Staying Relevant in a Fractured Order: Singapore’s Small-State Playbook from SM Lee’s Chatham House Dialogue (Oct 2025)
Staying Relevant in a Fractured Order: Singapore’s Small-State Playbook from SM Lee’s Chatham House Dialogue (Oct 2025)
When I listened to the interview of Senior Minister (SM) Lee Hsien Loong speak at Chatham House on 27 October 2025, I heard not just an update on Singapore’s foreign policy, but a masterclass in how a very small, very exposed, very trade-dependent country survives when the world’s biggest powers decide they no longer want to play by the old rules. Ten years after his last appearance there in 2014 — right after Russia’s annexation of Crimea — he was effectively saying: the unraveling we worried about then has now become the operating environment. The US-led multilateral order has frayed, US–China contradictions have hardened, and middle and small states are being forced to navigate “rogue waves” rather than calm seas. My aim in this essay is to restate, analyse and elaborate on his key arguments — on trade, security, ASEAN, small-state agency, RMB internationalisation, migration, and how to withstand pressure — and to situate them against credible sources so the reflection is not merely narrative, but properly grounded (Chatham House, 2025; Ministry of Foreign Affairs Singapore [MFA], 2025).
I am a Singaporean observer who follows economics, geopolitics and markets closely, and who believes that domestic policy, foreign policy and economic strategy are now fused. You cannot talk about Singapore property, investments, or business certainty without understanding what SM Lee described — that the US is no longer “holding the ring” for free trade, that China is too big to exclude but too politically entangled to fully trust, and that ASEAN cannot become the EU by decree. The world has become more transactional, and yet Singapore still has to be principled and relevant.
Singapore should navigate a world no longer anchored by a dependable, US-led multilateral order. His core point, which I fully share, is that great-power rivalry — especially between the US and China — is now structural, not cyclical. That means countries like ours cannot wait for the system to “fix itself”; we must create room, rules and relevance for ourselves even when big players turn inward.
On trade, he was realistic but not defeatist. Even if Washington is less committed to MFN and the WTO is slow, we should not discard it. Instead, we build practical, plurilateral deals — like the WTO e-commerce JSI or the newer Future of Investment and Trade Partnership — that keep rules alive and open the door for others to join. At the same time, we deepen ASEAN economic integration and, critically, link regions (EU–ASEAN, EU–CPTPP, RCEP) so the world does not harden into rival blocs.
On security, he drew a sharp contrast with Europe. Asia’s states may have disputes with China, but most do not want to frame China as an existential enemy; they want continued US presence, continued business with China, and an open, multipolar region. That is classic Singapore: we welcome all, choose principles, not sides.
What made his remarks most useful was the small-state operating manual beneath them — stay active diplomatically, be economically useful, keep domestic cohesion, manage immigration sensibly, and stand your ground politely when big powers apply pressure. If we do that, we don’t have to “punch above our weight”; we just have to avoid being ignored. That, in today’s fractured order, is already success.
1. A world no longer policed by one benevolent centre
SM Lee opened with a blunt diagnosis: the US-led multilateral order has “come a long way towards unravelling.” That is consistent with a decade of scholarship that has documented the retreat of US trade leadership, the politicisation of supply chains, and the weaponisation of interdependence (Baldwin, 2016; Farrell & Newman, 2019). In his telling, the shift has two drivers:
accumulated trade and macroeconomic imbalances; and
growing strategic rivalry between the US and a much stronger China.
This is not new — tension has been “brewing for some time” — but he said 2025 brought it “to a boil” with a new US administration leaning harder into bilateral, security-framed trade. That is credible: even since 2018, Washington has used export controls, entity lists, outbound-investment screening and industrial policy tools to manage China, while also becoming sceptical of WTO dispute settlement (Office of the United States Trade Representative, 2024). SM Lee simply described the end-state from the perspective of a small state: the indispensable power says it will “no longer stand for multilateralism and MFN rules,” prefers bilateral leverage, and occasionally frowns when others try to liberalise among themselves.
That matters because much of Singapore’s post-1965 strategy depended on an open, rules-based trading system backed by US power (Huff, 1995). Once that umbrella thins, we need fallback architectures — and that is where his three-part trade strategy came in.
