Over Investment Funds

In one dimension, Singapore and China have been competing to

attract foreign investments from the MNCs. Singapore is slowly loosing its
competitiveness to China partly due to increasingly higher costs of doing
business in the island Republic. In September l994, Siemens, a giant
German MNC announced the companys plan to establish its overseas
headquarters in China and decided to reduce its investment in Singapore.
The high cost of running its business in Singapore has deterred Siemens
to invest large amounts of money in Singapore. Instead, in November,
l994, Siemens announced that the company decided to invest US$3.5 bil-
lions in Asia from l995 to the year 2000. About US$l billion and US$500
millions will be allocated to China and India respectively.30) From 1987 to
1993, China attracted FDI US$53910 million, whereas Singapore received
US$33400 million in the same period. In 2000 China received US$40.7 bil-
lion whereas Singapore acquired US$21.7 billion.31) China has the advan-
tage over its neighbouring states when attracting more FDI, because the
MNCs perceive China as a future rising economic superpower in the 21st cen-
tury. Singapore on the other hand is constrained by its size and population.
Aware of the intense competition for foreign investments funds among
the Asian states, former Prime Minister Goh Chok Tong raised the issue
at the ruling Peoples Action Partys (PAP) anniversary dinner on 8th
November, l994, in which he highlighted the adverse effect Asias rapidly
changing economic order had for Singapores economic competitiveness.
He described the opening up of China and India to foreign investments
like switching on powerful big vacuum cleaners simultaneously which
sucked away the low and semi-skilled manufacturing industries from the
established centres, including Singapore. Furthermore, due to Chinas
huge population who provides a vast labour force, China has the advan-
tage over Singapore to attract labour intensive industries to its cities.32)

30) Business Times, 11 October l994.

31) Shri Prakash, Chinas Relationship with the ASEAN Countries: Conflict Management in
a Multi-Polar World, in <http://www.idsa-india.org/an-apr-5.html>. p.9.
162 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

3. Changing Roles of Middlemen

How can one minimize Singapores weaknesses and strengthen its com-
petitiveness? One way is to change the role of the middlemen in Singapores
economy. In order to compete more effectively, Singapore must go regional
and global. The traditional role of its entrepot services must be widened to
include a larger and wider range of services for the MNCs such as invest-
ment consultancies, management, finance, information and intellectual ser-
vices, joint partnerships, etc. One practical way, for example, is to form con-
sortiums, which can be joined by western MNCs investing in China.
Singaporeans rich experiences in doing business and their ability to
speak Chinese and English adds to their advantage when performing the
roles as investment advisors not only for western MNCs to invest in
China but also for Chinas state enterprises which want to invest in
Southeast Asia. Similarly, Singapore and Taiwanese MNCs can form con-
sortiums to invest in China as Singapore had signed an Investment
Protection Agreement with China in September 1996 and the Double
Taxation Agreement in April l986.33) Hence, Taiwanese MNCs registered
in Singapore with Singaporean companies as their partners could thus be
legally guaranteed of their investments in China.

4. Singapore as a Model for Chinas Economic Modernization?

Can Singapore be a model for Chinas economic modernization?34) A

Model connotes a framework, which can be used as a means to achieve
certain goals. The extent of usefulness or application of a model from one
country to another cannot be completely or comprehensively emulated, as
the conditions of each state are different. Four prerequisites must be met
for a meaningful transfer of a model to China. First, the country must
have a culture and working ethics similar if not identical to China; second,
that countrys economic development policies must have been tested suc-
cessfully; third, the country has moved from a poor developing society to a
prosperous industrialized nation. Finally, that political system must dis-

32) Lianhe Zaobao, 9 November l994; Business Times, l0 November l994; The Straits Times, 9
November l994.
33) See, Shee Poon Kim, supra note 3, p.108.
34) Former Minister of Finance and Deputy Prime Minister Dr. Goh Keng Swee was appoint-
ed as advisor to the Chinese government in l985.
2005 Singapore-China Special Economic RelationsSHEE 163

