US-China trust needed more than trade deal to stop break-up of world economy, Singapore minister warns

Even if the United States and China reach a trade deal, the lack of “strategic trust” between the two powers could still result in a fragmented global economy, Singapore’s trade and industry minister warned on Monday. Chan Chun Sing said countries around the world would try to “de-risk their economies” by making supply chains operate in silos to hedge against any further falling-out between the economic giants. “That is the most dangerous trajectory for the world’s economy,” Chan told American media. On Sunday the US slapped a new 15 per cent tariff on US$110 billion worth of Chinese imports, which was met with reciprocal taxes on American goods by Beijing. Another round of increases is planned for December 15. Chan said he did not believe the trade war would be resolved soon. The minister also cautioned that the dispute had widened beyond a US-China conflict, and medium-sized powers increasingly were placing their interests ahead of the global multilateral system. The clash had gone beyond a trade war as it had spilled into the technology sector and currency markets, Chan added. In May, Washington banned most US companies from doing business with Chinese tech firm Huawei and has continued to pressure allies to avoid using the company’s equipment for 5G communications networks. Then, last month, America formally labelled China a currency manipulator, a decision which could open the door to US sanctions against the Asian giant. Efforts to resolve the tariff war have stalled and the two sides have yet to agree on plans to resume negotiations in Washington this month. “I think the markets are looking beyond the deal to say, ‘What are some of the measures we need to take in order to prepare ourselves,’ because I think the lack of strategic trust will be the more important factor,” Chan said. “Without … strategic trust, it will be very difficult for both sides and the rest of the world to say we still have one integrated global economy.” The minister would not comment on whether Singapore, a close trading and security partner of the US, had been pressured by Washington to avoid using Huawei for the city state’s 5G roll-out. Trump’s trade antics used to rattle China, but time is now on Beijing’s side “I think the US and our partner countries know we take our security and network resilience very seriously, and we have shared with them how we intend to do it,” he said. Asked how Singapore’s export-reliant economy – which has shrunk on the back of a global slowdown amid the trade war – was coping, Chan said the government was focusing on getting the “long-term fundamentals” in order. Singapore was also diversifying its trading partners to “de-risk the entire economy”, he said, and was pressing ahead with economic restructuring. Singapore will continue not to take sides between US and China, says PM Lee The country would ensure a high quality of investment to bring about long-term gains, he added. In Singapore’s parliament on Monday, he said the city would remain open to foreign talent and not erect barriers to protect local workers, even as officials sought to “reap long-term rewards for Singaporeans”. Chan said the Regional Comprehensive Economic Partnership – a proposed trade deal between the 10 member states of the Association of Southeast Asian Nations and China, Japan, South Korea, Australia, New Zealand and India – would likely be reached later this year or early next year. The 27th round of negotiations ended in July with no agreement. The deal would cover about one-third of the world’s gross domestic product, about 40 per cent of world trade and almost half the world’s population. On whether protectionist sentiment was holding back the talks, Chan said there was an acceptance that trade-offs were needed to “get everyone across the finishing line”, but he did not elaborate. Outside trade, these discussions were also bringing together countries currently having trouble seeing eye to eye on other issues, Chan said, citing South Korea and Japan, which are locked in historical and territorial disagreements. Chan was also asked about the impact on Singapore of the anti-government protests rocking Hong Kong, which are heading into their 14th week. After a weekend of violent clashes and travel disruption, the Chinese city saw the start of a two-day class boycott on Monday by students who should have been returning to school for the new academic year. Chan said Singapore was watching developments in the city closely and counted the protests among the other “uncertainties” it had to grapple with, such as Brexit and the disputes between Seoul and Tokyo. Some businesses based in Hong Kong could be looking at relocating to the Lion City, but “we are not just looking at the numbers, we are also looking at the type of investments we are able to attract”, he said. “We want investments coming here because they value our safe harbour status, they value our intellectual property protection regime, and so forth.” Economic discontent a ‘primary force’ behind Hong Kong unrest Singapore-based economist Jeff Ng of Continuum Economics said the slowdown in China’s economy would have the biggest impact on Singapore, more so than Hong Kong’s troubles or the situation in the US. Growth in the city state is forecast to be between zero and 1 per cent this year. Sian Fenner, senior Asia economist at Oxford Economics, said the Southeast Asian nation’s trade diversification efforts had been positive but would not help it escape the short-term pain resulting from its dependence on exports. Song Seng Wun, an economist with CIMB Private Banking, added: “Diversifying is really all we can do … The two largest economies matter because if they are going to be whacking each other, we just have to make sure we look for as many smaller countries to do business with that hopefully, collectively, still give us business opportunities.”

US-China trust needed more than trade deal to stop break-up of world economy, Singapore minister warns

Chan Chun Sing says the ‘most dangerous trajectory’ for global trade is nations big and small ‘fragmenting’ their supply chains to reduce economic risks The lack of strategic trust between Beijing and Washington is problematic for the global economy, Chan cautions

Chan Chun Sing says the ‘most dangerous trajectory’ for global trade is nations big and small ‘fragmenting’ their supply chains to reduce economic risks

The lack of strategic trust between Beijing and Washington is problematic for the global economy, Chan cautions