US embassy cable - 05SINGAPORE2894

C O N F I D E N T I A L SECTION 01 OF 02 SINGAPORE 002894 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 09/26/2015 
TAGS: ECON, EFIN, EINV, ETRD, PGOV, PREL, SN, CH 
SUBJECT: ALL SMILES, LITTLE SUCCESS IN WU YI VISIT TO 
SINGAPORE 
 
REF: A. SINGAPORE 1745 
 
     B. 04 SINGAPORE 2540 
 
Classified By: EP Counselor Laurent Charbonnet.  Reasons 1.4(b)(d) 
 
1. (C/NF) Summary: Singapore's ties with China remain 
strained, despite the favorable press coverage of Chinese 
Vice Premier Wu Yi's September 19-21 visit to Singapore.  In 
a frankly negative read-out, the PRC Embassy told us many 
Chinese officials still do not trust Singapore and complained 
that Singapore only seeks economic gains and doesn't pay 
enough attention to China's political and strategic 
interests.  In fact, mutual "misunderstandings" mean that the 
two sides have not set a date or even agreed to start 
negotiating a proposed Singapore-China Free Trade Agreement. 
PRC diplomats told us that Prime Minister Lee's visit to 
China will be delayed until later in October for scheduling 
reasons, but China "didn't mind" if Singapore saw this as a 
sign of unhappiness.  End Summary. 
 
Back on Track? 
-------------- 
 
2. (C/NF) While the local press hailed the September 19-21 
visit of Chinese Vice Premier Wu Yi to Singapore as a sign 
that bilateral ties were "firmly back on track," the 
relationship remains strained, according to Chinese Embassy 
poloff Li Bijian (protect).  The relationship still feels the 
aftershocks of then-Deputy Prime Minister Lee Hsien Loong's 
July 2004 visit to Taiwan (Ref B) and many Chinese officials 
believe that "Singapore can not be trusted" because it would 
"sell out" China's interests, averred Li.  The visit yielded 
only five minor agreements and China reportedly rebuffed 
Singapore's two main objectives: China refused to set a date, 
or even agree, to start negotiations for the Singapore-China 
Free Trade Agreement (FTA), and did not ratify the RECAAP 
anti-piracy agreement (Ref A.) 
 
A "Misunderstanding" Means No Date for FTA Talks 
--------------------------------------------- --- 
 
3. (C) Both the Chinese Embassy and MFA told us that there 
had been a "misunderstanding" about a possible 
China-Singapore FTA: Singapore had argued that a bilateral 
FTA was allowed under the China-ASEAN FTA; China rebutted 
that it was not.  After reviewing, at Singapore's suggestion, 
Article 12 of the China-ASEAN FTA, Vice Premier Wu admitted 
that the agreement provided for separate FTAs, but requested 
additional time to study the issue, according to MFA 
Northeast Asia Directorate Deputy Director Teo Boon Hee.  Teo 
added that China was concerned that a bilateral FTA would be 
lopsided in favor of Singapore.  Chinese Embassy econoff Guo 
Chuanwei (protect) said that China had no intention of 
negotiating an FTA with Singapore, but rather was willing to 
consider only an accelerated program under the existing 
China-ASEAN FTA framework.  Even with this arrangement, China 
worried that this would lead other ASEAN members to demand 
similar concessions through bilateral trade deals, said Li. 
Singapore planned to send a delegation to China in the next 
few weeks to discuss the FTA issue further, said Guo.  China 
also asked Singapore to seek other ASEAN members' concurrence 
to negotiate a separate FTA, Guo concluded. 
 
Political Complaints 
-------------------- 
 
4. (C) China thinks that Singapore is interested only in the 
economic benefits from the bilateral relationship and is not 
paying sufficient attention to China's political and security 
interests, said Li.  For example, China had been displeased 
with Singapore's support for a permanent seat on the UN 
Security Council for Japan, which China strongly opposes. 
Prime Minister Lee's public endorsement of Japan's membership 
had compounded the problem, said Li; China is concerned this 
could embolden other ASEAN members to back Japan. 
 
5. (C) China does not support Singapore's efforts to 
encourage a greater role for user-states to enhance maritime 
security in the Malacca Strait.  Noting that most of China's 
oil imports flow through the Strait, Li said China fears that 
"outside powers" could end up being stationed in the Strait 
and block the flow of commercial traffic.  He specifically 
noted the growing posture of Japan's naval forces in the 
region.  Furthermore, China had told Singapore it had no 
intention of ratifying the RECAAP agreement until Indonesia 
and Malaysia had done so first. 
6. (C) On Taiwan, Li claimed that China and Singapore had 
reached a "gentleman's agreement" after Lee's visit to Taiwan 
that there would be no more ministerial-level visits to 
Taiwan.  China knew, however, that Singaporean ministers 
continued to travel, quietly, to Taiwan.  He complained about 
the access granted to Taiwan's new representative in 
Singapore, Hu Wei-Jen, who had met with President Nathan and 
Senior Minister Goh after his arrival.  Li said Singapore's 
military training in Taiwan, stretching back several decades, 
was an on-going bilateral irritant. 
 
7. (C) Singapore's main strategic message during the visit 
was that it was important for ASEAN to engage all of the 
major powers, including China, Japan, India and the United 
States, according to MFA.  Singapore reiterated its support 
for an inclusive East Asian regional architecture. 
Postponing the PM's Trip 
------------------------ 
 
8. (C/NF) Prime Minister Lee planned to visit Beijing October 
11 and meet with President Hu Jintao.  Due to scheduling 
conflicts, China planned to delay the visit until October 20 
but had not informed the GOS yet, noted Li.  He commented 
that the delay wasn't related to China's displeasure with 
Singapore on political and security issues, but wouldn't mind 
if the GOS interpreted the postponement that way.  MFA told 
us the visit was on for "sometime" in October.  The next 
likely high level visit after that would be Premier Wen 
Jiabao, according to MFA.  However, China has not responded 
to Singapore's invitation and PM Lee plans to raise it when 
he is in China. 
 
Bridge to Nowhere? 
------------------ 
 
9. (C) Li scoffed at Singapore's efforts to tout itself as a 
"bridge" between China and India or China and Southeast Asia. 
 Chinese firms were more than capable of establishing direct 
relationships with both regions on their own, he claimed. 
The Singapore financial market was an important source of 
capital for Chinese firms, however.  Li said that China hoped 
for greater investment by Singaporean firms in China, 
especially to help revitalize state-owned enterprises in 
Northeast and Western China.  He noted that most Singaporean 
investment in China had been in the financial sector, led by 
Temasek, which had taken a minority stake in the Bank of 
China, China Construction Bank, and China Minsheng Bank. 
 
10. (C) Comment: Given more than a year of talk about the 
Singapore-China FTA, this level of disagreement on the basis 
for negotiations is surprising.  China wants to use its 
growing economic muscle to develop stronger links to 
Singapore and the region, but in this case is insisting that 
these be forged on its own terms.  China's confidence in the 
allure of its growing economy is palpable -- it believes it 
can demand and receive political and strategic benefits in 
exchange for improved access to its market.  Singapore's 
press hype about its special links with China and its 
potential role as a portal to China and India also seem to 
have received a dash of cold water.  End Comment. 
LAVIN