play tight political control in line with Chinas centralized political system.
The debates of how to make China a rich nation and have a powerful
army has always been a central concern for Chinas modernizing elite
since the l9th century. Since Dengs embarkment on the four moderniza-
tions in l978, some Chinese thinkers believe that Singapores economic
prosperity can be an alternative model to the Western model of protes-
tant ethics and the rise of capitalism.35) Singapore seems to be qualified
to be emulated as a limited model for China as it fulfils the above four pre-
requisites, i.e. the efficient work ethics of Chinese Singaporeans with an
authoritarian political culture, the role of the state spearheading economic
development, and the ideology of economic pragmatism attract the top
Chinese leaders attention. In November l978, for example, when Deng
Xiaoping visited Singapore, he was deeply impressed with Singapores
economic achievement. Two years later, i.e. in l980, Jiang Zemin visited
Singapore. He too, was impressed with the success of the Jurong Town
Corporations Industrial estate. Likewise, in August l98l, the then Chinese
Premier Zhao Ziyang while visiting Singapore, praised the island Republic for
its achievements in managing economic and social development.36) In June,
l990, the then mayor of Shanghai, Zhu Rongji who later became Prime
Minister of China came to Singapore to study public housing, social security
and how to attract investments for the Pudong Special Economic Zone.37)
In the minds of the Chinese leaders, Singapore can be used as a possi-
ble limited model to emulate. It can be argued that Singapore can share
some of its experience of economic development, skills of management of a
modern city with China because, first Singapores thriving economy and
prosperity has proven that a majority of ethnic Chinese with hard working
ethos can ensure economic development and success.38) Second, Singapores
political stability, law and order appeal to the top Chinese political lead-
ers. Finally, Singapores success in managing corruption also has attracted

35) Max Weber, The Protestant Ethic and the Spirit of Capitalism, (New York: Charles Scribners
Sons, l958).
36) See, The Straits Times, 12 August l98l; The Mirror, (Singapore), l September l98l; Singapore
Bulletin, September l981.
37) Tan Kong Yam, Singapores Role in the Economic Development of China, (Singapore:
National University of Singapore, Faculty of Business Administration, Working Paper
No.55 1991), p.12.
38) See, Hung-Chao Tai, ed., Confucianism and Economic Development, (Washington D.C.:
The Washington Institute Press, 1989), pp.214-18.
164 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

Chinas interest.
Singapores model of political authoritarianism and economic liberal-
ism attracted the top Chinese leaders as they witnessed the collapse of
Gorbachevs Perestroika and Glasnost policies, which brought about the
collapse of the communist system. Moreover, Chinese leaders do not accept
either the Western model of modernization, which would necessitate
development along the Western line of liberal democracy.
However, there are constraints and limitations in applying Singapores
model to China. First, historically, Singapore has always been performing
the role of a middleman entrepot economy, whereas China was mainly a
peasant economy. Singapore is a small city-state whereas China has a
huge hinterland economy.
Second, Singapores economy is based on the principles of an export-
oriented open free-market economy, whereas Chinas economy is extensive-
ly controlled by the state. Hence how can a free-market export economy be
fitted into a socialist Chinese economy with capitalistic characteristics?
Third, it is difficult for the ruling CCP government to do away with
the socialist ideology, as it is the basis of legitimacy of its rule. Hence, any
attempt to emulate liberal capitalism can result in ideological debates and
conflicts in the Chinese political system. Can China therefore preserve
socialism as its state ideology and follow capitalism for its economy? How
can Singapores unique ideology be transferred, which can be described as
encompassing the pragmatism of America, the rules of law of the British,
the democratic socialism of the Europeans, and Chinese Confucianism.39)
In other words, when looking into the feasibility of transferring a model
from one society to another, the uniqueness of culture and ideology of
these societies has to be taken into consideration. The top Chinese leaders
however, are fully aware that their political tradition, culture, social and
economic conditions are very different from Singapore.
China is now at the crossroad. On the one hand, China cannot reverse
its course of modernization and open policies, which will inevitably bring
about political democratisation in the political system, but this political
modernization, will result in the challenge to the authority of the CCP
rule. On the other hand, without political modernization, China cannot
sustain its economic growth in the long run. As Lee Kuan Yew argued, the

39) The Straits Times, 12 April 1994.

