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From the Silk Road to the Straits: The Singapore-China Economic Story
- Foo Yong Kun, Marcus Cheong, and Lan Sin Yu
- 6 days ago
- 8 min read
In this Explainer, find out...
How have Singapore-China economic relations progressed over the years?
What policies have been enacted to strengthen Singapore-China trade ties?
Why is China an important economic partner for Singapore today?
Introduction
As the US-China trade war continues to disrupt global supply chains and reshape the international trade order, countries like Singapore are compelled to adapt swiftly to growing uncertainties in an increasingly volatile global economy. As a nation heavily reliant on trade, Singapore continues to position itself as a strong advocate for multilateralism and stability in global trade.
In A Tale of Two Economies: The United States-Singapore Trade Story, we explored the history and progression of Singapore-US trade ties. In this Policy Explainer (PE), we will now turn our attention to the other global superpower—China. Despite stark differences in geography, population size and resource endowment, Singapore and China have built a strong and multi-faceted economic partnership.
This PE will trace the development of Singapore-China economic relations over the years, examine key bilateral trade policies implemented to strengthen economic ties and connectivity, and explain the importance of China as an economic partner for a small and open economy like Singapore.
Evolution Of Singapore-China Economic Ties Over The Years
Singapore-China economic relations have remained relatively stable over the decades. This enduring partnership stems from the foresight and efforts of Singapore’s previous leaders, who saw the potential in China’s rapid development and the mutual benefits it could bring for both countries. The extent and scope of economic cooperation have since expanded from a primarily trade-oriented relationship to an “all-round high-quality future-oriented partnership” seen today.
Prior to the Establishment of Formal Diplomatic Ties
Before establishing formal diplomatic relations, Singapore and China were already enjoying close informal economic ties. Regular official visits began with former Prime Minister Lee Kuan Yew’s first trip to China in May 1976, followed by then Chinese Senior Vice-Premier Deng Xiaoping’s visit to Singapore in November 1978. Singapore and Chinese leaders also signed a trade agreement on 29 December 1979 and set up respective trade representative offices in 1981 to strengthen economic links between the two countries. These early initiatives laid a strong foundation for the future development of bilateral economic relations.
After the Establishment of Formal Diplomatic Relations in 1990
After the establishment of formal diplomatic ties, both countries upgraded their trade representative offices—originally set up in 1981—to embassies, marking a formal transition in bilateral relations. With greater people-to-people exchanges and deepening business cooperation, total bilateral trade volume grew by 14 per cent from S$5 billion to S$20 billion between 1990 and 2001. Singapore’s imports from and exports to China also grew annually at 12 per cent and 19 per cent respectively, leading to a narrowing trade deficit with China.
Government-to-Government Economic Projects
During his tour of southern China in 1992, Mr Deng Xiaoping remarked that “Singapore's social order is rather good. Its leaders exercise strict management. We should learn from their experience, and we should do a better job than they do”.
With the aim of sharing Singapore’s industrialisation experience and governance model with China, the Suzhou Industrial Park (SIP) was established in 1994 as the first economic intergovernmental project. Focusing on areas related to green development, the digital economy and biomedical sciences—projects that extended beyond trade—the SIP provided an opportunity for government officials to work together on common initiatives. Today, the SIP is one of China’s top industrial zones, with a regional gross domestic product of 368.6 billion yuan in 2023—15 per cent of Suzhou city's GDP that year.
Following the success of the SIP, the second flagship intergovernmental project, Sino-Singapore Tianjin Eco-City (TEC), was soon launched in 2007. Amidst rapid industrialisation and urbanisation, both countries recognised the pressing need to focus on sustainable economic development and combat a range of environmental issues. The project envisioned building a township with eco-friendly features such as green buildings and business parks, renewable energy and green transport. In 2013, the eco-city was recognised as China’s first “national green development demonstration zone”, providing tax incentives to environmentally friendly firms. It also exemplifies high-quality, low-carbon economic growth and serves as a model for other cities in China to potentially emulate.
