SINGAPORE -- Singapore and China are expected to upgrade their existing free trade agreement by the end of 2018, in what is seen as a signal of their commitment to economic liberalization amid escalating trade wars between Washington and Beijing.
The two countries have long been mutually dependent. China is Singapore's biggest export destination, while Singapore is China's biggest source of foreign direct investment.
This week, the two sides conducted meetings in Singapore with the aim of deepening their economic ties, with Chinese Vice Premier Han Zheng visiting the city-state.
"We will conclude [the upgrade of] the FTA by the end of this year," Singapore's Deputy Prime Minister Teo Chee Hean told reporters on Thursday, adding that he hoped to sign it in November when Chinese Premier Li Keqiang comes to the city-state.
Singapore and China first signed the bilateral FTA in 2008, which currently eliminates tariffs for 95% of Singapore's exports to China. In 2015 the two countries started negotiations on upgrading the agreement, in areas such as services and investment.
This week's development came amid escalating trade tensions between the U.S. and China.
The administration of U.S. President Donald Trump is slated to implement a new round of tariffs on China worth $200 billion from Monday.
The expected upgrade of the Singapore-China FTA would therefore help these two countries to promote trade, an expert said.
Irvin Seah, an economist at DBS Bank, told the Nikkei Asian Review that the latest development between Singapore and China "has sent sent a message to not only countries in Asia but also countries around the world that there are still countries that truly believe in the benefits of free trade."
Singapore, whose economy heavily relies on trade, has been eagerly promoting free trade in the international community, including in the negotiations over the Regional Comprehensive Economic Partnership, a proposed trade pact that encompasses 16 countries in the Asia Pacific region. The RCEP member countries aim to reach a substantive conclusion by year-end.
For China, an upgrade of the bilateral FTA would complement infrastructure projects in its Belt and Road Initiative, as the trade agreement covers not only goods but also investment. Singapore is a key nation to the BRI due to its unique position as regional financial center.
During this week's bilateral talks, Singapore and China agreed to further collaborate in financial areas, including "supporting the Belt and Road Initiative," according to the Monetary Authority of Singapore, the city-state's central bank. They would also cooperate on financial connectivity and fintech, the authority said.