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Transcript of Deputy Prime Minister and Minister for Finance Lawrence Wong's Dialogue at Bloomberg New Economy Forum, 17 November 2022

17 Nov 2022


1.     Deputy Prime Minister and Minister for Finance Lawrence Wong
2.     John Micklethwait, Editor-in-Chief, Bloomberg Editorial and Research

Micklethwait: Deputy Prime Minister, thank you very much for talking to us again. I should explain to people who are not Singaporeans that you are here in two capacities. One is a member of the current government – Deputy Prime Minister as we said, the second is the anointed successor to Prime Minister Lee and thus the expected next Prime Minister, assuming that the People's Action Party somehow manages to win the next election.

DPM: Indeed, we do not take that for granted.

Micklethwait: That had seemed to work quite well since 1959. I asked Henry Kissinger on this stage – which Lee Kuan Yew would be more worried about, out of Russia-Ukraine, or US-China? He said definitively, US-China. I wonder where you stand on that.

DPM: I am not surprised at all.

Micklethwait: Do you think anything has changed on that? Because if you come back from Bali (where the G20 was held), because of Xi meeting Biden (for the first time as Presidents)?

DPM: It is very good that the leaders had an important and constructive meeting on Monday. But this is really just the beginning of a long and difficult journey. We should not have any illusions that this one meeting will change things overnight, because there have been such deep suspicions and distrust built up over so many years. And as the saying goes, trust is built in drops, but lost in buckets. So now begins the long journey of building trust step by step and recognising that there are still major differences between both sides, making sure that neither party takes any actions that will cause trust to be eroded very quickly. But for now, it is a good start.

Micklethwait: Do you think, is there a logical next place for that to go? I mean, they talk about discussing things like climate change, those are sort of the easy subjects, in some ways.

DPM: But do not trivialise them (these subjects), because I think these practical areas for cooperation are indeed important steps to building trust, as are the next steps of opening more channels of communication, which is happening. It is a very good thing because you need that beyond the personal relationship at the very top – you need more channels of communication for trust to be built, and importantly, through these actions and interactions, hopefully the development of some guiding principles or guardrails, so that both sides understand where the other’s red lines are, what are some of the difficult issues. They will then have some basis to manage this very important relationship for the coming years.

Micklethwait: You talked earlier about the US and China sleepwalking into conflict. Is that still your worry? Do you think they should have woken up now?

DPM: We always worry. The good thing is that both sides have made very clear they do not want to enter into conflict, that they are looking at a new phase in their relationship where they want to manage differences, avoid competition from escalating into conflict, and that is positive. But as I mentioned just now, the fundamental differences have not changed. America considers China its strategic rival, and it has made it clear that it wants to not just have a lead in technology for one or two bounds, but as far a lead as possible. And the more America takes action in that direction, the more China will feel, ‘you are really just trying to keep me down permanently, to contain me’. That will elicit a reaction from China, so the risk of us moving into a more bifurcated and balkanised world still remains.

Micklethwait: You are referring to the kind of “chip war” so to speak, especially the recent Biden declaration, the new rules about chips, which make it very difficult for anyone to work with both America and China.

DPM: It is chips, it is technology, it is also trade and supply chains. On both sides, (when it comes to) trade and technology, I think there are legitimate concerns around security. There are legitimate concerns about building greater resilience in supply chains. But if you carry the arguments too far, I think there will be many unintended and far-reaching consequences that will make all of us worse off.

Micklethwait: When I was here last, it was publicly very obvious that Singapore or Indonesia, the region, took a very dim view of Nancy Pelosi’s visit to Taiwan. Do you think it is the same thing about the semiconductor deal, was it something that is seen as overly aggressive against China?

DPM: Like I said, we recognise that there may well be areas of legitimate security concerns. But you can make the argument that everything is dual-use, really. So how far does that go? If you can keep it to, and be very careful about, defining your security interest and limiting it to areas of critical technologies where there are legitimate security interests, I think there will be more countries that understand America's position and will be prepared to support that. But once it gets more and more far reaching, I think there will be concerns from many countries in Southeast Asia.

The same goes for dealing with supply chains. If there are critical dependencies in essential areas and there is a need for more diversification, then all of us would support that. We constantly look at diversifying our import sources, which is why when our neighbours banned the export of live chickens to Singapore, we did not flap because we have got many alternatives, like frozen chickens. Diversification is not decoupling.

Micklethwait: You are in a strange position on the chipmakers because, at least in principle, you could imagine the Southeast Asian region gaining, because chipmaking is now going to move away from China and Taiwan.

