(Bloomberg) — Singapore’s Deputy Prime Minister Gan Kim Yong said neutrality is not possible, highlighting the rising challenges for the city-state that has long sought to tread a diplomatic tightrope amid US-China trade tensions.
“If you try to be neutral and walk the middle road, the road is getting narrow and narrower, eventually you will be at a knife’s edge and you won’t be able to stand on it,” Gan said at a conference hosted by UBS Group AG in Singapore. “The key is we have to take sides, we have to take position, we have to do so based on principles.”
The city-state, he said, takes a approach based on its interests that the country has to do businesses with both the US and China, as well as other countries. A taskforce set up earlier this year that he chairs is to help the government and businesses cope with the situation, he said.
“We try to find a way that will be comfortable for both sides so that we can continue to do business with both sides,” Gan said. “I must say that it’s increasingly difficult and challenging.”
The remarks come a day after Prime Minister Lawrence Wong announced a new cabinet in which Gan retained his position as deputy prime minister, as well as the trade minister portfolio. Wong has said the city will forge closer links with countries who share the same commitment to open and free trade.
China has historically been the nation’s biggest trading partner, while the US is the largest foreign investor and a critical military partner. Singapore’s merchandise trade with China last year reached S$170.2 billion ($132 billion), the official data shows, the highest of any nation. That’s compared with S$132 billion it did with the US.
Separately, Singapore will keep manufacturing among its key sectors, and maintain its 20% contribution to the gross domestic product, Gan said Thursday.
Semi-conductors, pharmaceuticals, and aerospace are among the businesses that the government encourages, Gan said. Financial services including wealth management remain another key sector to the economy, he said.
Gan, who is also chairman of the Monetary Authority of Singapore, justified the central bank’s position to maintain a strong local currency, which has appreciated more than 5% against the dollar this year. “When we go overseas and find things are cheaper, never forget that this is because we have a strong Singapore dollar,” he said.
–With assistance from Catherine Bosley.
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