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Singapore can also help Hongkong in its business dealings
with the Mainland. Unlike the relationship between China and
Hongkong, the relationship between China and Singapore is a
formal one between two sovereign nations. For example, Singapore has an investment guarantee agreement with China. Singapore also
has an investment guarantee agreement with Taiwan. Because of
this, some Taiwanese businessmen find it convenient to route
their investments in China through Singapore. There may be areas in which Hongkong businessmen may find such an arrangement
similarly helpful for their investments in China. In a broader sense, Singaporean participation can help lower the political risk of projects which involve China, and therefore good for all
parties concerned.
The risk of political instability in China cannot be lightly dismissed. While we may all agree that in the long term China's economy will do well, the short and medium term prospects
are less certain.
China is going through a historic transformation on a continental scale, like a tectonic plate in transition. Hongkong is on the faultline which makes it prone to earthquakes. No assurance from Beijing or London can mask this reality. The point is how the uncertainty can best be managed over the next five, 10 or 20 years.
It is therefore natural for Hongkong capital to want to diversify out of Hongkong. But because of the opportunities in Hongkong and in China, outside capital will also want to diversify in. Singapore's declared interest in Hongkong stems from this logic of mutual diversification and from the role we can play to help buffer political shocks.
REST OF THE WORLD
Our mutual interests go beyond China. At international forums, like GATT and later APEC, it behoves Singapore and Hongkong to act in concert. We are both utterly dependent on free trade and the free movement of capital and knowledge in the world. Over the last two years, officials of our two governments have worked more closely together in many areas, like this Conference for example. We should encourage more such Co-
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