Singapore welcomes “good and reputable” companies to list on its exchange, said Senior Minister Lee Hsien Loong at a fireside chat at Business China’s FutureChina Global Forum 2024 on Oct 18. Speaking to moderator, SPH Media’s Lee Huay Leng, the senior minister added that if there are good overseas companies that are interested in listing on the Singapore Exchange S68 (SGX) but don’t fit the exchange’s rules, SM Lee asked them to let the exchange know so it can “look at [its] rules”.
So far, the SGX has welcomed a few Chinese companies to list, although their results have been “mixed” with some good and the rest, “harder to assess”. Some of the Chinese companies listed on the SGX include Yangzijiang Shipbuilding BS6 , Yangzijiang Financial Holding YF8 , Yanlord Z25 , Nio Inc NIO , China Everbright Water U9E , Dasin Retail Trust CEDU and Sasseur REIT CRPU .
“It's not easy to have a stock listed overseas from where the company's business is, where that overseas market and investors there may not know exactly what's happening with the company's natural operations. So that has been a practical difficulty, but we still like to have good companies come in this year,” he says, in response to a question from the audience.
Comments about Singapore's stocks aside, the rest of the fireside chat was focused on the Chinese economy, tensions between China and the West, the country's "fundamental change", as well as the US elections and how its outcome may affect China.
China’s ‘fundamental’ change
Amid tensions between China and the West, Lee notes that the “fundamental” issue is China’s change from being a small part of the world economy and a “negligible part” of international trade in 1978 when it first started its Open-Door policy, China makes up 20% of the world economy and 20% of global trade today.
“So anything which China does, whether it is good or it is bad, the impact on other countries is enormous. The situation has changed,” he says.
China’s becoming a more advanced economy was also another change, from its initial phase of making goods such as clothing, lower-end electronics products and assembling goods.
Today, the country is moving up and making electric vehicles (EVs), photovoltaic panels and are in pharmaceutical industries. “You are in industries which are competing with similar advanced industries in the developed economies. It is a more competitive relationship and therefore China's growth in these markets is not just benefiting the consumers, but also impacting the producers in other countries,” Lee notes. “And that is difficult. You have to accommodate somehow, but it is difficult.”
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Furthermore, with China’s growth and development comes changed interests.
“You have strategic interests, you have security interests, you have foreign policy interests in very far away parts of the world. The Belt and Road Initiative includes countries in South America. And in Africa, China is very active,” says Lee. “China's interface with the rest of the world is multifaceted. And then the question comes, ‘Who is number one? Who is number two? How does number one and number two work together? Can you work together?’”.
“There is no doubt that for the world, we are much better off with China like it is today, than with China as it was 30 or 40 years ago or 50 years ago. But it means that there has to be an adjustment. It is not a matter of right and wrong.
“But it is in China's interest, and it is in the world's interest that this adjustment has to be made. What is the adjustment? It is to acknowledge that the situation has changed, that China's heft, its influence, its impact on the world is on a different scale. And you have to make accommodations and adjustments to the rules, which were set up at a time when China was much smaller,” he adds.
China yet to peak; ‘unwise’ for the West to write the country off
To this end, it is “unwise” for the West to write China off and this “works in both directions”, Lee says, adding that both the US and China have “this danger of underestimating the other”.
To him, China has yet to peak for three reasons.
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For one, the factors which hold it back, such as its declining population and workforce, are not things which have to “bind and paralyse it”.
“The population may not be growing, but you can make better use of the population, the workforce,” he says, noting China’s “very low” retirement age of 50 for women and 55 for men.
Even though the Chinese government is going to adjust the retirement age to 55 for women and 60 for men, Lee notes that the retirement age is “still quite low” while adding that the adjustment may take the country some 20 years to achieve. “But if you can stay productive longer, if you can stay active longer, if you can make full use of the women – that is one major source of growth capacity,” says Lee, referring to Chinese leader Mao Zedong’s famous adage that “women hold up half the sky”.
In his view, China’s process is not complete either. While the country has been urbanising “very systematically” with about 1% of the population – or 15 million people – moving to the cities, 35% of China’s population still rural, compared to developed countries’ farming population of about 2% to 3%.
To do so, the country has to have jobs and homes in the cities, set up schools for their children and introduce an “agricultural reform” for them to make use of the land that they have been farming. “Maybe lease it out to somebody, or sell it to somebody else, consolidate, become bigger scale, more productive, and take that and go into the city and make a new life in the city,” he suggests.
