Chinese New Year speech by Senior Minister Lee Kuan Yew on Monday, 10 Feb 97 at the Tanjong Pagar Community Club

The outlook this year is more promising than Chinese New Year 1996. Last year, tension was building up across the Taiwan Straits, and a stand-off was threatening between China and the United States. The picture has since changed radically. China and America have both looked over the cliff and realised that too much was at stake. However strongly Americans believe that they can convert the world, including China, to their standards of human rights and democracy, they have decided, for the time being, to live and let live, to trade and invest in China, and to let time bring about changes in China. I believe that broader and deeper economic links with the US will change China's economy, and with it the Chinese people, as has already been happening; but these changes will be made at a pace and in a manner determined by China, and not in accordance with an American agenda.

After his re-election, President Clinton made an important policy statement in Canberra on 20 November 1996. Naming one of his three objectives as "deeper engagement with China". Clinton said: "The direction China takes in the years to come, the way it defines its greatness in the future will help to decide whether the next century is one of conflict or co-operation. The emergence of a stable, an open, a prosperous China, a strong China confident of its place in the world and willing to assume its responsibilities as a great nation is in our deepest interest. True co-operation is both possible and plainly productive. …… The United States and China will continue to have important differences, especially in the area of human rights and we will continue to discuss them candidly. But by working together where possible and dealing with our differences openly and respectfully when necessary, we can deepen our dialogue and add to Asia's stability." The whole of Asia looks forward to a deep engagement between the US and China covering economic, strategic and security issues.

China knows that the use of military force against Taiwan to achieve re-unification, can only be a weapon of last resort. However, when it ordered Airbus aircraft, not Boeing, and entered into a memorandum of understanding to build a new jet aircraft not with Boeing, but with Europe's Airbus Industry, i.e. China made clear that it was prepared to pay an economic price, using its market weight and potential to achieve foreign policy goals, provided only that it would hurt America as much.

There is more news to confirm this new policy. The new US Secretary of State, Madeleine Albright, has made clear that human rights is but one facet of a larger set of relationships the US has with China. She has also announced she will visit China as one of the countries on her first journey overseas. Vice President Gore is also to visit China. US Defence Secretary William Cohen has promised to engage China in solving human rights and other problems from a larger perspective, instead of taking a confrontational approach for a quick fix. America, he said, would be in a better position to help influence China's behaviour over a longer period of time, by being constructively engaged, even though in the short term they would not see much progress. In other words, American Human Rights groups should not expect dramatic changes in China's overall policy on human rights and democracy.

So it came as no surprise that a few days ago, America and China reached agreement on the long simmering dispute over China's textiles exports to America. China will open its markets to American textiles to reduce its trade surplus. Both sides spoke in optimistic terms of their future trade relations.

All the same, President Clinton faces several strong anti-China critics in Congress, the media, academia, the think tanks, and the pro-Taiwan lobbyists. China will have to take this into account and accommodate Clinton's difficulties if Clinton is not to be swayed away from his policy. If the policy prevails for the next four years, the economic ties between the two countries will be so broad, so deep, and so mutually beneficial, that it will be costly for the next administration to reverse this policy. However, each has been disappointed with the other in the last few years, and both have become wary of backsliding and further setbacks. This tempers the otherwise promising outlook.

China's relations with Taiwan have stabilised, although there is little warmth between them. The missile exercises across the Taiwan Straits have made clear to all the lengths to which China will go to prevent Taiwan from "creeping" towards independence. This has put limits on what countries, will do to accommodate Taiwan's "pragmatic diplomacy". All Asean countries have recognised that there is only one China, that Taiwan is a part of China.

