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Singapore Out in the Cold as Southeast Asia Chases China Cash

Bloomberg News

(Bloomberg) -- China’s plan for a maritime “Silk Road” to Europe is helping channel funds to Southeast Asia for roads, railways and ports. But amid the deals bonanza, one country risks missing out.

Despite strong historical and cultural ties to China, the tiny state of Singapore has found itself in Beijing’s crosshairs, in part for its stance over territorial disputes in the South China Sea. As other Southeast Asian leaders lined up to meet President Xi Jinping at a summit in Beijing this week for his Belt-and-Road Initiative, Singapore was represented by National Development Minister Lawrence Wong.

China views Singapore as being less supportive of Xi’s plan because unlike other countries that announced their leaders would attend without requiring a formal invitation, Singapore sought an invite, according to people familiar with the matter. They asked not to be identified because of the sensitivity of the information.

“The cooler political relationship between Singapore and China could have ripple effects which influence economic and trade relations,” said Lu Jianren, a researcher at the China-Asean Research Institute at China’s Guangxi University. “Singapore has been less proactive to work with China while many leaders in the region showed greater enthusiasm that they want Beijing to be more involved in Southeast Asian growth.”

China’s Ministry of Foreign Affairs didn’t immediately respond to a request for comment. “I wouldn’t say we have major problems; we’ve had some issues and some incidents,” Singaporean Prime Minister Lee Hsien Loong has said of China, in an interview aired by theBBC in March.

Singapore is Southeast Asia’s wealthiest nation and its position straddling the Strait of Malacca lends it strategic importance as a gateway to the South China Sea. As such it should stand to benefit from Xi’s effort to better connect China to the rest of the world through trade and infrastructure.

China remains Singapore’s largest trading partner. Singapore is still the second-largest investor in China, even as the amount slipped from $6.97 billion in 2015 to $6.18 billion last year, according to official China figures.

Singapore has been involved in China’s economic development since the early 1990s. It helped build an industrial park in 1994 in the eastern city of Suzhou which was regarded as a model for attracting foreign investment. There has since been a development in the northern port of Tianjin and most recently a project in Chongqing aimed at boosting the regional logistics hub.

Read more: China-Singapore tensions spilled into the open over customs spat

Still, deals signed during the forum in Beijing point to the political mood: Malaysian Prime Minister Najib Razak inked nine documents with China for proposed investments worth $7.2 billion, with Xi describing ties as their “best ever.” Indonesia signed a $5 billion loan facility after President Joko Widodo met Xi over the country’s Jakarta-Bandung high-speed rail link.

Vietnam’s president, Tran Dai Quang, used his first state visit to China to seek a boost in imports of Vietnamese farm produce, according to the Saigon Times. The countries signed five documents on economic and technological cooperation.

Xi-Ma Summit

For Singapore, Wong signed a memorandum with China to “enable the two sides to enjoy better bilateral relations, more substantive economic ties and closer people-to-people exchanges.” He said Singapore could join Hong Kong and London in facilitating lending to projects aimed at improving connectivity along the trade routes.

Two years ago, Singapore-China ties were riding high. In late 2015, the city-state of 5.3 million hosted the first summit between leaders from China and Taiwan since the two sides clashed in a civil war seven decades ago, with Xi meeting then-President Ma Ying-jeou.

The late Lee Kuan Yew, who led Singapore for 31 years, was known for his pragmatism as the country opened up its economy and financial sector to countries from China to the U.S., and as someone whose advice was sought by other leaders.

South China Sea

A number of hiccups last year put a cloud over ties. Singapore as coordinator for the Association of Southeast Asian Nations-China relationship was caught up in public wrangling over how Asean should respond as a collective to China’s claims to most of the South China Sea. The city-state doesn’t contest the waters itself.

Singapore lets the U.S. Navy use it as launchpad to send Littoral Combat Ships and Poseidon surveillance aircraft into the South China Sea. 

In November, Hong Kong seized nine Singaporean infantry carrier vehicles en route from Taiwan on a container ship after being used in exercises. While Singapore had long trained in Taiwan, the shipment prompted a protest from Beijing, and it wasn’t until January that Singapore secured its release.

Singapore was also a vocal champion of a 12-nation U.S.-led Pacific trade pact of which China was not a member. The deal was a hallmark of former U.S. president Barack Obama’s engagement with the region, and was abandoned by Donald Trump when he took office.

‘Goodwill Gestures’

Still, Zhai Kun, deputy president of the China Association of Southeast Asian Studies, said ties between Singapore and China should eventually recover. “Singapore has showed some goodwill gestures that the country could play an important financial role in the initiative, and the two nations have a tradition to do business,” he said.

On Tuesday, Chinese Communist Party Politburo member Zhao Leji led a delegation to the biannual Singapore-China Forum in the city-state. In a meeting with Lee, the two hailed a “strong and substantial relationship.”

Meanwhile, there remains unease in parts of Southeast Asia about China’s military expansion and what its growth as a regional power might entail.

“They are the only one around with extra money to make new investments in Southeast Asia,” said Oh Ei Sun, principal adviser to the Pacific Research Centre in Malaysia. “Strategically, they still have a long way to go before catching up the breadth and depth of American influence here which dates back decades.”

To contact Bloomberg News staff for this story: Rosalind Mathieson in Singapore at rmathieson3@bloomberg.net.

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Brendan Scott

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