External trade has played a key role in the economic growth of East Asian countries. In particular, Singapore is highly dependent on external trade, and has close trade ties with China, which has been Singapore’s largest trading partner since 2013; in 2020, Singapore’s imports and exports with China accounted for 14% of its total trade.
With the global spread of the coronavirus since January 2020 and the anti-globalism measures of the Trump administration, the global supply chain has taken an unprecedented hit, and bilateral trade between Singapore and China has also been severely challenged. This year, the pandemic may come under some control and China has adjusted its regional strategy, which could have new implications and give further impetus to the Singapore-China trade relationship.
...although the pandemic has led to a drop in bilateral trade, China is still Singapore’s largest trading partner and its share of Singapore’s trade continues to grow...
Singapore and China trade ties strong despite pandemic
According to statistics from Enterprise Singapore, Singapore’s external trade and trade with China both dropped in 2020, but China remains its largest trading partner. Singapore’s import and export figures for 2020 was S$969.1 billion, down 5.2% year-on-year. In terms of Singapore-China trade, Singapore’s imports and exports to China in 2020 were worth S$136.2 billion, down 0.8% year-on-year. But although the pandemic has led to a drop in bilateral trade, China is still Singapore’s largest trading partner and its share of Singapore’s trade continues to grow, showing the great complementarity and stability of Singapore-China bilateral trade.
After taking a heavy hit from the pandemic, Singapore’s exports to China recovered quickly. Singapore’s total exports since March 2020 shrank year-on-year due to the pandemic; however, in contrast, from the second half of 2020, Singapore’s export growth to China showed a clear recovery. That is, after a sharp drop in export growth to China between February and May 2020, there was a strong rebound from June 2020, once again showing the complementarity and stability of bilateral trade.
Singapore-China bilateral trade has made steady contributions to Singapore’s economic growth. In 2020, Singapore’s trade surplus with China grew as its export growth to China outstripped import growth from China. Singapore’s trade surplus with China in 2020 was S$5.48 billion, up from S$3.53 billion in 2019. The proportion of trade surplus in GDP is a gauge of external trade contribution to the local economy (omitting value added) — Singapore’s trade surplus with China in 2020 was estimated at 1.2% of GDP, up 0.5 percentage points from 2019, indicating that even with the pandemic, trade surplus with China remained an important driver of Singapore’s economic growth.
In 2021, as the pandemic starts to come under control and vaccines are distributed, the global economy will begin to rebound, with a 5.2% growth forecast for the global economy and 8.2% growth forecast for China’s economy, and 6% export growth forecast for Singapore. In terms of exports to China, Singapore will continue to maintain a high volume of exports. In particular, the exports of chemical products, metal products, and mineral fuels are expected to do better in 2021, after a drop in 2020. At the same time, with China’s high demand in integrated circuits and high-level manufacturing, Singapore’s exports of related products will also see relatively high growth.
The US government’s restrictions on China’s trade and technology has prompted China to ramp up building a new regional industrial chain in East Asia that is centred on the China market and does not use US technology.
China’s regional focus will benefit Singapore-China trade
The impact of China’s regional strategy adjustment on Singapore-China trade will be seen in three areas.
First, China will put more emphasis on regional trade arrangements, which will reinvigorate Singapore-China trade. The pandemic coupled with US-China conflicts have made the global trade supply chain and industrial chain more fragile; the global trade supply chain will gradually shorten and become more region-centric. Strengthening trade links with neighbours has become China’s top international strategy. With China-US relations unlikely to change, China will focus more on the Regional Comprehensive Economic Partnership (RCEP), especially trade relations with ASEAN and Singapore.
Second, China will focus on building a regional industrial chain in East Asia. The US government’s restrictions on China’s trade and technology has prompted China to ramp up building a new regional industrial chain in East Asia that is centred on the China market and does not use US technology. As an ASEAN leader in the high-tech sector, especially in integrated circuits, Singapore will have more opportunities for industrial cooperation with China, which will boost bilateral trade growth.
Singapore stands at a key geographical location and is a maritime hub of both of China’s largest and second largest trading partners — ASEAN and Europe.
Third, the RCEP and China-EU investment agreement highlight Singapore’s hub status. Singapore is situated at a key geographical location and is a maritime hub of both of China’s largest and second largest trading partners — ASEAN and Europe. With the implementation of the RCEP and China-EU investment deal, Singapore can leverage its unique geographical advantage to play an even more influential role in China’s most important regional cooperation.
Related: Token economics: How Singapore can boost synergy with China in building digital economies | Ambassador Chan Heng Chee: The future of Singapore-China strategic collaboration | Regulating new technologies: Singapore and China can work together | Wake-up call for ASEAN countries: Curb over-reliance on China and seize opportunities of global supply chain restructuring