2. Trade: don’t throw away the WTO, deepen regionalism, link regions
I found the most useful part of the dialogue to be his refusal to declare the WTO dead. “There is life in the old dog yet,” he said. Many academics and practitioners have argued that plurilaterals inside the WTO are now the only realistic path forward — and SM Lee cited exactly such efforts: the Joint Statement Initiative (JSI) on e-commerce, co-convened by Singapore, Australia and Japan, which stabilised its text in July 2024 after five years of negotiations (WTO, 2024), and the newer Future of Investment and Trade Partnership (FITP) started by a cluster of small, like-minded economies. His logic was straightforward:
even if universal consensus is impossible,
partial, voluntary, “consenting adults” agreements under the WTO umbrella still signal commitment to common rules,
and successful small agreements can later become the nucleus for something bigger — just as the P4 eventually crystalised into the CPTPP, which the UK then joined (Petri & Plummer, 2019).
This is consistent with trade literature that says “variable geometry” — coalitions of the willing operating inside a wider institution — is better than fragmentation into hostile blocs (Hoekman & Sabel, 2019). It also tracks with Singapore’s signature style: start something small, show it works, expand it, and leave the door open.
His second move was regional: fix what’s in your own backyard. Even the EU is still not a fully single market across services, finance and investment; ASEAN, with all its summits and blueprints, still has non-tariff barriers, regulatory divergence and behind-the-border frictions (ASEAN Secretariat, 2024; Ravenhill, 2014). In a world where big-power security concerns now intrude into trade, it is relatively easier for Southeast Asian states to make intra-ASEAN flows smoother. And because necessity has grown — “now that the necessity is greater” — there is more political will.
The third move was, to me, the most strategic: link regions so we don’t end up with airtight, rival blocs. He welcomed renewed EU–MERCOSUR talks, EU–ASEAN interest, and even the idea of the EU talking to the CPTPP group. That web-building approach is exactly how small states prevent the “spheres of influence” outcome. If Europe, Asia-Pacific and parts of the Global South are interlaced with overlapping trade deals, it becomes harder for any one great power to insist on exclusive economic zones. This is how SM Lee thinks Singapore and other small states can help “avoid a worst-case outcome.”
He also inserted a realistic line about China: you cannot design a rules-based trade future that excludes the world’s largest trader. But integrating China fully requires not just saying “rules-based order,” it requires demonstration that trade will not be politicised — that oysters, wine, coal or bananas won’t suddenly face “phytosanitary” issues during a diplomatic spat. That is a fair, empirically supported worry; Australian, Philippine and Korean experiences show that trade can be used as a signalling tool (Armstrong & Drysdale, 2011). His conclusion: we should still bring China into “this ink blot of a rules-based trading system,” but everyone will watch for restraint.
3. Security: Asia is not Europe
The second pillar of his talk contrasted security perceptions in Europe versus Asia. In Europe, the threat picture is stark: a revisionist Russia, the memory of the Cold War, and a functioning, mission-focused NATO. You arm, you deter, you sustain support for Ukraine.
Asia is messier. China’s military modernisation is real and “palpably growing,” but most Asian states do not frame China as an existential threat; they frame it as a necessary economic partner with whom they have disputes to manage, especially in the South China Sea. Even formal US allies like Japan, Australia and South Korea have large Chinese trade and investment flows they want to preserve. And even claimant ASEAN states want to “do business and manage the relationship,” not escalate it into a zero-sum confrontation (Storey, 2020).
This is classic “hedging” behaviour — cultivating security ties with the US while deepening economic ties with China to maximise autonomy (Kuik, 2008). SM Lee was candid: Asian states liked the “Goldilocks” period when they could benefit from Pax Americana and China’s rise simultaneously. Now, with sharper US preferences, they will be “pushed from both sides,” but most still prefer that to a carved-up region. His preference is clear: keep Asia open, multipolar and contestable — with US, China, Japan, Australia, the UK and the EU all present — so small states have choices. That aligns with Singapore’s longstanding “not choosing sides, but choosing principles” line (MFA, 2025).
