US-China relations are the ties that bind for Singapore and Asean

The following is part two of an article first published in ThinkChina.sg by George Yeo, a former Singapore minister for foreign affairs, who is now senior adviser for Kuok Group and Kerry Logistics. The first part was titled, "How Singapore's 'Chinese-ness' helped shape China's great revival".

In 10 years, China's nominal GDP may overtake that of the US. Short of nuclear war between the US and China, there is little doubt that China's importance to Singapore and Asean will continue to grow. But we have to be watchful of the worsening relations between China and the US, which are affecting the entire world.

US antagonism towards China's rise will not abate for years to come. It stems from frustration with its own internal contradictions and heightened concern that China will displace it as the pre-eminent power in the world. Although China does seek greater influence in the world, I do not believe that it wants to displace the US as top dog. It is not how China sees itself. Except for a short period during the Cultural Revolution, China has never been a missionary power. It sees its civilisation and culture as unique to itself. Unlike the West, it does not proclaim its values to be universal.

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What China desires is a multipolar world with itself as one of the major poles. China knows that it may be years, even decades. before the US accepts a multipolar reality. China's response to the US is predictable: be firm on matters of principle, retaliate if necessary but avoid escalation where possible.

China's dual-circulation economy plan elaborates this strategy. The internal circulation economy is to ensure that the Chinese economy will continue to thrive regardless of external disruption. China fully expects the US to put pressure on it from every direction over an extended period of time with the help of allies.

Psychologically, Beijing is preparing the Chinese people for "protracted warfare". China already has the world's most vertically integrated economy. It is working furiously to overcome critical deficiencies like nano-chip technology. There is quiet confidence that its internal market is big enough to sustain continued growth. China already has a bigger retail market than the US.

DUAL ECONOMY

Although the external circulation economy will still be given high emphasis, and remains a critical stimulus for domestic progress, China knows that different parts of it will be disrupted at different times by the US. Among the Five Eyes countries, there is tighter and more public coordination. The US is stepping up pressure on Europe, India and Japan to support its moves. They will go along sometimes, but not every time, and certainly not on all issues. With a secure internal circulation economy, China's domestic policy will be less of a hostage to US interference and its foreign policy will have more room for manoeuvre.

The dual-circulation economy is not novel. Dynastic China always depended more on internal circulation than on external circulation. When Lord Macartney presented gifts from King George III to Emperor Qianlong in 1793, the latter gave the curt response that there was nothing China was not capable of producing for itself.

This arrogance became China's undoing and the country could not withstand the Western onslaught in the subsequent decades. Internalising this lesson, China takes care to underline that it will continue to open up to the world under the dual-circulation strategy. The Belt and Road Initiative is integral to the external circulation economy and, despite opposition from the US and a few other countries, remains vital for the development of critical infrastructure in Asia and Africa.

The details of this dual-circulation strategy - increasingly presented as an imperative - are currently being elaborated in the 14th Five-Year Plan (2021-2025) which is being drawn up. The key idea is strategic robustness which enables China to continue opening up without thereby becoming more vulnerable. A strong international circulation will help China overcome the US's stranglehold on critical technology and its weaponisation of the international financial system.

Recently, Henry Kissinger warned that US and China leaders "have to discuss the limits beyond which they will not push threats". Otherwise, "we will slide into a situation similar to World War I". Further, the US should "think of an economic world in which no other country should be able to blackmail us, but where that objective is not designed in such a way that all potential technological capabilities in other countries have to be confronted and reduced".

China's dual-circulation strategy is conducive to this outcome. The stark reality is that US-China relations in the coming years will have fateful consequences for all of humanity in the 21st century.

Much will depend on the US recovering its strength and self-confidence. American society has never seen such division since the Civil War. Under President Trump, US foreign policy has put America first in a forceful way, including restricting foreign student access to universities that are the best in the world. The US can only be "a benign superpower", a term frequently used by Lee Kuan Yew, if it is internally united, hopeful and vital. The Covid-19 pandemic has been a testing period. The International Monetary Fund estimates that the US economy will contract 4.3 per cent while China's will expand by 1.9 per cent.

ASEAN'S ROLE

The future of Singapore and Asean is bound up with the titanic contest between the US and China. Peace and development in Asean require us to balance the big forces at play, and in a dynamic, not static, way. Sometimes, we may have to lean further in one direction to maintain our poise. Our objective is always to be the peacemaker. Singapore's relations with China can only continue blossoming if Asean, as a whole, is stable and neutral.

China is already Asean's most important trading partner and will become more so in the future. It is in Asean's interest to welcome the presence of other partners as well, especially the US. We welcome everyone's friendship provided no one insists on an exclusive friendship, which was Premier Zhu's wise insight into the psychology of Southeast Asia. A friendly, unthreatening Asean open to all the major powers is good for China.

The only issue which can undermine Asean-China relations is the South China Sea. Once the Code of Conduct is signed, minds can turn to win-win cooperation and joint development of mineral and maritime resources. For example, Hainan Island, which is already a special economic zone and a separate customs region, can be brought into closer relationship with Asean. By so doing, the South China Sea becomes (again) a peaceful waterway connecting China and Southeast Asia and one open to all countries in the world. For much of maritime Asian history, China and Southeast Asia enjoyed close relations without significant conflicts, with the trade winds bringing people, goods and ideas both ways.

Asean will play a modest but significant role in China's internal circulation economy and a major role in China's external circulation economy. Singapore, which is a creation of 19th century China trade, will play an essential role in China's external circulation economy. Singapore has been an enthusiastic supporter of the Belt and Road Initiative.

As the renminbi becomes a major currency for international trade, Singapore's role in China's external financial circulation will assume greater significance. Hong Kong's role has been somewhat diminished by Beijing's new national security law while London's role has also been affected by increasing pressure from Washington to act against China.

Without Asean, Singapore's manoeuvring space is severely circumscribed. Asean must always be the first circle of Singapore's foreign policy. We are a small country and can never hope to treat major powers as anything but. Other Asean countries more or less feel the same way. It is this common fear which binds us together. Although we are not united like members of the EU, we do share common instincts which have grown stronger.

The diversity within Asean forces us to adopt flexible internal structures and systems. This variable geometry gives Asean its resilience. Singapore's good relations with China are contingent on Asean's good relations with China. When I was trade minister, we often negotiated bilateral FTAs with major economies first before encouraging the rest of Asean to come along. In the case of China, we took a conscious decision that Asean should have its FTA with China signed up first before we negotiated with China bilaterally.

Although Singapore's relationship with China has a long history, it is right that we mark the establishment of diplomatic relations 30 years ago as a milestone. It marks two important features: one, that we are politically separate from China and, two, that we share a natural affinity borne of history and culture. Clarity of these two features will ensure that the relationship between Singapore and China will continue to flourish amid geopolitical and geoeconomic shifts, for our mutual benefit and that of the region.

This article originally appeared on the South China Morning Post (SCMP).

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