DPM: No, we can see why companies and investors might want to diversify their exposure in Asia, look at smarter diversification, and set up more manufacturing in Southeast Asia. Certainly, many Southeast Asian countries will welcome that. But I think if diversification becomes decoupling, and you have separate supply chains, different technology or circles which cannot interact with one another, countries will have to choose sides and no one wants to be in that position.

Micklethwait: We will come back to choosing sides in a second, but surely, the world that you will inherit could be one where there are two tech ecosystems – there is an American ecosystem, and there is a Chinese tech ecosystem, and you might have to keep a foot in both, but you cannot sit in the middle.


DPM: There already are two separate ecosystems evolving in some critical areas of technology. But I am talking about how this might become more pervasive across even very straightforward matters. The entire technology supply chain is such a global network now, it is not like in the days of the Cold War. So if you are talking about a complete separation – nothing in my ecosystem can be made in another ecosystem – then in such a case, we are talking about a major separation which will not only impact Singapore, but it will impact the whole world and companies everywhere.

Micklethwait: In terms of America, when America keeps on coming to this region – we had Katherine Tai this week – will you join them in their non-existent trade pacts?

DPM: We understand (their position) as we have had this conversation before. We know the constraints of domestic politics in the US. We would like to have trade; we would like to have market access. We encourage the US Administration to keep these options open. At a suitable time down the road, if the opportunity arises, do consider it. But meanwhile, there are many areas we can cooperate on, (such as) around the green economy, the digital economy, supply chains, including green financing, and many things that America can do in Southeast Asia.

Micklethwait: But do you think that America is losing that part of the economic argument, because it is not coming. There is a group of countries, including Singapore, who are sympathetic to many of the more democratic parts of the American message, perhaps even a little bit scared of Chinese hegemony. Yet, as long as America keeps on coming back here without the kind of economic frameworks that you and other countries have, it is making it hard for America to win that battle?

DPM: Which is why we have been a consistent advocate for America to strengthen its economic cooperation and put meat on the Indo-Pacific Economic Framework which they have introduced and implemented. It is a framework now, but it needs meat and that means looking at each of the pillars of cooperation and pursuing concrete projects. It is happening, the Ministers have been meeting for one or two rounds, and I think there are some concrete projects that are being discussed. It is promising and there is something on the table. It is not just talk.

Micklethwait: What about China? Do you see any change in China's attitude now that Xi has somewhat miraculously been elected to a third term?

DPM: For the Chinese Communist Party and for Xi Jinping, now that the Party Congress is over, they have consolidated and made it very clear that the new leadership team will be very focused on setting the direction for China's economy going forward. They have medium- and long-term goals very clearly set out but their immediate challenge is to get out of COVID-Zero, and deal with some of the very real challenges in the near term, including the property market debt.

Micklethwait: In the past, certainly going back a year or so, there were kinds of mumbling out of places like Singapore that China was overreaching. There was talk of trying to interfere in domestic politics, those sorts of things. Now that Xi Jinping is more safely ensconced, do you think that might change?

DPM: It is hard to say. All countries, as they become bigger and larger in size, more developed, look to become more assertive in their foreign policy and to assert their national interest. This is not unique to China at all. As a small country, Singapore experiences this all the time.

Micklethwait: Something which would be unique and which is certainly something which is on everybody's minds here is the chances of China invading Taiwan. What kind of odds do you put that up?

DPM: President Biden made clear after his meeting with Xi Jinping that he did not see any imminent threat of an invasion in the near term. That is the readout we got from the meetings that they had. We think that is the case because China and President Xi now have so many immediate domestic preoccupations. Why would they want to do something like this? But having said that, for China, Taiwan is a red line, as President Xi made it as clear as possible to President Biden. It is in fact, the reddest of red lines, because for China, Taiwan is about sovereignty; it is about territorial integrity. So China cannot have America talk about two Chinas. There is one China and after all, this was the basis of the 1972 agreement as well.

Micklethwait: Do you think this is one of those debates where you can see the different people, you can see America, China, Taiwan, the three main parties, they are all repeatedly saying they want to keep the status quo whilst at the same time, slightly salami-cutting a little bit more; each time they have just tried to change the debate slightly?

DPM: Which is why I mentioned at the start of our conversation, that this is just the beginning of a long process, because on China, indeed everyone is saying the right things, but manoeuvring for maximum advantage. That is not helpful because accidents can happen, miscalculations can happen, and that is why it is so important for both sides to come together, sit down and have a clear understanding of where the red lines are; communicate with one another. Have that level of communication, not just at the very top, but across all levels, including amongst the military.

Micklethwait: Your Foreign Minister’s nice phrase about “you could have overlapping circles of friends” – do you worry that you are heading towards a world where it is harder to have overlapping circles of friends?


