SINGAPORE Prime Minister Goh Chok Tong has warned his countrymen of a serious economic threat from China and laid out a strategy to create a globally competitive "new Singapore."

Singapore's greatest economic challenge is dealing with China's rise as an emerging manufacturing powerhouse, Goh said in a televised speech late Sunday spelling out his vision for the next decade.

"I have seen China's transformation at close quarters. It is scary," he said. "Our biggest challenge is therefore to secure a niche for ourselves as China swamps the world with her high quality but cheaper products."

Goh, an economist by training, said Singapore's new economic strategy "will enable us to develop new bases of growth."

He said the country, currently dependent on electronics exports, could no longer rely on past policies which transformed the resource-poor island into Southeast Asia's richest economy within three decades.

"Singapore's growth up to now has primarily been investment driven. This has taken our prosperity to an extraordinary level. But looking into the future, there are limits as to how much more we can rely on such a strategy," he said.

Goh's new economic strategy would focus more on spreading Singapore's wings into regional and global markets as well as continuing to restructure the economy, AFP reported.

Goh's speech, which capped the extended celebration of the country's 36th Independence Day on August 9, came as latest data showed Singapore's economic engine was slowing down sharply, hurt by the severe downturn in the global electronics sector and the U.S. slowdown.

Some economists are now warning the economy could contract this year after key non-oil domestic exports slumped by a record 24 percent in July from a year ago, marking the fourth straight month of decline.

"Singapore has a window of about 10 years to make this transformation, and upgrade to the next level of economic development," he said, warning the next decade will be more difficult than the last 10.

"We are now in a new phase of global development. Moreover our economy is uncomfortably sandwiched between the developing and developed econonomies," Goh said.