The economy of tiny Singapore is taking a big hit from the slowdown in China, an impact coming just as the city-state is struggling with a homegrown demographic squeeze.
Buying and selling goods is a crucial driver of growth for Singapore's economy: companies based on the island supply components that go into smartphones made in China and the shipping industry helps transport raw materials across the world. Wholesale and retail trade makes up nearly 20% of gross domestic product.
This makes Singapore particularly susceptible to the weakness in China's economy, the world's second largest, which last year grew at its slowest pace in 25 years.
Veteran diplomat Chan Heng Chee, an ambassador-at-large for Singapore, told CNBC that the resulting drop in China's appetite for raw materials was particularly painful.
"We all know there's a slowdown in the region and the Chinese economy has slowed down. And it has impacted on very many countries. They're buying much less raw materials," Chan said. "For Singapore, because we are a trans-shipping hub this would immediately impact on us as the volume of cargo that would go through."
It's a slowdown immediately apparent in data released earlier this week. Singapore's non-oil domestic exports (NODX) contracted 7.2 percent on-year in December, accelerating the decline from November's 3.4 percent fall. Exports to China fell nearly 19 percent on-year in December.
"Singapore is aware that this year the numbers may not look so good and we're trying to see what we can do about it to make ourselves more competitive and perhaps to see what to do about rising costs," said Chan, whose previous positions have included a 1996-2012 stint as Singapore's ambassador to the U.S.
The Asian Development Bank (ADB) has also kept an eye on the city-state's rock-and-hard-place position.
"Costs have been rising. This is an expensive place to do business in terms of wages … manufacturing in that sense gets hit and that's noticeable in the figures," Ganeshan Wignaraja, an advisor to the ADB's office of the chief economist, said last week.
"On the demand side, you have the close link with the People's Republic of China. Singapore makes many components and some of the goods that go into the phones and the other things China makes, like electronics," he said. "Added to that, you've had in the last couple of years sluggish U.S. demand, another big customer."
The picture is complicated by the city-state's looming demographic crunch.
By 2030, the number of people over the age of 65 in the city-state is expected to double, making up around 20 percent of the population. At the same time, fewer babies are being born.
Singapore's fertility rate was only 1.2 births per woman in 2013, according to World Bank data. That's not just below the replacement rate of 2.1, it's below even famously aging Japan's rate of 1.4 and puts the city-state only fourth from last globally.
It's not a recipe likely to produce enough workers to keep costs down.
"We had hoped to resolve this problem of falling birth rates and aging by opening up our borders and allowing immigrants to come in. It would help. But there has been a pushback," Ambassador Chan said. "I think Singaporeans have indicated that they find the increase in the population of immigrants in recent years to be something they are not comfortable with."
Indeed, resistance to an influx of immigration was likely a driver of the ruling People's Action Party's (PAP) relatively weak performance in the 2011 election. In that election, the PAP's share of the vote slid to its lowest-ever at 60.1 percent and the opposition parties won a record six seats out of parliament's then total 87. Since then, the pace of immigration has been slowed sharply.
In 2015 elections, the PAP, which has ruled since the city-state's independence in 1965, won around 69.9 percent of the vote, taking 83 of the expanded parliament's 89 seats.
"We are not shutting off altogether, but we are slowing down the numbers quite substantially to a level where we are comfortable with," Chan said, noting that many countries globally are also struggling with immigration issues. "I think the sudden surge of numbers in the numbers that have come has proven to be a challenge."
The increase was certainly fast and furious: Singapore's total population climbed to around 5.45 million in 2015 from around 4.40 million in 2006, according to official data. That surge outpaced the addition of new infrastructure and housing, leading to overcrowded public transportation systems and fast-rising housing prices.
The population surge even outpaced plans set by Singapore's city-planners in the 1990s, which forecast it wouldn't hit 5.5 million until around 2091.
But Chan expects the immigration faucet will turn back on eventually.
"We are a practical and pragmatic people. As the population ages, it's who will be the caregivers and I think Singaporeans understand that," she said.
But even in the face of Singapore's manufacturing downturn and labor tightness, the ADB still sees opportunities for the city-state's economy to grow.
"South Asia has the opposite problem. Lots of young people with insufficient number of jobs," Wignaraja said, noting that the silver-haired demographic is on the rise not just in Singapore, but also across East Asia, including South Korea, Japan and Thailand. "Investing from one to the other makes sense."
Singapore, in particular, has a great deal of expertise to offer developing countries within Asia, he noted.
"Singapore has expertise, I feel, in running industrial estates. You have these fantastic industrial estates in this country. You know how to promote investment. I think selling that expertise is important," he noted. "Generally, it's becoming an integrated service hub for the region. In that sense, Singapore has a real first mover advantage."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1