As China’s global economic clout grows, amidst worsening tensions between China and the US, Singapore faces an increasingly challenging task in striking a balance between the two superpowers.
In that respect, Singapore has something in common with HSBC. Both the US and China have important influence in the city state and HSBC, one of the world’s largest banks serving 40 million customers in 65 countries.
Continuing its historical tradition, HSBC has an important presence in Hong Kong and mainland China. The bank, listed in Hong Kong, London, the New York Stock Exchange and Euronext Paris, also has substantial business in US, UK and Singapore.
Recently, HSBC has been caught in a bind between the US and China. On August 17, HSBC was conspicuously absent among a list of 18 banks announced by the People’s Bank of China that will participate in pricing for a new loan prime rate to be set by the Chinese central bank, as part of China’s reform of interest rates.
Although the reasons for HSBC’s exclusion are not stated, this move has aroused speculation that the sidelining of such a major China-focused bank could possibly be due to Beijing’s displeasure with HSBC’s role in the case of Huawei Technologies, a leading Chinese telecommunication equipment firm. Around February in London, Liu Xiaoming, the Chinese ambassador to the UK, questioned then HSBC chief executive John Flint on his bank’s role in the arrest and prosecution of Huawei chief financial officer Sabrina Meng Wanzhou in Canada, reported the Financial Times on August 19. Flint resigned as HSBC chief executive in August.
Under the demand of the US Department of Justice (DOJ), HSBC investigated Huawei and provided its findings to the DOJ, which led to US charges against Meng, reported Reuters in February. HSBC’s investigation occurred in 2016 and 2017, while it was under a deferred prosecution agreement (DPA) with the DOJ to avoid US charges. Under the DPA, the DOJ installed a US lawyer, Michael Cherkasky, to monitor the bank till July 2018, which demonstrated the US hold on HSBC.
As the US tries to restrict Huawei, Singapore may have a “big headache” trying to choose between the Chinese telecommunication system supporting Huawei or the US telecommunication system, Singapore Prime Minister Lee Hsien Loong said at his National Day Rally speech on August 18.
Supposing in future, the DOJ requests the extradition from Singapore a senior Chinese executive like Meng. How will the Singapore authorities respond without alienating the US and China?
Speaking in Mandarin, Lee said if Singapore supported China, the US and other countries may assume this is because Singapore is a majority Chinese nation. Conversely, in the past, Singapore has disagreed with China on certain issues, he added. “Some mainland Chinese asked us, ‘We share the same culture, race, language, why don’t we share the same viewpoint?’”
Whether in Washington or Beijing, Singapore must maintain its stance and explain its position, Lee stressed.
Apart from commonalities in race, China’s growing economic might will exert increasing influence on the Southeast Asian nation. Lee said the US is by far the biggest foreign investor in Singapore, but Chinese investments in the Lion City are not insignificant. The stock of Chinese investments in Singapore has been growing at an annual average of 10 percent since 2010, reaching S$36.3 billion (US$26.2 billion) by the end of 2017, Singapore Trade and Industry Minister Chan Chun Sing said in February. Increasingly, Chinese companies like Bank of China have offices in Singapore employing many locals, along with US multinationals like Apple. China is now Singapore’s largest trading partner. Moreover, Singaporean companies like Capitaland have substantial investments in China.
Like HSBC, both the US and China have strings to pull in Singapore.
The Singapore government professes support for the Belt and Road Initiative, China’s plan to connect with other nations through infrastructure projects like ports and railway. However, senior US officials like State Secretary Michael Pompeo have publicly criticized Belt and Road as opaque debt traps which undermine the sovereignty of nations that accept Chinese projects.
The US is the world’s strongest military power with substantial partnership with the Singapore Armed Forces, while China’s naval strength in the South China Sea is growing.
Already there are divisions within Singapore’s elite on how to handle a rising China. In 2017, a retired Singapore diplomat, Bilahari Kausikan, criticized another former Singapore diplomat, Kishore Mahbubani, for writing in a newspaper column that Singapore should know its place as a small state dealing with China. Although neither men are card-carrying members of the ruling People’s Action Party (PAP), both can be described as members of the local establishment. In future, whether the PAP or another party rules Singapore, I do not rule out the possibility of disagreements within the ruling party on how to manage China.
Navigating between China and the US will be as delicate a balancing act for Singapore as a snail moving along a razor blade. But if Singaporean leaders demonstrate intelligence and dexterity, they can soar like a butterfly transcending the dilemma of choosing between the world’s two biggest economies.
Toh Han Shih is a Singaporean writer in Hong Kong.