On December 18, Hainan Island will close its borders, and this is the fundamental reason why Singapore cannot sit still!

Singapore's good days are based on the Malacca Strait 'lying down.' This waterway, which is no wider than 37 kilometers, is the most beautiful 'toll station,' and the transshipment trade alone supports half of its GDP. But with Hainan closing its borders, this 'toll station's' sign has been shaken.

When the Indonesian freighter 'Sumatra' first bypassed Singapore and directly sailed to Hainan's Yangpu Port, Singapore's Prime Minister Lawrence Wong urgently called for 'China and Japan to put down their historical burdens,' revealing the deep anxiety of this 'Asian toll station' leader.

Singapore's prosperity is built on the geographical monopoly of the Strait of Malacca. 37% of global maritime trade and 50% of crude oil transportation must pass through this 37-kilometer-wide waterway, allowing Singapore to construct the busiest transshipment port system in the world.

Data from 2024 shows that the container throughput managed by the Port Authority of Singapore reached 38 million TEUs, with 70% being transshipment cargo between Southeast Asia and East Asia.

This 'shipping economy' allows Singapore to earn triple revenue from transshipment trade fees, ship refueling fees, and financial settlement fees, with 22.3% of GDP coming from wholesale trade.

But this model has a fatal flaw: profits are paper-thin. A ship transporting palm oil from Indonesia to China needs to pay a 12% transshipment fee when transiting through Singapore, while Hainan's closure directly implements a '30% value-added processing tax exemption' policy.

After the Golden Agri-Resources Group built a factory at Yangpu Port, processing costs dropped by 18%, saving $120 million annually. Even more alarming for Singapore is that Yangpu Port has opened a direct express route to Jakarta, shortening the journey by 5 days, and the cargo damage rate has decreased from 8% to 3%.

The policy dividends released by Hainan's closure can be described as precise strikes: tax scissors difference: the corporate income tax has been cut from 25% to 15%, and the highest personal income tax rate has been compressed from 45% to 15%, which is 5 percentage points lower than Singapore. The owner of a 300,000-ton oil tanker can save 240,000 yuan on a single refueling.

Value-added processing trap: Southeast Asian raw materials processed in Hainan are sold to the mainland duty-free, directly cutting into the profit core of Singapore's transshipment trade. Thai rubber is shipped directly to Hainan via the China-Laos Railway, and after processing into tires, it is fully exempt from tariffs, saving 12% compared to transiting through Singapore.

This dimensionality reduction strike is rewriting the rules of the game. When Hainan attracts companies to set up production with the 'domestic and outside customs' system, Singapore's 'toll fee' model becomes an inefficient 'toll booth'.

In the face of the impact, Singapore has launched two major self-rescue plans: green shipping hub: investing 3 billion Singapore dollars to renovate the terminal and promote hydrogen fuel supply stations. In July 2025, the world's first hydrogen-powered cargo ship 'Singapore' was trialed, claiming a 50% reduction in carbon emissions.

Digital trade barriers: A 'Starlink Port' system is introduced, using blockchain technology to achieve paperless documentation. But reality is harsh—by the third quarter of 2025, 63% of Southeast Asian companies still abandoned usage due to system compatibility issues.

These efforts have yielded little effect. The fundamental contradiction lies in: Singapore's land area limits the space for industrial upgrading. Yangpu Port has a bonded area of 120 square kilometers, capable of accommodating 200 300,000-ton cargo ships simultaneously, while Singapore's Jurong Port has a maximum capacity of only 30 ships.

Hainan's closure marks the global shipping pattern entering the 'dual-core drive' phase: Singapore continues to control high-end services, with 6.8% of global foreign exchange trading still concentrated here, and the number of multinational corporate regional headquarters is three times that of Hainan.

Hainan is building a complete industrial chain: relying on a market of 1.4 billion people, Hainan is forming a closed loop of 'processing-research and development-sales'. By 2025, Hainan's production of new energy vehicles will exceed 500,000 units, with 70% of components coming from Southeast Asian transshipment.

This division of labor has restructured the利益链条. When Malaysian palm oil companies choose to build factories in Hainan, Singapore's warehousing income decreases by 15%; when Vietnamese coffee beans take a detour to Yangpu Port, Singapore's futures trading volume drops by 12%.

In the 1990s, Dubai rose through free trade zone policies, with container throughput at Dubai Port soaring from 3 million TEUs in 1995 to 21 million TEUs in 2025.

Singapore's response strategy is intriguing: on one hand, it cooperates with Dubai to open the 'Middle East-Southeast Asia' express line, while on the other hand, it secretly suppresses UAE shipping companies.

History may repeat itself. The competition between Hainan and Singapore is essentially a clash between 'policy innovation' and 'traditional advantages'. When Hainan attracts industry chains with 'value-added processing' and cultivates the domestic market with 'duty-free consumption', Singapore's 'toll booth' model is bound to be unsustainable.

Behind Hainan's closure is the covert battle between China and the U.S. in the South China Sea. The Chinese Navy's 'Fujian' aircraft carrier conducts routine patrols to ensure the safety of the shipping route from Yangpu Port to Europe. Data from 2025 shows that the accident rate for merchant ships in the South China Sea has dropped to 0.02%, on par with the Strait of Malacca.

Singapore's anxiety lies in: if China completely controls the South China Sea shipping lanes, the strategic value of the Strait of Malacca will plummet. This concern has driven Singapore to accelerate its alignment with the United States, with joint military exercises in 2025 increasing by 40% year-on-year.

Standing on the observation deck of Yangpu Port, the silhouette of a ten-thousand-ton giant ship breaking through the morning mist contrasts strangely with the American military reconnaissance aircraft in the skyline. Hainan's closure is not to replace Singapore, but to prove: in this efficiency-driven era, any business model relying on geographical dividends could be disrupted.

When China breaks the monopoly with institutional innovation, and when companies replace transshipment trade with industrial chain integration, Singapore's 'golden era' will eventually come to an end.

This transformation has no losers—Southeast Asian countries benefit from lower logistics costs, China opens up its domestic market, and Singapore needs to consider: where should the next 'toll booth' be built?