2005 Singapore-China Special Economic RelationsSHEE 165

CCP may not want to give up control of the government, but China cannot
avoid changing its system now that communism has proven to have failed
across the globe.40) But foreign policy influences that come along with for-
eign investments cannot be avoided.41) Challenges to the CCP rule and
erosion of the leaderships legitimacy and authority are inevitable as the
society is becoming more pluralistic and open and its economy more afflu-
ent. Furthermore, as China became a member of the World Trade
Organisation (WTO), the process of globalisation will further erode the
hegemony of the CCPs rule. Clearly, globalisation has brought about the
retreat of the authority of the state and strengthened the market forces in
the Chinese domestic economy.
Suffice it to argue that in view of the above differences, the Singaporean
model cannot be comprehensively applied to Chinas unique conditions.
Singapores model, which works for the island Republic, may not be totally
practicable in China. However, as a latecomer to modernization, China
can minimize making mistakes by avoiding the pitfalls from the experi-
ences of the New Industrialised Economies (NIEs) in Asia, including
Singapore. In this sense, Singapore can share some of its useful and limit-
ed experiences of the management of a sophisticated modern economy and
even its pitfalls with China. The latter will have to decide ultimately
which part of the model could be emulated and which part should be
avoided. The SIP, a joint project to create a modern town in China by
Singapore is a good example, where Singapore can share its experiences in
creating a modern sophisticated industrial city in China. From 1994 to
2000, about 140,000 Chinese officials from different areas visited the SIP
to learn and adopt the model to their own cities and development zones.42)
Modernization connotes three dimensions, i.e. firstly, physical (i.e.
infrastructure); second, institution-building; three, changes of values and
ideology. The physical dimensions are less problematic than the second
and the third dimensions. The creation of the SIP project, based on
Singapores Jurong Town model, a transfer of software to China was not
too difficult, though some adjustments were necessary to suit the local
conditions in Suzhou. However, it would be impossible to transfer

40) The Straits Times, 25 September l990.

41) Gerald Segal, The Challenge of Chinas Foreign Policy, Asian Affairs, Vol. 21, Part III,
October l994, p.274.
42) The Straits Times, 6 May 2001.
166 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

Singaporean values and ideology to a socialist/communist state, as the

Chinese themselves have not defined exactly what socialism with
Chinese characteristics entails. Culture, especially values are difficult to
transfer. Hence, before China decides which model to emulate, some of
these fundamental questions need to be answered. First, what is modern-
ization for? Second, what does China hope to achieve? What are the moti-
vations and the aspirations of the people?

5. The Suzhou Industrial Project: A Case Study of a Build, Manage

and Transfer Model

In September 1992, both then Senior Minister Lee Kuan Yew43) and
Ong Teng Cheong, the then Deputy Prime Minister visited Suzhou.
Suzhous Mayor, Zhang Xinsheng then requested Lee Kuan Yew to help to
industrialise Suzhou like Singapore.44) In 1992, during Dengs Nanxun
(southern trip), he personally instructed the CCP and local officials to
learn from Singapores development experiences. Deng chose Singapore
partly because he perceived the island Republic fit into his image as a sin-
isized state and partly because China could not emulate the developmen-
tal model of either Hong Kong or Taiwan due to political sensitivity.
Moreover, Singapores population is predominantly ethnic Chinese and
thus shares part of the common cultural heritage and linguistic affinity.
The diplomatic normalization in October 1990, made it easier for China to
seek closer ties with Singapore. From 1992 onwards, after Dengs open
endorsement of learning from Singapore, many Chinese officials and
bureaucrats from national, provincial and city levels came to Singapore to
conduct field studies on the Singaporean economic and social development
experiences, ranging from studying Singapores public housing pro-
gramme, social security, that is the Central Provident Fund (CPF), port
authority, to industrial management, etc.
In February 1994, Lee Kuan Yew and Chinas Vice-Premier Lee Lanqing
formally signed an agreement to develop a seventy-kilometre industrial
park based on Singapores Jurong Industrial Park experience. The total
cost of the SIP was estimated to be about US$20 billion, to be fully devel-

43) Lee Kuan Yew became Mentor Minister in Lee Hsien Loongs Cabinet since 12 August
2004.
44) Memoirs of Lee Kuan Yew, From Third World to First, The Singapore Story: 1965-2000,
(Singapore: Times Media Private Limited, 2000), p. 719.
2005 Singapore-China Special Economic RelationsSHEE 167