China’s advanced and high-quality technology in its electric vehicles (EVs), batteries and solar panels is also another reason to believe in the country still. “I think in many areas, China is actually world-class… That is a big reason why the costs have come down, and why the Chinese products are so competitive. And so it shows the Chinese can do it.”
Finally, Lee noted the determination of the Chinese, who have seen what they can do, what other countries can do, and are aware that they need to catch up. “I think that determination is there, and it will get them to move forward and to see through any difficulties there may be. So I have reasons for confidence, and I am hopeful that the reasons for confidence will outweigh the signals of concern.”
China’s ‘more mature’ economy to see slower growth
While the series of stimulus packages recently given by the Chinese government will be “helpful” in boosting the confidence of the Chinese economy, the country’s economy is likely to grow slower than its previous growth rate of 8% to 10% a year. Now, if the country is able to sustain growth of 5% per year for another 10 years, it is “doing well”.
“First of all, you are already more mature. It is not so easy to keep on just transforming yourself. Secondly, the labour force is not expanding anymore. The total population has peaked, the working age population has also peaked. It has levelled off, probably starting to come down already, slowly. And so, you can no longer just have a natural expansion of the economy,” he says.
The “less favourable” external environment, with “geostrategic” tensions between the country and the US and Europe, also means foreign investments will require more encouragement to go into China.
“The export markets are not as open as they used to be. So that is another factor which influences China – not just the growth, but also the upgrading and transformation,” he says.
Finally, Lee notes that the Chinese government’s priorities have shifted, with national security and domestic political considerations coming above economic development.
“In that situation, I think the environment for people to spend, for companies to start up, or for big companies to build new businesses, I think will be more cautious. It is inevitable,” he says. “The government will give reassurances that they do want the private sector to have an important role. They do want entrepreneurs to have confidence. But the national security considerations are important. The political considerations cannot be ignored. And that has an impact.”
US elections
In response to a question on the US elections from a member of the audience, Lee says the tensions between China and the US are “not personality-based”.
“There are forces, there are deep attitudes which are formed on both sides,” he adds. “A social consensus on the American side that China is a challenger, a rival, even a threat to America in the long-term, potentially.”
“And on the Chinese side, a very deep conviction that the Americans want to stop the Chinese from matching them; certainly would not allow the Chinese to overtake the US, and even overtly saying that the US would prefer the Chinese to be behind them. This is a very fundamental contradiction, which is not going to go away,” he continues.
No matter who’s going to be in the White House after this November’s elections, the tensions are not going to change.
“I think with Harris, it will progress in a more predictable way, with fewer sudden shocks and less risk of things going completely out of control. But that basic attitude is not going to change,” Lee says.
“With Trump, things can progress in many more sudden directions. For example, he has said that the day after he comes into office, he will put 60% tariffs on Chinese products, and 10% on everybody else. And he may possibly do that. It is within his power to do that. And if he does that, you are in uncharted territory,” he adds.
Overcapacity
On the issue of overcapacity from China, the senior minister notes that it is an issue in some industries such as EVs and solar panels where the country has “very intense competition” and “very high production”.
With solar panels alone, China comprises 80% of the global market and has the capacity to produce more than 100% of the world’s demand. EVs are also another “prime example” with 150 different brands in the country.
“China is a big market, but you do not need 150 different brands of EVs,” says Lee.
Even though the senior minister does not see overall overcapacity in China, he notes that the country has a “considerable” export surplus and balance of payments, which is an issue.
China’s exports exceeding imports and having a trade surplus is having an impact on other economies and manufacturers elsewhere, he says, adding that China’s export surplus makes up about 2% of its GDP and about half a per cent of the world’s GDP, which is no small thing.
To Lee, the solution is for China to increase its domestic consumption and bring its economy into a “better external balance”, although it is not so easy to do.
“It is not just a matter of households spending more. But it is about restructuring the economy so that the household earnings can rise – particularly for those who are not already very well off, and who will then spend the money. And the households must have the confidence to go out and to spend it; whether it is on travel, whether it is on food, whether it is on clothing, luxuries,” he says.
“They tell me that this year, during the golden weeks, the travel demand is less than in previous years. So that is a sign, but it goes beyond that. There has to be economic restructuring,” he adds.
