In 1989 Singapore had not yet established diplomatic relations with China, largely out of deference to Indonesia, the ASEAN state most concerned about China's intentions in the region. Indonesia's move to initiate diplomatic relations with Beijing in February 1989, however, was expected to clear the way for Singapore to follow. Regarding Indonesia's announced intentions, Singapore's First Deputy Prime Minister Goh Chok Tong stated in February 1989 that it was "logical" for Singapore "to follow suit"; however, he saw no need to move hastily because Singapore already had a cordial trading relationship with China. Singapore's trade with China in 1988 amounted to US$2.98 billion, a 27 percent increase over 1987. Reexports to China were up by 108 percent over the same period.
The other side of improving relations with China was maintaining good relations with Taiwan. Although Singapore lacked diplomatic ties with Taiwan in 1989, the two enjoyed a flourishing economic exchange. Trade with Taiwan in 1988 reached S$5.2 billion, exceeding that with China ($5.7 billion). Some analysts suspected, however, that once serious negotiations to establish diplomatic ties began with Beijing, China was likely to pressure Singapore to end its relationship with Taiwan, particularly in matters of military cooperation such as the training in Taiwan of Singaporean troops. Others speculated that the relationship would not be affected. Lee Kuan Yew said in March 1989 that he did not expect Singapore's relationship with Taiwan to change because both countries had been aware for some time of Singapore's intention to follow Indonesia in normalizing relations with China and both had taken such a development into consideration. A visit by Taiwan's President Li Teng-Hui shortly after Indonesia's diplomatic initiative, was interpreted as a sign of continuing warm relations between Taiwan and Singapore.
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