oped in twenty years and based on a Singaporean style of industrial, resi-

dential, recreational community with a population of six hundred thou-
sand providing employment for three hundred and sixty thousand work-
ers.45)
The first phase of the SIPs development covered eight square kilome-
tres. A company by the name of China-Singapore Suzhou Development
(CSSD) was set up as a joint venture enterprise between Singapore-
Suzhou Township Development (SSTD), a Singaporean consortium (twen-
ty-four companies) led by the Keppel group, which is a Singapore govern-
ment linked company and its Chinese counterpart, Suzhou Industrial
Park Corporation (SIPC). Singapore took up 65% whereas its Chinese
counterpart subscribed to the remaining 35% equities. The central govern-
ment of China and Singapore agreed that the objective of the SIP was
software transfer from Singapore to China. From Singapores perspec-
tive, the aim was to run and manage an administrative system in Suzhou.
It was hoped that the SIP would create a favourable business environ-
ment, attracting high-tech companies from among MNCs, generating more
jobs and finally to improve the economic well-being of the Chinese workers
and employees in the SIP. Although the CSSD works as a commercial prof-
it-oriented entity, like any private business enterprise, Singapore hoped
that the SIP could be a model of a Singaporean success story, which, if suc-
cessfully implemented in Suzhou, can be extended to other Chinese cities.
In other words, from Singapores perspective, Singapore hoped to
Singaporeanize the Chinese in Suzhou, a political vision that cannot be
ignored. Singapore took the SIP very seriously in particular Lee Kuan Yew
himself who had a stake in seeing directly the developing of a successful
industrial park in Suzhou. Initially, the development of the SIP went off
as planned from 1994 to 1997. By July 1998, the first phase of the eight
square kilometre area was already completed with one hundred and three
projects worth US$3.19 billion commitments out of which eighty-six indus-
trial projects were worth US$2.63 billion.46) Sixty companies started pro-
duction and twenty-six companies were under construction. By the end of

45) Asia Times, 22 August 1996. See also Henry Wai-chung Yeung, Local Politics and Foreign
Ventures in Chinas Transitional Economy: The Political Economy of Singaporean
Investments in China, Political Geography, Vol. 19 (2000), p.830.
46) Data presented by Singapores Ministry of Trade and Industry on 8 July 1998 during a
presentation of one of its senior staff to a group of Chinese scholars.
168 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

1998, the contractual commitment by foreign companies amounted to

US$5.8 billion with an actual amount of foreign investment worth
US$2.54 billion. Twenty-five of the worlds top five hundred companies
invested in the SIP with an average investment each amounting to US$30
million.47) The largest foreign investment company was New Zealand
based, namely the Lion Beer Companies, which invested about US$340
million in the SIP to produce beer.48) By April 2001, Philips became the
largest investor in the SIP with a commitment of US$1 billion. 49) By
September 2000, the accumulated contractual foreign investment reached
US$7.383 billion with an utilized capital totalling US$3.888 billion. By the
end of 2002 the total contractual foreign investment is expected to be more
than US$10 billion, with at least US$5 billion utilized foreign
investment.50) By 2003 the SIP successfully attracted more than 1300 pro-
jects with cumulative contractual investments of US$15 billion whereas
the actual foreign investments over the past ten years amounted to
US$7.2 billion.51)
In April 1998, the SIP launched a CPF scheme, the first one in Chinas
industrial relations. There were sixty-nine companies with four thousand
and two hundred and eighty-three employees participating in the CPF
scheme worth RMB41.6 million.52) However the development of the SIP
was not without its problems. By the end of 1997, there were conflicts
between Singapore and the Suzhou local authorities. Apparently, the con-
flicts started mainly due to the local authorities decision to compete with
the SIP from another industrial park set up in the late 1980s at the
Suzhou New District (SND) run by the Municipal government itself. In
November 1998, Suzhous vice-major, Wang Jinhua leading a group of
Suzhou officials visiting Germany, told a group of German investors that

47) Lianhe Zaobao, 28 December 1998.

48) In 1997, the Lion Beer Co. established a regional headquarter in Shanghai and employed
about one thousand four hundred employees. See Lianhe Zaobao, 28 December 1998.
49) The Business Times, 28 April 2001.
50) Synergy, SIP Quarterly July-December 2000, pp.3-4.
51) Data provided in Senior Minister Lee Kuan Yews speech of 10 June 2004 in Suzhou at the
ceremony to mark the achievements of Suzhou Industrial Parks 10th anniversary, at
<http://stars.nhb.gov.sg/data/pdfdoc/2004061102.htm> accessed 21 November 2004; see
also China Daily, 18 May 2004, at <http://www.china.org.cn/english/BAT/95727.htm>
accessed 21 November 2004, and <http://www.suzhou.gov.cn/English/Invest/19.shtml.>,
accessed 21 November 2004.
52) Data presented by the MIT on 8 July 1998, op. cit.
2005 Singapore-China Special Economic RelationsSHEE 169

