When Singapore Schooled China in Making Money

When Singapore Schooled China in Making Money

Why you should care

Following his 1978 tour, Deng Xiaoping took home plenty of ideas about how to unleash China’s potential.

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Geo facts & figures

Singapore’s Prime Minister Lee Kuan Yew, dapper in a gray suit and flanked by his wife and government officials, stood expectantly on the runway of the Paya Lebar airport. The authoritarian but pragmatic leader was there to welcome an important guest to the small island nation not yet 15 years past independence. There, walking down the steps of a plane, accompanied by a 36-person delegation, was the senior vice-premier of China, Deng Xiaoping, in his first (and what turned out to be his only) official visit to Lee’s country.

Deng may have been diminutive at just 4 feet, 10 inches, but he packed outsize power — No. 2 in the Chinese leadership hierarchy after Hua Guofeng, chairman of the Communist Party, premier and Mao’s chosen successor. Deng was wearing a gray Sun Yat-sen–style suit, still popular with party leaders at the time of the visit, in November 1978. He shook hands with a smiling Lee, who stood a foot taller. Soon, they were off — Lee had much to show Deng.

The island had moved from making matches and fish hooks to petrochemicals.

Singapore had, despite the odds, become an incredible success story since parting ways in 1965 with the Federation of Malaysia over deep political and economic differences. The city-state had virtually no natural resources — only 242 square miles of jungle land at low tide — and little industry. But, largely due to a panicked government’s quest for survival, it prospered.

Under the leadership of Lee, the state focused on attracting foreign investment with a strong rule of law and sound monetary policy. The government developed industrial land and invested in infrastructure. It put money into education and health services to create a new working class among its 2.4 million citizens. Its ports opened to the world. Within a decade, the nascent nation had joined the exploding, export-oriented economies of Hong Kong, South Korea and Taiwan as one of the Asian tigers.

In 1965, Singapore’s unemployment was around 9 percent, manufacturing’s share of gross domestic product was 14 percent and nominal per capita GDP was around $500. By 1975, Singapore’s manufacturing base had grown to 22 percent of GDP, the economy was at full employment and per capita GDP was more than $3,000. The island had moved from making matches and fish hooks to petrochemicals.

While the Singaporean state supported industry, it didn’t levy harsh regulations. It was nothing compared to Maoist China. “Singapore established a good rule of law, other than in domestic politics, so both domestic and foreign companies felt comfortable making investments there,” says Josh Kurlantzick, a fellow for Southeast Asia at the Council on Foreign Relations. And the courts were known to dispense reliable justice — “unless you’re going to court in a case against the ruling party.”

Also important to Deng: Singapore’s growth was accomplished with what was effectively one-party rule. Lee had no time for political competition and regularly used the law to crush opponents and criticism. It seemed to be the best of both worlds: Western economic growth and Eastern politics.

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Singapore Prime Minister Kuan Yew Lee speaking at a May Day rally in 1965.

Source Larry Burrows / Contributor / Getty

Lee escorted Deng around the island to see for himself what Singaporeans had accomplished. The first stop was the Housing Board headquarters, where the chairman rattled off facts and figures. “As it turns out, he needed to be so [well-informed] — for [Deng], displaying great interest in Singapore’s successful massive housing program, fired one question after another at him,” reported The Straits Times on Nov. 14. Next up: a tour of industrial-use land and efforts at reclamation.

Deng was clearly impressed. He described Singapore as “industrious and valiant in a young country full of vitality,” according to The Straits Times. “While adhering to the principle of independence and self-reliance, we will learn from the advanced experience of other countries,” he told reporters during the trip.

Within a month of Deng’s visit to Singapore, he had seized control of China from the reform-wary Hua. Deng then began the pragmatic era of “socialism with Chinese characteristics.” He started by decollectivizing agriculture and moved on to attracting foreign capital, à la Singapore. He introduced special economic zones for businesses to operate in relatively free from bureaucracy. Tens of thousands of Chinese officials headed off to Singapore to continue studying its system. “Singapore’s social order is rather good. Its leaders exercise strict management. We should learn from their experience, and we should do a better job than they do,” Deng said in 1992 during an inspection tour of southern China.

“The ideas that Deng Xiaoping formed, if he had not come here and seen the Western multinationals in Singapore producing wealth for us … then he might never have opened up,” said Lee in Tom Plate’s Giants of Asia: Conversations With Lee Kuan Yew.

Of course, the Chinese reforms didn’t mimic Singapore on everything. For example, while Lee’s party in Singapore was largely a vehicle for stability and growth, China’s ruling party had real ideology, explains Stephan Ortmann at the City University of Hong Kong. “China maintains all the Communist baggage despite claims to pragmatism,” he says. And the whole “rule of law” aspect has never existed in China to the extent it has in Singapore.

Lee himself eventually visited China 33 times. When he died in 2015, he was heavily mourned by Chinese state media. Today, China is the world’s second-largest economy and its current president, Xi Jinping, has his own school of thought that could be a relative of Deng’s. He’s just added more Chinese characteristics.

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