Chinese firms catch up with US companies in value added to Singapore's economy, fixed-asset investments hit 10-year high
Chinese companies are catching up with firms from the United States in terms of how much value they add to Singapore's economy, according to the city state's economic planning agency, which also revealed that business-investment commitments in the trade-reliant country last year had risen to their highest in a decade.
According to data released by the Economic Development Board (EDB) on Tuesday, investments secured from foreign companies last year are expected to add S$31.2 billion (US$23.4 billion) per annum to the country's economy when the relevant projects are completed. Chinese firms accounted for 39.7 per cent of that total, or S$12.39 billion, compared with 40.9 per cent or S$12.76 billion for their American counterparts.
The figures for companies from China were up from S$2.53 billion in 2019, when they made up 8.6 per cent of the total of S$29.4 billion. Investments from US firms fell from S$20.1 billion that year, or 68.4 per cent of the total.
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EDB managing director Chng Kai Fong attributed the growth to investments made by Chinese firms that were "largely digital in nature, largely tech". Among the firms the agency highlighted were Tencent - China's largest social media and gaming company - and ByteDance, owner of the popular but beleaguered app Tiktok, which has been the subject of sanctions from Pakistan, India and the US.
Tencent has chosen Singapore as its regional headquarters. Photo: Reuters alt=Tencent has chosen Singapore as its regional headquarters. Photo: Reuters
Chng said while digital and tech companies had grown rapidly in recent years, this trend had been further accelerated by increased usage of technology during the Covid-19 pandemic, allowing the companies themselves to project an "outsized contribution" to Singapore.
Other Chinese companies that have moved to Singapore include Alibaba-backed Ant Group, which was recently awarded a Singapore digital bank license; Haitong Securities, China's second-largest brokerage; Huawei's cloud division; and Tencent-backed digital bank WeBank. Alibaba owns the Post.
Singapore, which last year was mired in its deepest recession since its independence in 1965, still attracted S$17.2 billion of commitments to fixed-asset investment - up 13 per cent from 2019, and its highest total in a decade. The term refers to a company's capital investment in facilities, equipment and machinery, which EDB chairman Beh Swan Gin described as proxies for manufacturing investment. The committed investments for last year are expected to create more than 19,000 jobs over the next five years.
The rise in commitments for fixed-asset investments was boosted by sectors such as semiconductors as well as the energy and chemicals industry, and is well above EDB's medium- to long-term annual goal of S$8 billion to S$10 billion. Beh said last year had coincided with the upcycles of those industries, during which projects tended to be in the billions of dollars. Every eight to 10 years, there was a "wave of investments" from companies that were increasing capacity to meet growing demand, he added.
Selena Ling, head of treasury research and strategy at OCBC Bank, said this was because Chinese companies were becoming increasingly global in their business reach. She added that these investments in Singapore were "a reflection of China's growing economic presence and also of Singapore's attractiveness as an investment base for hub activities".
Manu Bhaskaran, chief executive of economics research firm Centennial Asia Advisors, said it also meant that business commitments from Chinese firms generated huge value added per worker. "This makes sense because regional headquarters operations can be very high-value work," he said. "It is a good performance by the EDB."
Beh from the EDB expects investments by Chinese tech companies into Singapore to grow "for some years". He said that given how Chinese companies were doing well in the tech and digital sectors in Asia and Southeast Asia, "the prospects of them establishing regional activities and dream teams [and] regional headquarters in Singapore are good".
Added Ling: "The implications for Singapore are that notwithstanding the recent US-China tensions, both those countries remain large and important investment engines for the region and Singapore."
This article originally appeared on the South China Morning Post (SCMP).
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