Singapore needs the United States and China to work out their differences to ensure prosperity, its prime minister said on Tuesday.

The city-state of five million people is one of the most open economies in the world. It is heavily reliant on trade and its position as a financial centre driven by Asia’s rapidly growing economies.

“First of all it depends on the U.S.-China relationship,” Lee Hsien Loong said in an interview about the risks facing his nation. “If that turns sour, a lot of things can go wrong.”

 

The world’s two largest economies are at odds over issues from trade and currency levels to human rights. The U.S. mid-term elections on Tuesday have seen the subject of China relations leap from think tanks to mainstream political debate.

 

Singapore, with one of the highest per capita incomes in Asia, has interlinked trade and financial relations with both powers, and feels the tensions keenly.

 

“The key, of course, is America-Chinese relations and that’s very difficult because on the ground in America the mood is quite sour,” the 58-year-old prime minister said. 

 

“And not just among the unions and the Democratic (Party) left wing, but even the corporates, the businessmen.”

 

Lee said he worried that short-term thinking could lead to bad decisions.

 

“Nobody is speaking up to say ’please manage this with a long-term perspective’,” he said. 

 

The prime minister, dressed informally in open shirt and wind-breaker jacket, said he had a basic optimism about the eventual health and development of both the U.S. and the Chinese economies, even though in both cases many years of transformation would be needed.

 

Beijing required fundamental structural change to drive more domestic demand and investment.

 

“I believe the Chinese understand this and I believe they are going to do something about it,” said Lee, a frequent visitor to China. ”It’s not going to happen overnight but over 10 years I see change.”

 

The United States needed to transcend the difficulties of domestic partisan politics to take tough decisions on fiscal policy.

 

“If you look at it on a five-year time frame, you can’t help being worried but if you look at it in a 20-year time frame you say of all the economies in the world, the Americans are the ones most capable of re-inventing themselves,” Lee said.