China becomes Singapore's 4th largest trade partner

Asian Economic News, Jan 18, 2005

SINGAPORE, Jan. 17 Kyodo

China overtook Japan for the first time to become Singapore's fourth largest trade partner in 2004, a year that the country's external trade hit a record high of S$580 billion (US$355 billion), according to the latest annual trade data released Monday by Singapore's external trade promotion agency.

Helped by China's economic expansion, Singapore's trade with the country grew 31 percent year-on-year to S$53.3 billion, making it the fourth largest trade partner following Malaysia, the European Union and the United States, the International Enterprise Singapore under the Ministry of Trade and Industry said.

Japan ranked fifth at S$51.8 billion.

If trade with Hong Kong, which is worth S$35.9 billion, were included, China's trade with Singapore grew to S$89.2 billion last year, making it the largest trading partner, slightly ahead of Malaysia. Trade with Malaysia stood at S$88.2 billion last year.

In terms of non-oil domestic exports alone, China also became Singapore's fourth largest export market at S$11.7 billion, overtaking Japan, and would have been the third largest market after the European Union and the United States if trade with Hong Kong were included.

Government officials said they are optimistic that trade with China would continue to increase this year despite fears of a slowdown in the Chinese economy. The agency said it expects strong growth in the Chinese economy this year and ''this would have a positive impact on our direct and indirect exports to China.''

Last year's trade performance was helped by improving global economic conditions, especially in the United States and Japan, the recovery of global demand for semiconductors, which boosted the electronics industry here, which makes about 35 percent of the world's hard disk drives, it said.

Soaring oil prices also benefited Singapore in its role as an oil refiner and re-exporter.

Singapore enjoyed a trade surplus last year, with total exports amounting to S$303.5 billion and imports totaling S$276.9 billion.

The agency projected the country's total external trade would grow at a more moderate pace of between 7 percent to 9 percent in 2005 due mainly to an expected slowdown in global electronics demand.

One of the bugbears is the weakening U.S. dollar. ''Though short term currency fluctuations, in general, do not have significant impact on our exports, a persistently weak U.S. dollar may put a dampening effect on world growth, which would in turn affect our overall export performance,'' it said.

Last year, Singapore's non-oil domestic exports to the United States recovered from three consecutive years of contraction to post a positive 6.4 percent growth, while similar exports to Japan expanded 7.7 percent in 2004 ebbing slightly from the 10 percent increase in 2003.

China and Singapore are planning to launch negotiations for a free trade agreement.

Bilateral free trade talks were originally scheduled to begin in November last year but have been delayed after a spat between the two countries earlier last year over Singapore Prime Minister Lee Hsien Loong's trip to Taiwan just before he took over the leadership.

Leaders of the two countries have mended ties in recent months, but there has been no word when the talks might begin.