they should put their money in the SND which has the full support from
the local authorities.53) What was disturbing to Singapore was that the
Suzhou delegation advised the German investors to invest in the SDN
directly and not via Singapore.54) Another example to show that the local
authorities tried to use Singapores brand name for its benefit, was the
naming of the SND website as CS-SND, very similar to the CS-SIP. The
CS was an abbreviation of China-Singapore whereas the other CS
stands for the local authorities as China-Suzhou.55) In Singapores view,
this is an unfair practice on the part of the Suzhou local authorities.
Furthermore, these incidents, together with other difficulties encountered
with the Chinese counterparts prompted Singapore to bring up this con-
flict openly to the highest authorities in Beijing when Lee Kuan Yew met
Jiang Zemin in December 1997. While there, Lee Kuan Yew explained
why Singapore decided to bring the SIP conflict versus the rival park into
the open. I have decided that this is an impossible situation and should
be resolved once and for all. Otherwise, I will be here every four months,
trying to sort things out, and thats not my job. My job is to get it started,
come here once a year, read reports in between, give it an extra push, an
added impetus now and then, but not to come fire-fighting every few
months.56) Singapore, in particular Lee Kuan Yew felt that the rivalry
between SIP and SNP was unnecessary and wasting time and efforts.
Since the central government has openly expressed full support for the
SIP, there was no need to have two industrial parks. In Lee Kuan Yews
view, to have two industrial parks in Suzhou is like having two soccer
teams competing for each other instead of playing together as one team,
which has better chance to achieve maximum results.57) Lee Kuan Yew
was right. The SIPs performance improved and generated profits by the
end of 2001 after Suzhou Vice-Mayor Wang Jinghua became the CEO from
January 2001 onwards. Wang decided to terminate all links with the SIPs
rival SND industrial park and to make CSSD a profitable company under
his stewardship.58)
How can the conflict between the SIP and the SND industrial park be

53) The Sunday Times, 14 December 1997.

54) The Sunday Times, 14 December 1997.
55) The Straits Times, 10 December 1997.
56) The Straits Times, 10 December 1997.
57) The Business Times, 5 December 1997.
58) The Straits Times, 6 May 2001.
170 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

explained?
First, the difference between Singaporean political values and atti-
tudes and the local authorities in Suzhou was one of the causes. In
essence, Singaporean political culture is different from Chinese political
culture. Singapore is ruled by law whereas China is ruled by men.
Since politicians are fallible, especially at the local level and are paid mea-
gre salaries, there are always some irresistible temptations to be corrupt.
As Michael Leifer observed, In the case of the Suzhou project, the impedi-
ment to fruitful economic cooperation had been a culture of corruption at
the local level that had not been overcome by a common culture in the tra-
ditional sense.59) Lee Kuan Yew admitted that there was no meeting of
minds between the two sides. Furthermore the subtleties of the Chinese
language could be another cultural factor contributing to the difficulties.

Probably because I spoke in English rather than in Mandarin, he

(Jiangsu province governor Zheng Silin) understood perfectly what I
meant, that we should be in the same team, wearing the same jerseys,
not in two teams kicking in each others goals. It was a different story
with Jiangsu Party Secretary Chen Huanyou however.

Lee Kuan Yew said,

I made the mistake of speaking in Mandarin. My mandarin is not

good enough to convey the intricacies of international economics.60)

Furthermore, part of the difficulties was also due to the inability of the
local authorities in Suzhou to understand the intricacies of international
economics as Lee Kuan Yew said,

I dont think they understand the intricacies of international marketing.

If they did, they would not be in the position contrary to their interests.61)

Is the inability to know the Chinese language a liability in doing business

with China? Initially, it can be a problem, which can be overcome.
However, language is more than an instrument of communication.
Language connotes cultural values, attitudes and expectations. There was

59) Michael Leifer, supra note 2, p.121.