Meanwhile with the return of Hong Kong imminent, Taiwan and China have agreed to allow direct shipping links between the ports of Kaoshiung in Taiwan, and Fuzhou and Xiamen in Fujian province. This is a start in the normalisation of communications and transportation. The policies they adopt towards each other will decide whether Fujian province and Taiwan will prosper or stagnate, while the rest of China and Asia race ahead. Kaoshiung has the potential to be a one of the largest container transhipment hubs for East Asia. What it needs is for both sides to agree that "one China" includes China (PRC) and Taiwan (ROC). Both can reserve their position on which is the rightful holder of that one and only sovereignty over China. This was the position when the Wang-Koo talks began three years ago. Closer interdependence will not only yield economic benefits, but will also restrain both sides from any rash steps which will raise tensions.

1997 is a crucial year for China. It needs stability both internally and internationally because of two major events: the return of Hong Kong on 1 July1997, and the 15th Congress of the Communist Party this autumn, to elect leaders for the next five years.

There will be no economic upsets for Hong Kong after its return to China in July. Its economy will continue to be buoyant. We have given 25,000 Hong Kong families AIP, (approval in principle) for permanent residence in Singapore. Although some have settled in Singapore, I do not expect all of them to come for many years. I have not said this to boost Hong Kong's morale and confidence. The Government Investment Corporation has invested, and is continuing to invest, a few billion dollars in Hong Kong. We have joined Hong Kong developers to build office and shopping complexes at several new stations of the mass transit railway to the new airport. Each investment is between $300-$400 million. SATS (Singapore Airport Terminal Services) has bid for, and won, the right to operate ground services at the new airport. The number of Singaporeans working in Hong Kong has increased to 8,000 and is still increasing. The Singapore International School in Hong Kong will have to be enlarged. Hong Kong looks set to prosper for many more years, provided its people mind Hong Kong's business, and do not meddle in China's politics.

Hong Kong's leaders and people have to make up their minds whether they want to prosper under "one country, two systems", or to engage China on human rights and democracy, as the Hong Kong "Democrats" have been doing, encouraged by American Human Rights groups, the US media and by Governor Chris Patten and his policies. No human rights and democracy hero can reverse the inevitable - that over time Hong Kong will become more of a Chinese city, if by nothing else than by osmosis. The to-ing and fro-ing between 6 million in Hong Kong and the 66 million in Guangdong province, both Cantonese, will gradually make the two populations very alike. Indeed they have already been influencing each other since Deng's "Open Door" policy in 1978. The western gloss that gives that cosmopolitan air to Hong Kong will gradually be worn away by constant exchanges with China. Hong Kong's leaders will subconsciously revert to their Chinese cultural reflexes. There will be a blending of their present different social mores. This underlines the need for Hong Kong to have a strong-minded and firm Chief Executive, supported by a incorrupt and efficient civil service, to preserve the virtues of the British system: the rule of law and the sanctity of contracts, fair commercial practices, a level playing field between all players whether they be well connected insiders or unconnected outsiders, and transparency and accountability in all decision making.

Hong Kong's Chief Executive's job is very demanding.To succeed, he must first gain and retain the confidence of China's leaders. If they distrust him as they distrust Governor Patten or Martin Lee QC, HK will be the loser. If they are confident that he understands and will uphold China's basic national interests and goals, then they will give him the latitude to safeguard Hong Kong's interests within these limits, especially the interests of its business and professional classes. He has to maintain a delicate balance between the interests of the mainland and the island because they do not always coincide. Then he has to assure his anti-China sceptics in the US, its Congress, media, academics and lobby groups, that he has maintained Hong Kong as a separate administrative unit, separate from China, so that Hong Kong can continue to enjoy separate textile quota's and other existing advantages. He has been criticised for not defending and preserving Gov Patten's "democratic" initiatives. But were he to do so, he would totally lose China's confidence. However, he can protect and maintain the freedoms and liberties which Hong Kong enjoyed before Governor Patten attempted to enlarge them, provided this is to preserve Hong Kong's system, and not to change the system in Guangdong province, or worse, the PRC.

If China does well economically, as I believe it will, Hong Kong will also do well. But the climate of confidence will increase investments, trade and growth throughout East Asia. China's high growth will give an added 1 to 2% growth to other East Asian countries, those that have much trade with and investments in China.