Establishment of the China-Singapore Free Trade Agreement (CSFTA)
In 2008, Singapore signed a comprehensive free trade agreement with China, making her the first Asian country to do so. The CSFTA eliminates tariffs on 95 per cent of Singapore's exports to China, making Singaporean goods more competitive in the Chinese market. Furthermore, Singaporean firms can also benefit from lower trade barriers and increased market access to various industries in China such as banking, petrochemical and tourism. This contributed to deepening trade ties between both countries, with China becoming Singapore’s largest trading partner by 2013. The CSFTA has been constantly reviewed and upgraded over the years. More recently, the Further Upgrade Protocol was enacted on 31 December 2024, allowing businesses to enjoy greater market access to the Chinese services sector. Details of the CSFTA and the Further Upgrade Protocol will be discussed in the following section.
Bilateral Trade Policies Implemented
CSFTA Further Upgrade Protocol
From 31 December 2024, the CSFTA was upgraded to strengthen trade ties between Singapore and China. This round of upgrades was the third round since the CSFTA’s establishment—it was previously upgraded in 2011 and 2019. The 2024 round of upgrades included the following measures:
1. Greater Market Access For Singaporeans to China’s Services Sectors
Limits on Singaporeans’ equity in 22 sectors were removed. Some examples of these sectors include:
Construction and related engineering services;
Retail and wholesale;
Renting and leasing;
Technical testing and analysis services; and
Architectural and urban planning services.
2. Liberalisation of Trade Rules
The Investment Chapter of the CSFTA included new rules to ban the following practices:
Nationality-based discrimination against investors from Singapore or China to enter markets in the other country; and
Nationality requirements for appointing firms’ senior management or board directors.
Moreover, a new Telecommunications Services Chapter was included to provide clearer rules and transparency for regulating the telecommunications industry in both countries. These rules aim to facilitate industry collaboration for innovation and development.
3. New “Negative list” of Chinese Industries
This negative list is a list of Chinese industries which Singaporeans cannot invest in. The implication is that Singaporeans are free to invest in any industries not on this list, hence promoting investment flows. This negative list is significant because it is the first time that China has completed negotiating the upgrade of an FTA with a negative list.
Prior Upgrades to the CSFTA
The previous upgrade in the CSFTA took place in 2019. This upgrade included four main measures.
Firstly, improving trade in goods by providing Singaporean businesses with improved Rules of Origin that allowed more Singaporean exports to receive preferential treatment.
Second, improving trade in services. In the maritime industry, the upgraded protocol allowed Singaporean shipping firms to own majority stakes or establish wholly-owned enterprises in China’s major port cities. For the construction industry, rules were relaxed for Singaporean construction firms to undertake joint projects in China.
Third, strengthening the existing Investor-State Dispute Settlement mechanism to enhance protection for Singaporeans when investing in China. Fourth, improving customs procedures to facilitate trade.
These measures reflect the continued strengthening of the CSFTA, and by extension Singapore-China trade ties, over time.
Other Bilateral Trade Policies Implemented
Beyond the CSFTA, Singapore and China have inked an array of various economic cooperation agreements. For instance, the Monetary Authority of Singapore and the People’s Bank of China announced joint measures in 2024 to boost financial cooperation in green finance and capital market activity. Such measures include initiatives to support the issuance of cross-border green loans, and a potential pilot programme to increase Singaporean investors’ access to Chinese bonds.
Separately, regarding shipping activity, Singapore’s Maritime Port Authority and the transport Department of Shandong, a coastal Chinese province with many ports, have collaborated. They did so by signing a Memorandum of Understanding in 2023 to collaborate on advancing decarbonisation and digitalisation in shipping activity.
