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Briefs: PM Lee to handover to DPM Lawrence Wong on May 15, US and China debt pose risks for global public finance: IMF

The Edge Singapore
The Edge Singapore • 9 min read
Briefs: PM Lee to handover to DPM Lawrence Wong on May 15, US and China debt pose risks for global public finance: IMF
Wong will be sworn in as PM at 8pm on May 15 at the Istana. Photo: Bloomberg
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Quoteworthy: "I accept this responsibility with humility and a deep sense of duty. I pledge to give my all in this undertaking." –— DPM Lawrence Wong, who is poised to take over the top job from PM Lee Hsien Loong on May 15.

PM Lee to hand over to DPM Lawrence Wong on May 15

Deputy Prime Minister (DPM) Lawrence Wong is set to succeed Prime Minister (PM) Lee Hsien Loong on May 15, marking Singapore’s third leadership transition since independence. “DPM Wong has the unanimous support of the PAP (People’s Action Party) MPs (members of parliament),” reads the statement issued by the Prime Minister’s Office on April 15.

“For any country, a leadership transition is a significant moment. Lawrence and the 4G (fourth-generation) team have worked hard to gain the people’s trust, notably during the pandemic. 

“Through the Forward Singapore exercise, they have worked with many Singaporeans to refresh our social compact and develop the national agenda for a new generation,” says Lee.

“The 4G team are committed to keeping Singapore working well and moving ahead. These will always be top priorities for the government. I ask all Singaporeans to give Lawrence and his team your full support and work with them to create a brighter future for Singapore.”

See also: A new trade war offers no easy way back for old global order

Wong will be sworn in as PM at 8pm on May 15 at the Istana. Lee is the third Prime Minister of Singapore, following Goh Chok Tong and his father, Lee Kuan Yew. Goh served from 1990 to 2004, while the elder Lee held office from 1959 to 1990.

On Nov 5, 2023, Lee announced that he would transfer leadership to Wong before the upcoming General Election, which must be called by November 2025. He had previously stated that he planned to hand over the reins before he turned 70 years old. Those plans were derailed by the pandemic and DPM Heng Swee Keat’s decision to step down as leader of the ruling PAP’s 4G team.

Lee turned 72 on Feb 10 and is marking his 20th year in office this year. Before his appointment, Wong was most recently the DPM and Minister for Finance. His many other roles include chairman of the Monetary Authority of Singapore, chairman of the international advisory council of the Singapore Economic Development Board (EDB), deputy chairman of the GIC board and chairman of GIC’s investment strategies committee.

See also: Should we fear a trade war?

Wong began his career as an economist in the Ministry of Trade and Industry in August 1997. He was posted to the Ministry of Finance in January 2002 and the Ministry of Health in July 2004. From May 2005 to August 2008, Wong was Lee’s principal private secretary.

Wong wasn’t initially chosen as Lee’s successor. DPM Heng Swee Keat, who held that position for over two years, announced in April 2021 that he would step aside. The unexpected announcement, a rare disruption to Singapore’s typically smooth political transition, was attributed to Heng’s age. He turned 63 on April 15.

Wong, a pivotal figure in managing the pandemic response, was designated as the successor in April 2022 and officially confirmed when he was promoted to DPM two months later. He is 51 years old.

Wong entered politics by contesting in West Coast GRC during the 2011 general election. After the team’s victory, he became the MP for the Boon Lay division within the GRC. He later shifted to represent Marsiling-Yew Tee GRC (Limbang) in September 2015, where he has served since.

Meanwhile, Wong was chosen as the leader of the PAP’s 4G team on April 14, 2022. He was then promoted to DPM on June 6, 2022, and later appointed as the PAP’s deputy secretary-general, a newly established role, in November 2022. — Felicia Tan

IMF says US, China debt pose risks for global public finances

Officials at the International Monetary Fund (IMF) said the world’s two great economic rivals, China and the US, will drive much of the increase in global public debt over the next five years. American spending creates trouble for many other countries by keeping interest rates high.

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“In both economies, public debt is projected under current policies to nearly double by 2053,” the IMF said in its Fiscal Monitor, an overview of global public finance developments. “How these two economies manage their fiscal policies could, therefore, have profound effects on the global economy and pose significant risks for baseline fiscal projections in other economies.”

Higher interest rates in the US make life difficult for many countries by strengthening the value of the US dollar against other currencies, making dollar-priced commodities more expensive and increasing debt burdens for countries that have borrowed in the US currency.