He also reminded the UK audience that freedom of navigation in the South China Sea is not a niche Asian concern — it is about global sea lines of communication. That’s a gentle way of saying: European presence in Indo-Pacific security is welcome, not meddling.
4. Small states: agency through clustering and competence
One of the best moments was when Dr Samir Puri asked whether small states will end up clustering “for safety” or whether they can be positive agenda-setters. SM Lee said: both. “Minnows do tend to school together,” but if the group articulates sensible rules, bigger fish may join without crowding them out. That was his experience with FITP and, earlier, the P4. This echoes much of the small-state literature — that small countries can “upload” their preferences to multilateral forums if they are organised, competent and seen as honest brokers (Katzenstein, 1985; Cooper & Shaw, 2009).
He also explained Singapore’s active-diplomacy philosophy: we are present in the UN’s Forum of Small States (FOSS), in climate talks (where Singapore has chaired carbon-market architecture discussions), and in every platform where we can “nudge” the consensus. His line “once you think you punch above your weight, you are going to be knocked out” was vintage Lee Hsien Loong — modest in tone, but actually describing a very ambitious diplomatic reach.
To make that diplomacy work, he said, you need “good people… present,” not just Zooming in. That is a reminder that in international politics, personal credibility, preparation and reliability matter. For a city-state, reputation is leverage.
5. Navigating US–China contradictions in Southeast Asia
When asked about whether ASEAN will look very different in five to ten years — with Indonesia already joining BRICS (2025), and others expressing interest — SM Lee answered with realism. He expects:
US–China “deep contradictions” to remain, because the US now sees China as a “pacing challenge” and intends to stay ahead in technology, military and AI;
China to insist development is its “right” — a red line;
both sides to understand that a full-blown fight would be ruinous — echoing Kissinger’s “the fight cannot be won and must not be fought”; and therefore
Southeast Asia to remain economically open to all, provided all major powers keep investing, trading and staying engaged.
That is in line with ASEAN’s long-standing “omni-enmeshment” strategy: bring all powers in, so none can dominate (Goh, 2007). It also explains Singapore’s strong support for RCEP — which he said Singapore helped shape early — as a way to embed China, Japan, Korea, ASEAN and Australasia in a single, not-too-deep, but very wide framework (ASEAN Secretariat, 2024). Yes, India dropped out in 2019; yes, RCEP is shallower than the CPTPP; but yes, it is still a signal of “we want to trade; we don’t want to beggar thy neighbour.”
On whether ASEAN should become more EU-like, he was frank: the problem is not the secretariat’s size; the problem is divergent strategic outlooks. Laos, a landlocked country bordering China, will not have the same view on South China Sea freedom of navigation as the Philippines, an archipelagic claimant; Indonesia’s large domestic market gives it a different calculus from ultra-open Singapore. Without aligned threat perceptions, supranationalism will not fly. That matches academic comparisons of ASEAN and the EU: ASEAN is consensus-based, sovereignty-conscious and deliberately non-supranational (Ba, 2009; Acharya, 2014).
6. RMB internationalisation: Singapore can help — but only China can decide
When an economist in the room asked what role Singapore could play in China’s renminbi (RMB) internationalisation, SM Lee’s answer was precise. Singapore is a financial centre and already an RMB clearing hub; it will trade whatever instruments market participants want. But the ceiling is set in Beijing, not Singapore. For the RMB to become a true reserve or transaction currency, China must:
loosen capital controls;
deepen and democratise access to its bond and financial markets;
give international investors confidence that financial claims are insulated from geopolitical decisions; and
separate, credibly, commercial obligations from political leverage.
Until then, as he put it, people will recall that the “banker may take instructions from the government.” This is exactly the problem that has limited RMB internationalisation since China launched the offshore CNH market in 2010 (Prasad, 2017). It is also why, despite US extraterritoriality concerns, the dollar still dominates: “TINA — there is no alternative.”
His comparison to frozen Russian assets in Europe and to US influence over dollar assets was clever; he was saying, in effect: every system has political risk, so China must decide what balance of openness and control it wants if it wants others to hold large RMB positions.