Importance of China As An Economic Partner For Singapore
China is a significant economic partner to Singapore due to the high volume of bilateral trade between the two nations. In 2024, Mainland China was one of Singapore’s top trading partners. Singapore’s exports to Mainland China also exceeded its imports, reflecting a trade surplus with China in terms of merchandise trade value (see Figure 1).
Investment and Finance Links
Singapore has established itself as a pivotal offshore centre for Renminbi (RMB) transactions. Such examples include the renewal of the Bilateral Currency Swap Agreement between the Monetary Authority of Singapore (MAS) and People’s Bank of China in 2022 for another five years until 2027, at a scale of RMB 300 billion (or S$65 billion)., This was done to promote trade and investment settlement in local currencies and enhance financial stability. This is significant for Singapore-China economic ties because the swap agreement facilitates the use of local currencies, reducing reliance on third-party currencies like the US dollar, thereby lowering transaction costs and exchange rate risks for businesses engaged in bilateral trade. Such arrangements can also increase trade flow as shown by an empirical study.
Another example would be that Chinese companies are increasingly leveraging Singapore as a strategic base to access ASEAN markets. Tech giants such as Alibaba, Tencent, ByteDance, Huawei and Xiaomi have established significant regional headquarters or operational bases in Singapore. These companies use Singapore’s strategic location, robust infrastructure, and favourable business environment to expand their reach across the ASEAN market and beyond.
As such, the above examples show that Singapore and China are major investors in each other’s economies. This is significant for Singapore-China economic ties because collaborations between Chinese and Singapore tech firms foster innovation and technological advancement. Joint ventures and partnerships in sectors like Artificial Intelligence, fintech and biotechnology contribute to the growth of both economies. Additionally, the presence of Chinese companies in Singapore enhances bilateral trade and investment flows. It facilitates the exchange of goods, services and capital, reinforcing the economic interdependence between the two nations.
Belt and Road Initiative (BRI) Collaboration
The BRI is China's global infrastructure development strategy, launched in 2013, aimed at enhancing regional connectivity and economic integration by investing in transportation, energy, and digital networks across Asia, Africa, and Europe.
Singapore plays a crucial role in providing financial services for BRI projects. For instance, Singapore’s position as a leading financial centre in Asia makes it an essential partner in financing BRI projects. The city-state’s sophisticated banking infrastructure, stable regulatory environment, and expertise in global trade facilitate the mobilisation of capital for large-scale infrastructure projects. Singapore’s financial institutions, including major banks and investment firms, provide a range of services such as project financing, syndicated loans, and investment advisory, which are crucial for the successful implementation of BRI initiatives.
Additionally, Singapore plays a pivotal role in supporting BRI projects through its robust legal and regulatory frameworks due to its commitment to transparency, significantly enhancing its role in facilitating trade and investment flows within the BRI. For instance, the MAS introduced the Guidelines on Individual Accountability and Conduct in September 2020. These guidelines aim to foster a strong culture of responsibility and ethical behaviour in financial institutions (FIs). By clearly defining the roles and responsibilities of senior managers and emphasising risk governance, the guidelines seek to ensure that decision-makers can be held accountable for misconduct or failures in oversight. The five outcomes that FIs should achieve are clear accountability, fit & proper standards, robust governance, oversight of key risk personnel, and strong conduct culture. This ensures that financial institutions remain transparent in their operations, decisions, and dealings with investors and clients. By promoting individual accountability and setting a high bar for conduct, MAS enhances investor confidence—especially in high-stakes cross-border initiatives like the BRI, where governance and risk management are critical.
Conclusion
All in all, China remains a key economic partner to Singapore, not only in trade but in other emerging sectors such as digital infrastructure, green development and financial services. Underpinned by strong trade flows, as well as common interests, both countries have achieved mutually beneficial growth from working closely together. Though the Singapore-China economic story is still in its early chapters, there is definitely much more to look forward to in the years ahead as both sides continue to tap into new areas of cooperation.
This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.
By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.
The citations to our Policy Explainers can be found in the PDF appended to this webpage.