China to be a huge market for ASEAN: Lee

China to be a huge market for ASEAN: Lee

Agence France-Presse, Singapore

China will eventually become a huge potential market for ASEAN as the country emerges from being a cheap labor source to be a producer of hi-tech goods, Singapore Senior Minister Lee Kuan Yew said Wednesday.

Lee, the founding father of modern Singapore, said China's transformation since his first visit there in 1976 has been "startling", with the improvements covering not only infrastructure but also the Chinese people's openness to new ideas and desire for learning.

"For Southeast Asia, China will initially be more of a competitor," he told a forum on China organized by the Singapore- based East Asian Institute.

Lee's statement comes amid worries in the Association of Southeast Asian Nations (ASEAN) they are being crowded out in terms of trade and investments by an emerging China.

Currently, China gets around 50 percent of all foreign direct investments (FDI) into East Asia, compared to 20 percent for ASEAN, reversing a trend in the early 1990s, Lee said.

"With China's emphasis on investment in human capital and technology catch-up through FDI, China has, within a short span of 10 years, moved from labor-intensive low-end products to high- end capital intensive industries such as semiconductor foundries," he said.

But as China adapts to new technology, improves research and development and learns new production techniques, "we can expect a reversal of China's role in the region," he told the forum attended by academics, diplomats and business leaders.

"As it grows, China will be a huge potential market for unfinished goods produced in Southeast Asia. China's burgeoning middle class will translate into more tourists for ASEAN," he added.

Even China's FDIs have been rising, said Lee.

In 2000, its overseas investments totaled US$551 million, of which about 18 percent went into ASEAN, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Lee, Singapore's former prime minister who now plays an influential role as a senior minister, called on East Asian economies to "recognize China's growth as a fact and devote their attention to dealing with it."

Regional countries must improve their own competitiveness as they seek for opportunities in the vast Chinese market, as China will both be the region's competitor and a partner for growth, he said.

Lee said China's entry into the World Trade Organization (WTO) marked the start of its "third transformation", the first being the Maoist era and the second the reforms under Deng Xiaoping built on by current leaders.

"By pushing ahead with WTO membership, the Chinese leadership has signaled its determination to stay the course towards greater openness and integration with the rest of the world," according to Lee.

But while it was a "strategic decision," it was also fraught with risks because it meant that China's reforms will be subjected to a timetable under the WTO.

"This, coupled with leadership transition and a widening economic disparity between the coastal and inland regions, will pose serious domestic challenges for China," he said.