60) The Straits Times, 10 December 1997.
61) The Straits Times, 10 December 1997.
2005 Singapore-China Special Economic RelationsSHEE 171

clearly a conflict of goals and expectations on both sides. As former CSSD

chief executive officer Lim Neo Chian (a Singaporean) admitted: The
issue is really that there are these differences of one side having certain
expectations and we, on our side, having certain expectations.62) However,
the local authorities in Suzhou expected Singaporeans to know about the
cultural differences in China as Chen Seming, mayor of Suzhou said,
When you (Singaporean) or your joint-venture partner decided to invest
in China, you must take into account our cultural differences.63)
Although both Singapore and the central government in Beijing want-
ed Singapore to transfer the software to Suzhou, the local government
was mainly interested in hardware transfer. The local government want-
ed Singapore to build more factories, which could provide more jobs, earn-
ing more money and more collection of revenues for the local government.
These conflicts show that the Chinese political system is much more com-
plicated than its Singaporean counterpart as they are more levels of
authorities, including the provincial, municipal, district and the central
government which are involved in the joint venture of the SIP. The conflict
of interests is an institutional outcome of fiscal politics in a shifting cen-
tral-local relationship during an era of decentralization and local autono-
my in China.64) Thus the SIP shows the conflicts of the priorities of inter-
ests between the central and the local governments in China. The top
leadership in Beijing may not necessarily be informed what has happened
at the grass root level. While the SIP is a joint venture project endorsed by
both Singapore and China, it however appears that the Central govern-
ment in Beijing has little inputs in the implementation of the SIP, as most
of the decision-making was made at the local level.
Second, the main reason for the conflict was the continuing losses
incurred by the SIP. By September 1999, it was reported that the SIP pro-
ject would have accumulated losses of US$60 million by the end of the
year 2000; the incurred financial loss would be about US$77 millions.65)
From Singapores perspective, the main reason for the SIP loss was the
fierce competition and undercutting of prices on the part of SND, besides

62) The Straits Times, 30 June 1999.

63) The Straits Times, 30 June 1999.
64) Henry Wai-Chung Yeung, supra note 45, p.831.
65) Business China, 17 January 2000, p.8; International Herald Tribune, 10 October 1999; The
Straits Times, 27 May 2001.
172 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

aggressive marketing by the local authorities for the SND. However, the
SND municipal authorities denied any attempt at undercutting the SIP
joint venture. As a Chinese official from Suzhous Foreign Economic
Relations and Trade Commission said,

We have treated both zones fairly. In fact, common consensus within

the government agrees that the SIP has received more preferential
policies than the SND [The two zones] are both sons of our city; we
would likely to see both of them grow up and prosper.66)

Despite Singapores efforts to persuade the local authorities of Suzhou to

only focus on the SIP for developments, they refused to comply. Thus
Singapore decided to scale down its further commitment to the develop-
ment of the SIP in order to minimize further loss of money. As a face-sav-
ing arrangement, both the Singaporean and the Chinese counterparts
signed a memorandum of understanding in June 1999 in which Singapore
reduced its equity from 65% to 35%, whereas the Chinese counterpart
increased its share from 35% to 65%, thus becoming the major developer
of the SIP. Both sides agreed that upon completion of the eight square
kilometres park, it would be handed over to the Chinese partner by the
beginning of January 2001.

After Singapore transferred the SIP to China on 1 January 2001, Suzhous

vice-major, Wang Jinghua took over the position of the CEO from
Singapores Lim Neo Chian. Wang decided to relinquish all ties with the
SIPs rival, the SND industrial park and concentrate all energy to turn
around the CSSD from a loss making into a profit generating company as
the most important goal of his administration. By 7 May 2001, when the
SIP celebrated its 7th anniversary, it was reported that for the first time
since its operation in 1994, the SIP will be able to make a projected profit
of US$7.5 million (S$13.5 million) to US$10million for 2001 and 2002
respectively, a reversal of the previously accumulated loss of US$77 mil-
lion at the end of 2000.67) The SIP has become so successful that it con-
tributes 10% of Suzhous GDP.68) By the end of April 2001, the SIP was

66) Business China, 17 January 2000, p.8; International Herald Tribune, 10 October 1999.
67) This data was disclosed by Chinas Ambassador to Singapore, Zhang Jiuhuan, The Straits
Times, 27 May 2001.
68) The per capital GDP in the SIP is around US$9200. (year 2000 data), compared to
2005 Singapore-China Special Economic RelationsSHEE 173