The American economy is on an up trend. Japan has difficulties with its banking system, and has increased taxes to meet budget deficits. Its growth may not be as high as America's. The Europeans will do marginally better this year than last year. So Singapore's economy will improve over last year. Our neighbours, especially Malaysia and Indonesia, will have even higher growth. We are facing more competition from Malaysia. Dr Prime Minister Mahathir as Prime Minister has put the Malaysian economy on track - a fast track - towards his vision 2020. Malaysians are moving upwards economically and socially. In several sectors they are drawing abreast of Singaporeans. But it is better that our neighbours are competing to do better than us, than if they were not making high growth. Imagine our problems if lack of economic growth in Malaysia and Indonesia were to cause international investors to worry about instability and the rise of extremism in both our neighbours. It is far better that they are catching up with us in advanced infrastructure, airports, container ports, multi-media corridor, high speed railways, and are attracting investments from international and Singapore investors. They force us to improve our own competitiveness by increasing productivity and keeping costs down.

Because of our sound economic policies, high growth and budget surpluses, the Singapore dollar, has been increasing in value against all currencies. Last year, it rose in tandem with the US dollar. However, when the US dollar stabilises and goes down, as may well happen in 1997, the Singapore dollar is likely to stay up. This has happened many times in the past. It makes the wage costs of the American and European MNC's in Singapore higher in their currencies. Our unions must bear this in mind when they negotiate increases in wages. NTUC leaders must get their members to work together with management to increase productivity. The government will do its utmost to keep down rents, fees and taxes, water and power rates and other costs. Otherwise these MNCs will shift their lower end production elsewhere.

As Singapore prospers, Tanjong Pagar GRC will flourish. We have decided to team up with West Coast GRC to form Tanjong Pagar CDC (Community Development Council). The CDC is a major step towards decentralising the functions of government. CDCs must recruit and mobilise more public spirited grassroot leaders to help administer the funds the government will give generously, as much as $3 to match every $1 of public donations. More can and will be done for the elderly, the young, and the needy, provided we can find the men and women to give their time. The government will provide the buildings and facilities. What the government cannot provide is the personal touch and the direct contact of voluntary social workers. Their altruistic and charitable feelings can motivate people to help themselves. Many welfare schemes in the West become bureaucratic and wasteful, because paid officials do not have those feelings and sentiments of altruism and idealism which volunteer social workers have. Hence paid officials cannot generate reciprocal feelings of appreciation and gratitude from those they help. It is this crucial factor of high morale, both in the giver and in the receiver, that makes the difference between the communitarian way of welfare which is effective, as against official or bureaucratic welfare which de-motivates those receiving handouts.

Before we had the main upgrading programme, the interim upgrading programme, and the new Selective En bloc Redevelopment Scheme (SERS) development where whole blocks are redeveloped, residents in the city constituencies were getting older. As their children grew up, found work and got married, they moved out into the new estates. The main and interim upgrading programmes, plus SERS, will keep the younger generation in the constituency, near their ageing parents. It will be easier for children to visit parents, and for grandparents to look after grand children, and will keep the extended family together.

We also have to increase our organisation to cope when more old people will need nursing and other medical help. Working families, with both husband and wife at work, will need help from nurses and other paramedics who can provide help at their homes. This is better than having old people sent to hospitals, which will not only be costly, but will also leave them feeling abandoned and isolated. When all is said and done, at the end of the day, we cannot measure our happiness just by our GDP growth. It is how our families and friends care for each other, how we look after our old and nurture our young, they are what make for a closely-knit society, one we can be proud to belong to.

In the next few years, Tanjong Pagar CDC must work in this direction, get more grassroot leaders to volunteer, and work out new schemes to help the old, the young and the needy. The money is not the problem. If we get the right spirit in our social work volunteers, the government will find the funds for all worthy projects.

Finally, I wish you another happy and prosperous New Year.