THERE are many opportunities for Singapore businesses today to benefit from China’s economic transition, said Deputy Prime Minister Heng Swee Keat at an event on Thursday (Feb 1).

He pointed out that beyond the ongoing trade tensions and tech war with the US, the friction between China and the European Union is also brewing due to the latter’s concerns over Beijing’s subsidies for its electric vehicles, solar panels and battery exports.

“The rest of the world having a big trade deficit with China and China having big trade surpluses is not sustainable,” said Heng, who is also Coordinating Minister for Economic Policies, at a fireside chat at the UOB Global Markets Economic Forum.

Corrections are necessary as the economy “needs a new growth path”, he added.

“Rebalancing the economy to promote diversification and stimulate domestic consumption is the right direction.”

UOB has forecast growth of 4.5 per cent for China’s economy in 2024, with the bank noting that this outlook leans towards the optimistic side.

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While restructuring the world’s second-largest economy is a challenging process fraught with uncertainties, Heng believed that one positive aspect is that the priorities of the Chinese government are “clear” and “well-stated”, which is to promote innovation and new industries.

Businesses can “find opportunities aligning with China’s policy priorities”, said Heng, citing an example of a Singapore provider of senior care facilities that continues to grow in China despite the country’s economic downturn.

During the dialogue, Heng cited the disruption caused by the Covid-19 pandemic and the ongoing US-China trade war as two factors driving the reconfiguration of the global supply chain.

This, he added, underscored the importance of integrating supply chain resilience into trade flows and the operations of companies in Singapore.

Concerns over Singapore’s inflation also remain, he said.

While higher costs of production are to be expected, Heng said he felt that the more important issue was how to manage these rising costs.

“Our key focus should be costs relative to productivity,” he said. “We have to keep on getting more productive (to mitigate the costs).”

Heng listed artificial intelligence as an example of how to boost productivity and countering the high labour costs in Singapore.

He also stressed the need for businesses across all sectors, big or small, to go digital and go green.

Overall, Heng said that while the global economic climate was likely to continue to soften in 2024, the world is not heading for a major recession.

“We act on the central case which is that there will still be growth in 2024. Our focus is to provide sufficient buffers for businesses (against downside risks),” he said.

In a separate speech at the event, UOB deputy chairman and chief executive Wee Ee Cheong said that despite the global uncertainties, the bank remains positive on South-east Asia.

The key growth engines include the fast-evolving sustainability sector, the shift of supply chains towards Asean due to geopolitical tensions, the China-plus-one strategy that has boosted the region’s competitiveness, and the rising affluence of the large, young and digitally savvy consumer population, said Wee.

Further upsides for the region include the rebound of most Asian currencies, driven by the narrowing interest rate differentials between the region and the US, and the stabilisation of the Chinese yuan.

UOB economists have forecast a 2024 GDP growth of 4.9 per cent for the Asean region, higher than the 4 per cent expected for the whole of 2023.