“High and uncertain interest rates in the US affect the cost of funding elsewhere in the world,” Vitor Gaspar, director of fiscal affairs at the IMF, said in an interview. “The impact is quite significant.”

As for China, the fund warned that a larger-than-expected slowdown in China — “potentially exacerbated by unintended fiscal tightening given significant fiscal imbalances in local governments” — could create risks for the rest of the world through lower levels of international trade, external financing and investments.

The report projected that overall primary deficits would decline to 4.9% of global GDP this year from 5.5% in 2023, but with substantial risks that would threaten public finances in many countries.

The IMF also singled out the UK, Italy, the US, and China as nations that face serious fiscal risks as debt continues to creep upwards. The four countries were driving global debt levels close to 100% of GDP, and they “critically need to take policy action to address fundamental imbalances between spending and revenues,” the IMF said. 

IMF officials specifically criticised GBP20 billion ($33.8 billion) of cuts to payroll taxes in UK Chancellor of the Exchequer Jeremy Hunt’s two most recent fiscal statements. Such recent policy changes, “although part-funded by well-conceived revenue-raising measures, could worsen the debt trajectory in the medium term,” the report said.

Asked about rising debt risk during an Institute of International Finance event in Washington on April 17, Bank of England Governor Andrew Bailey said public sector funding was important in addressing big challenges such as the pandemic, rising security risks and climate change. 

“We do have to look at it. It is important. It is a big-subject conversation,” Bailey said. “But I come back to this point: If you are living in very volatile times, then there are, of course, very big demands for a response from the policy.” — Bloomberg

Biden ramps up 2024 campaign rhetoric

President Joe Biden called China “xenophobic” while highlighting the Asian nation’s economic woes, as he sought to make the case for US economic strength during a campaign stop in the swing state of Pennsylvania.

“They’ve got a population that has more people retired than working. They’re not importing anything. They’re xenophobic — nobody else coming in. They’ve got real problems,” Biden said of China in remarks to steel workers in Pittsburgh on April 17.

The comments follow a phone call two weeks ago with Chinese President Xi Jinping, their first since a face-to-face meeting in November. While overall relations have stabilised of late, tensions are growing over Chinese manufacturing investments that risk job losses among blue-collar workers.

Biden’s remarks were some of his strongest criticisms against the world’s second-largest economy. Despite faster-than-expected growth in the first quarter, doubts about the recovery’s resilience linger. He also called for higher tariffs on Chinese steel and aluminium, part of a series of steps to shore up the American steel sector, including a pledge by the president that Japan’s Nippon Steel wouldn’t successfully acquire Pittsburgh-based United States Steel Corp. 

The tariffs would see the US impose new 25% levies on certain Chinese steel and aluminium products as part of an ongoing review while his administration also launches a formal probe into China’s shipbuilding industry. China’s Commerce Ministry on April 17 blasted the US review, saying it was “full of false accusations” and “based on the need of domestic politics.”

Biden also criticised US President Donald Trump for his policies toward Beijing while in office. “Trump simply doesn’t get it,” Biden said, claiming that it’s incorrect to view China as on the rise and the US as falling behind. As he departed Pittsburgh, Biden was asked if the steel tariffs would hurt ties with Xi, and he responded, “No.”

Chinese officials have recently sought to boost investor confidence overseas after years of strict pandemic curbs and tighter national security controls dented sentiment. Foreign businesses’ direct investment in China slumped to a 30-year low in 2023, underscoring Beijing’s challenges.

Xi’s government has recently expanded visa-free entry to a range of European and Asian nations after he pledged “heart-warming” measures for investors last year during a trip to the US. However, China has so far struggled to woo back foreigners after shutting the nation off during the pandemic: The business hub of Shanghai saw 44% fewer foreign visitors in the first two months of this year compared with the same period in 2019.

Imports have also been weak, with falling commodity prices and weak domestic demand due to a housing market crisis and other issues undermining Chinese purchases of foreign goods. Imports were up 1.5% in the first three months of this year, after a 5.5% drop last year.

Biden also vowed to continue efforts to deny China advanced technology like computer chips, which has spurred Xi to invest in becoming more self-sufficient. “They can’t be sent to China because it would undermine our national security,” Biden said. “When I spoke with Xi Jinping, he said, ‘Why?’ And I said, ‘Because you’d use it for all the wrong reasons, so you’re not gonna get those advanced computer chips.’” — Bloomberg 

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