Singapore Absorbs Chinese Capital

Trans-Pacific View author Mercy Kuo regularly interacts with subject matter experts, policy professionals, and strategic thinkers from around the world to learn their diverse views on US policy in Asia. This conversation with Dr. Angelo Venardos, CEO of Philadelphia Pte. Ltd. in Singapore and former Chairman of the Board of the Society of Trust and Estate Practitioners (STEP) – is the 359th in “The Trans-Pacific View Insight Series ”.

Since the COVID-19 outbreak in 2020, there has been an influx of Chinese capital into Singapore. What is causing this?

While the lack of official statistics makes it difficult to confirm actual trends, the Singapore Economic Development Board recently reported that an unprecedented surge in global demand for semiconductors last year saw Singapore benefit from an influx of manufacturing projects. of electronic products such as chip from USA and China. The war continued and players sought to reduce risks by geographically diversifying new facilities.

Singapore has always been considered the “safe haven” of Asia, and not necessarily the “tax haven” as so often described in the “West”. When there has been a crisis in another part of Asia, particularly in Jakarta, Manila, Bangkok, Yangon or Kuala Lumpur, there is “capital flight” to Singapore.

The Singapore model developed by Lee Kuan Yew offers: a) a stable democratic government, b) a jurisdiction based on the rule of law, and c) a well-regulated monetary system.

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As for the Chinese, whether from China or Hong Kong, the movement of capital began before COVID-19 as a result of highly visible and violent democracy protests.

In 2022, Singapore attracted a record S$22.5 billion in fixed asset investment commitments, compared with S$11.8 billion in 2021 and S$17.2 billion in 2020. These investments were expected to create about 17,000 new jobs.

Wealthy Chinese also appear to be moving their assets and families to Singapore, he explained.

For reasons of geopolitical diversification. High Net Worth Individuals (HNWI) from China have found in Singapore all the private banking services similar to those in Switzerland; private equity and venture capital services in London and New York; and augmented by the presence of all the major global banks represented in it. More recently, the Monetary Authority of Singapore (MAS) has offered attractive tax, residency and other relocation incentive programs for setting up Family Offices (FOs) in Singapore.

To date, over 700 FOs and possibly over 1,000 are believed to have settled in Singapore, with many likely coming from China. While English is the language of commerce in Singapore, the other three official languages ​​include Mandarin Chinese, Malay and Tamil, making it easy for the Chinese to relocate both their assets and their families to an Asian jurisdiction that it also has low crime statistics.

Is Singapore eclipsing Hong Kong as a regional financial and banking center?

In the past, Hong Kong was comparable to London and New York for its banking and financial services, such as IPOs, foreign exchange, and trade finance, classifying it as an International Financial Center ( IFC). Today, Singapore is undoubtedly the pre-eminent center for private banking and wealth management.

Hong Kong’s economy has been hit hard as a result of a two-year COVID-19 lockdown that has led to the destruction of its tourism industry, while Hong Kong’s once magnificent port has been brought to a near standstill due to problems with the supply chain. Chinese supply. The IPO capital market lost its luster due to the anti-corruption crackdown launched by Beijing and the new policy of wealth flattening in China. Despite these factors, Hong Kong, relying on China’s internal capital flows, will retain its strong position in terms of services to China’s capital markets, IPOs and investment banking sectors.

It would be wrong to view Hong Kong as a disaster, because the entrepreneurial talent of Hong Kong’s resilient local population will rebound in due time, if not like IFC, then within China’s Pearl River Delta (PRD) region, to compete with Shanghai and other Chinese cities.

For its part, Singapore, in addition to attracting the global family office sector, the authorities have improved the competitive position of its asset management industry through the introduction of the variable capital company (VCC), a corporate structure applied to collective investment plans. VCC’s structure benefits wealth managers to service family offices with segmented client accounts.

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What is the impact of the residence of Chinese wealthy elites on Singaporean society?

With the influx of wealthy Chinese, Hong Kong Chinese, and expatriates, real estate prices and rents have risen significantly in Singapore in recent years. This is putting pressure on the government to introduce relief measures and new property tax policies to curb the challenge, adding to inflationary pressures in Singapore.

Recognizing this, the Singaporean authorities will respond to tackle inflation like other central banks do, with tighter monetary policies and higher interest rates. However, investor concerns are more focused on the geopolitical risks of how Singapore deals with the ongoing balancing act of not having to choose between the US and China.

Take a look at how the Singapore government is handling the challenges and opportunities of this trend.

Singapore has always responded successfully to the opportunities created by a regional crisis of this type and, as in the past, preferring to diplomatically downplay the issues and not boast of such opportunities. As such, Singapore is highly experienced and highly sensitive to the social and labor challenges posed by the influx of capital and people from China to the small island state. That is why Singapore continues to prosper economically.

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