7. Immigration, identity and non-politicisation
The immigration question was interesting because he admitted, very plainly, that “it cannot be solved” — only managed. Singapore needs foreigners “in quite large numbers,” from CEOs to construction workers, but must also preserve social cohesion, domestic identity and political stability. That’s the policy triangle we have long practised: open enough to grow, cohesive enough to govern, clear enough in rules so foreigners know not to flaunt wealth or import external quarrels (Ministry of Manpower, 2024).
He also called immigration “very easy to politicise” — a warning rooted in actual Singapore election experience. Here again he drew on history: expelling productive groups, like the Huguenots, hurt France for generations. So the answer is calibrated openness plus clear norms, not nativism.
I would add: this is also a national-security question. In a world of influence operations, bots and foreign-linked narratives, Singapore cannot afford to have large, unassimilated communities pulled by external media. That is why he stressed: “This is Singapore. Please comply with our rules.” That is also why Singapore has steadily updated its foreign interference and online-safety regimes (Ministry of Home Affairs, 2024).
8. Withstanding pressure from big powers
I appreciated the candour in his “keep calm and carry on” anecdote. Whether it was the Michael Fay vandalism case in 1994, US tariff rhetoric, or China’s displeasure over Singapore’s principled positions, the operating method was:
don’t escalate needlessly;
don’t compromise fundamentals;
offer face-saving if it doesn’t hurt core interests;
restate that we still want to work together.
That is classic small-state realism, and it has worked because our foreign policy is seen as independent, non-proxy and based on our national interest. He mentioned telling a Japanese prime minister that “Singaporean Chinese are different from Chinese-Chinese” — that’s a polite way of asserting we will not be someone’s ethnic outpost. This domestic clarity on identity is what enables foreign-policy consistency.
9. The mindset for uncertainty: level with your people, stay relevant, defend yourself
The last part of the dialogue was almost a civics lesson. How did Singapore get through oil shocks, the Vietnam War, the Cambodian crisis, the Asian financial crisis, SARS, the GFC and COVID-19? Three habits:
Tell people the truth early. “We are in for a difficult time… let us hang together.” That creates the “rugged society” the founding generation talked about (Lee, 2000).
Be useful to others. If you are economically relevant and diplomatically constructive, others want you to succeed. That is external security by relevance.
Be able to fend for yourself. National Service, a serious SAF, external training grounds — all signal that Singapore will shoulder its own defence. That is credible-deterrence theory in practice for a micro-state (Bitzinger, 2016).
This triad explains why, 60 years on, Singapore enjoys “reasonably good standing in the world,” as he put it. It also explains why our diplomats can promise consistency to partners: domestic politics is aligned on foreign-policy fundamentals.
10. So what is the big takeaway?
To me, the core message of SM Lee’s Chatham House dialogue is this: small states are not doomed in a fractured order — if they are nimble traders, active diplomats, disciplined domestically, and principled enough to say “no” politely. We cannot restore 1990s-style globalisation. We cannot make US–China rivalry disappear. But we can:
keep the WTO alive through plurilaterals,
deepen ASEAN linkages,
stitch regions together so blocs don’t harden,
welcome all major powers into Southeast Asia,
maintain a credible defence,
manage immigration without xenophobia, and
speak as Singaporeans, not as proxies.
That is a lot of agency for a “45-minute taxi-ride” country. And it is a reminder that foreign policy is not abstract — it is the operating environment for everything else Singaporeans care about: investment, property, jobs, education and long-term asset allocation.
In a world where US–China dynamics, ASEAN integration and capital flows are shifting, you should work with an advisor who actually tracks these changes daily — not just property listings.
I am a Singapore-based real estate professional and SAF Captain (OC) who spends hours every day studying macroeconomics, geopolitics, equities and crypto, and writing source-checked essays so that my clients — international families, China/SEA investors, UHNWIs and institutions — can enter Singapore with clarity, not guesswork. Grounded in Singapore Land and Business Law, I do the due diligence, stress-test the risks, then structure portfolios that add Singapore property as a lower-volatility core: stable, income-generating and positioned for capital appreciation. 欢迎中国及东南亚客户与我联系，获取合规、稳健的新加坡资产配置建议。 If you want a courteous, humble but data-driven partner who understands both markets and policy, let’s speak — and build a resilient Singapore real estate position into your wider portfolio.
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