able to attract about US$8 billion of investment funds with about 37 of

Fortunes 500 multinational companies investing in the SIP.69)
What is the explanation for SIPs turning around from loss to profit?
First, the main reason is the local Suzhou authorities decision to elimi-
nate competition from the SND, which was the main reason for the losses
the CSSD incurred. As mentioned earlier, Lee Kuan Yew publicly took
issue in 1997 with Wang Jinhua for making unfair remarks about the SIP
to German investors.70) With China now having 65% of the equity stake in
the SIP, Wang has vested interests not to send any promotion teams
abroad for the SND to compete with the CSSD as he did previously.
Second, with credit to Singapore, the Singaporean team has built a first
class, competitive and high quality industrial park which is able to attract
transnational companies, such as Hitachi, Samsung, Solectron (electronic
components), Philips, Advanced Micro Devices, Volex and Bosch, etc.71)
Furthermore, the SIP has the advantage of transparency, no hidden cost,
quality and reliable infrastructure and good customer support for expan-
sion in the park.72)
In June 2001, Lee Kuan Yew made a trip to Suzhou in connection
with the celebration of the seventh anniversary of the development of the
SIP. He met Jiang Zemin on 8 June in Suzhou and was assured by him of
Chinas interest to upgrade cooperation with Singapore on the SIP. Jiang
Zemin praised Lee Kuan Yew for his contribution to the development of
the SIP when he told the Singaporean leader: In coming to the Suzhou
Industrial Park, one would inevitably think of you. You are the pioneer
who initiated the idea for the Suzhou Industrial Park.73) This time, Lee
Kuan Yew was optimistic about the SIPs future, as in his assessment, the
SIP has a good chance to reverse its past financial loss into profit. Lee
Kuan Yew assured China that Singapore would continue to transfer soft-
ware programs to Suzhou as long as China finds it useful.74) It is impor-

US$3200.for the whole of Suzhou and over US$800. for the whole of China. The
Straits Times, 27 May 2001.
69) The Straits Times, 27 May 2001.
70) The Straits Times, 27 May 2001.
71) Boschs managing director, Helmuth Kuklinski explained that Bosch decided to invest in
the SIP because of the Parks Institute of Vocational Technology, which provides for train-
ing high school graduates for the training floor. The Straits Times, 27 May 2001.
72) The Straits Times, 27 May 2001.
73) The Straits Times, 9 June 2001.
74) The Straits Times, 9 June and Lianhe Zaobao,14 June 2001.
174 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

tant for the SIP to preserve its uniqueness, to be a useful point of reference
for officials in other parts of China, said Lee Kuan Yew about lessons
learned from the experience of his involvement in the SIP project.75)
The above case study shows that the claim the ethnic Chinese
Singaporean shared part of the cultural heritage with China may not
guarantee them a major advantage in doing business in China. There is a
fundamental difference in the culture of the political economy between
Singapore and China. Singapore failed to understand adequately the intri-
cacies of politics and culture at the local level affecting the joint venture of
the SIP. The politics of business management in China is very different
from Singapores experience. The implication of the SIP software transfer
showed that to implant Singaporean ways and values into the minds of
their Chinese counterparts proved to be difficult if not impossible.
In order to boost the confidence of foreign investors, the Suzhou
authorities declared that they will adhere to the four nos policy: 1) no
change in the essence of the joint venture project; 2) no change of the joint
venture cooperation framework; 3) no change in the goal of developing the
park; 4) no change in the guarantees undertaken by the Suzhou authori-
ties to the foreign investors.76) Meanwhile, Singapore continues to pledge
its support for the SIP, in particular to the transfer of software to China,
such as the training for its Chinese counterparts to manage the industrial
park after January 2001. The SIP continues to be a government-to-govern-
ment joint project between Singapore and China despite the initial set-
backs for Singapore.
In short, by 2004, the SIP has emerged as Chinas Silicon Valley, a
high tech city with modern vibrant industrial, commercial facilities and
amenities like Singapore.

CONCLUSION

What observations can be made from this study? The overriding con-
siderations in Singapores China policy are based on enlightened eco-
nomic pragmatism. The island Republic saw Chinas push for moderniza-
tion from l978 onwards as a good business opportunity to get a foothold in
China as part of its second wing strategy to expand its markets, region-
75) The Straits Times, 9 June 2001.
76) SCMC, 15 May 2000.
2005 Singapore-China Special Economic RelationsSHEE 175

ally and globally.