DPM: We do. That is why we are very encouraged by this first conversation that took place between President Xi and President Biden. That is why we take the lesson from Ukraine. It is not to wait until conflict happens; that is too late. The lesson is really to start thinking now about what can we do in Asia, to develop a framework of cooperation that will maximise our chances for continued stability and prosperity, and to us, that means having a framework where we can have overlapping circles of friendships; where people can do business with many parties. We want all the major powers who have stakes in Southeast Asia, and to do business here in Southeast Asia.

Micklethwait: One of the consequences of what is happening at the moment, is that people have been leaving Hong Kong and coming to Singapore. A lot of mainland Chinese money seems to be coming here especially. Vast number of family offices have grown. There are a lot of other things coming in. I know you will tell me immediately that Singapore has nothing but the best interests for Hong Kong.

DPM: We want them to succeed.

Micklethwait: You want them to succeed but for better or worse, you are getting a lot of their money. Now, if that money is coming here, it does cause you problems though – it will cause you worries about inequality.

DPM: We will always keep Singapore an open economy. There is no alternative for us. After all, the whole basis of the Singapore story is one of the triumph of openness. That is why it is so important, even existential, for us to keep ourselves open. But we know that there are downsides to an open economy, which is why the Government is clear-eyed about the challenges and we will deal with these downsides (to an open economy). This includes making sure that Singaporeans can have access to affordable housing, ensuring inclusive growth, dealing with income and wealth inequalities, and also continuing to invest in Singaporeans, so that we give them that maximum advantage to excel and do well in an open economy.

Micklethwait: That is part of the problem, isn't it? You only have a small amount of space. “Rent” is the most common word I have heard in Singapore these past three days. There is a pressure in that direction.

DPM: That impacts more foreign professionals who are looking to rent, but it does have an impact on competitiveness. Prices are also a concern with regards to affordability. Fortunately, we do have in Singapore public housing that caters for 80% of Singaporeans. We can keep prices affordable, and we monitor this very, very closely – the entire property market as well as affordable housing for Singaporeans – because it is such an integral part of our compact, and because, as you say, Singapore is so small, and if we do not keep a close watch over it, a lot of the foreign investments in the property market can easily bring about a huge problem for us.

Micklethwait: One of the things Singapore has been very open to is crypto.

DPM: We are open to digital innovation and digital asset innovation, but we are not open to crypto speculation at all.

Micklethwait: You are one of the biggest crypto centres in the world. You might call it digital money, but given what has happened in the past couple of weeks in the crypto market, does that give you any cause for concern in that particular area?

DPM: It has just reinforced our views that we were on the right track to go big on digital assets innovation, which is an important enabler and something that potentially can transform financial markets, cross border payments, settlements, capital markets. A lot of potential there. But we have said this for a long time, even when people criticized us for saying that, which was that we need to take a strong stance against crypto speculation and trading, especially by retail investors. So even before FTX happened, we had put out a consultation paper on tightening regulatory rules around this aspect on crypto trading, on retail investors’ access to crypto. We plan to tighten, we had put out a consultation paper and we will review the rules that are necessary. But we will continue to embrace innovation around digital assets which we think has tremendous potential.

Micklethwait: Would you say it is part of a necessary shake-out for the crypto industry, and perhaps it is part of the maturing of crypto?

DPM: Partly. In the FTX case, there are very serious allegations that amount to potential fraud even, so it is not just about governance, it is a whole range of issues, and we will have to see what happens with the investigations. But I think there was a bit of a bubble, and now we are starting to see some shaking out (of that) as well.

Micklethwait: Can I ask you a bit about openness as well? You are the next face of Singapore, and you talked about Singapore being more open. It is famously open financially, a little bit less socially. The last time we were here, we talked about the laws of homosexuality being revised.

DPM: We have a debate on this in Parliament this month.

Micklethwait: Now that that has gone through –

DPM: It is coming in Parliament at the end of this month.

Micklethwait: Are there other things where you think Singapore could open up a bit further?

DPM: There is no question that we are becoming a very diverse society, and there will be segments in Singapore with different views. People will desire more openness socially as well. Because it is a very diverse society, the different segments in Singapore will value different aspects, including stability, security, the fact that their children can go out safely at night. These are important things to them as well. So how do we balance between these different considerations? I think society will evolve and the Government will continue to engage citizens and see how best to represent their aspirations.

Micklethwait: Any chances of more openness? Thailand has just decriminalised cannabis; rather than be tougher, would you take a similar stand, which would make your name?

DPM: I am not out to make a name for myself. I am here to make sure that Singapore continues to succeed and do well for many more generations to come.

Micklethwait: Thank you very much for being here. Thank you very much for listening to the New Economy Forum.