ALL SMILES, LITTLE SUCCESS IN WU YI VISIT TO

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