From Chinas perspective, Singapores strategic position, its popula-
tions ethnic Chinese background, its strong and stable government, plus
the success of its economic development strategy has attracted Chinas
interest to learn from Singapores experience of modern management of its
economy, including running the port, managing the public housing pro-
gramme, social security, etc.
In short, economic rationality is the main thinking in Chinas Singapore
policies. Since both countries emphasize more on economic interactions,
non-economic variables have become secondary in shaping Singapore-
China relations. The trade data consistently and clearly show that the
trade volumes between Singapore and China gradually increased over
time, despite political distrust from 1965 to 1975. There was no negative
correlation between political suspicion, hostility and trade. Although
Singapore continues to suffer from a trade deficit, it does not have adverse
effect on political cooperation between the two states. Singapore and
Chinas economic ties represent a unique example whereby China was
willing to learn from Singapores build, manage and transfer model of
managing a modern industrial park.
From Singapores perspective, the ethnic Chinese factor could be a
double-edged sword, i.e. a political liability and an economic asset. In the
1960s and 1970s, the ethnic Chinese factor was a sensitive issue in
Singapore-China political ties. Singapore was wary, premature diplomatic
links with China could have adverse effects on the political relations with
its neighbouring states, that is Malaysia and Indonesia. There was clearly
a strong feeling of anti-Chinese and anti-China sentiments in Indonesia
from l965 to l970. Thus Singapore could not associate itself closely with
China otherwise it would be perceived by the neighbouring states as
third China. In conclusion, economic pragmatism and seeking business
opportunities and profits are the main thrusts in pushing both Singapore
and China to widen and deepen their special economic relations in the
areas of trade, investments, joint developments and finally free trade area
and economic integration in the 21st century.
176 RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. 3

Table 1 Singapores Trade with China: 1965-2003 (in S$ million)

Year Total volume Imports Exports Balance
1965 246.9 224.5 22.6 - 201.9
1966 408.9 271.7 137.2 - 134.5
1967 481.6 385.8 95.8 - 290.0
1968 541.2 460.0 81.2 - 378.8
1969 593.3 418.5 174.8 - 243.7
1970 454.9 385.5 69.4 - 316.1
1971 453.3 406.7 46.6 - 360.1
1972 456.5 399.1 57.4 - 341.7
1973 701.6 573.2 128.4 - 444.8
1974 769.7 643.9 125.8 - 518.1
1975 780.5 682.0 98.5 - 583.5
1976 754.4 659.0 95.4 - 563.6
1977 815.1 670.4 144.7 - 525.7
1978 906.2 775.5 130.7 - 644.8
1979 1,263.7 894.1 369.6 - 524.5
1980 1,990.0 1,332.1 657.9 - 674.2
1981 2,007.1 1,629.8 377.3 - 1,252.5
1982 2,397.0 1,881.0 516.7 - 1,364.3
1983 2,197.0 1,747.2 449.8 - 1,297.4
1984 3,400.4 2,881.1 519.3 - 2,361.8
1985 5,701.8 4,971.7 730.2 - 4,241.5
1986 4,353.4 3,109.6 1,243.8 - 1,865.8
1987 4,522.6 2,975.8 1,546.8 - 1,429.0
1988 5,754.2 3,385.6 2,368.6 - 1,017.0
1989 5,645.3 3,310.8 2,334.5 - 976.3
1990 5,216.8 3,773.4 1,443.4 - 2,330.0
1991 5,323.5 3,838.8 1,484.7 - 2,354.1
1992 5,479.0 2,976.0 1,811.0 - 1,165.0
1993 6,945.0 3,668.0 3,068.0 - 600.0
1994 7,619.0 3,877.0 3,207.0 - 670.0
1995 9,640.0 4,412.0 3,911.0 - 501.0
1996 11,043.0 5,730.0 4,784.0 - 946.0
1997 14,484.0 6,259.0 6,038.0 - 221.0
1998 14,196.9 8,122.6 6,794.3 - 1,328.3
1999 16,291.6 9,648.9 6,642.7 - 3,006.2
2000 21,563.7 12,278.7 9,285.0 - 2,993.7
2001 22,445.3 12,900.3 9,545.0 - 3,355.3
2002 28,121.5 15,853.4 12,268.1 - 3,585.3
2003 36,914.5 19,276.3 17,638.2 - 1,638.1
Source: For 1960 to 1980 date see John Wong, The Political Economy of Chinas Changing
Relations with Southeast Asia, (London: Macmillan Press, 1984), pp.65-91; see also
Yearbook of Statistics, Singapore, Department of Statistics, 1965-1999.
Yearbook of Statistics, Singapore 2000, Department of Statistics, Ministry of
Trade and Industry, Republic of Singapore.
Data for 2001-2003 from Economic Survey of Singapore 2003, pp.142, 146 and 156
at <http://www.mti.gov.sg>