As a key infrastructure, financial, legal and logistics hub in Asia, Singapore is well-equipped to contribute to multipartite initiatives such as the Belt and Road Initiative (BRI) and the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (CCI)1. In addition, as many Singapore companies have business operations in Southeast Asia, they possess a proven track record and market knowledge of the region and its regulations. This means that Singapore companies can be good partners to Chinese companies investing in infrastructure projects in the region.
Four key areas that Singapore companies can complement Chinese partners on:
Singapore has served as a living lab for world-class infrastructure projects and through working with global partners, Singapore companies have developed expertise across the infrastructure value chain – from planning and design, to engineering, procurement and construction (EPC), development, and operations and management. In addition, Singapore is emphasising research and development for sustainable development and technology-enabled infrastructure. Singapore companies can work with Chinese partners on next-gen infrastructure in the region.
Singapore has a well-established financial ecosystem, comprising financial institutions with international project financing capabilities. Currently, 60% of ASEAN projects’ finance transactions are led by Singapore-based banks2. Supported by Singapore’s strong capabilities in Forex, especially for USD and RMB, Singapore companies are in an ideal position to offer financial services to Chinese-led infrastructure projects. Singapore banks such as DBS, OCBC and UOB have also been expanding their branch networks in China to reach out to more Chinese clients demanding international financing capabilities3.
Mega infrastructure projects in China usually involve complicated contracts. Singapore’s legal service providers are well equipped to offer legal guidance for these Chinese projects. In addition, with world-class dispute resolution institutions and a transparent legal system, Singapore is an ideal neutral place to resolve any arising disputes. According to industry players, with the rapid development of investments under the Belt and Road Initiative, the number of investment arbitration cases will continue to grow and bring more opportunities for Singapore companies in the legal sector.
As a new trade route between China and Southeast Asia via Singapore, the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity-ILSTC will require integrated logistics solutions, multimodal logistics standards and operations development.
1 https://asia.nikkei.com/Business/Banking-Finance/How-Singapore-sees-itself-complementing-China-s-Belt-and-Road 2 https://www.enterprisesg.gov.sg/Overseas-markets/Asia-Pacific/China/market-profile 3 https://www.businesstimes.com.sg/hub/business-china-special/spore-is-chinas-largest-investor
Rather than fear China’s massive and highly competitive tech market, Singapore startups should closely observe and capture the growing opportunity. To understand China’s tech ecosystem, it is important to keep track of the Chinese government’s initiatives to shape the sector and the latest market developments4.
As part of China’s 13th Five-Year Plan (2016 – 2020), the State Council has been pushing initiatives to support mass entrepreneurship and innovation. To encourage more international innovations to enter China, the Chinese government has established an integrated business license registry and enabled a one-stop registration process for foreign enterprises and their branch offices.
It is also useful to consider where technology and innovation are the most vibrant in China. Four key cities in the Chinese tech ecosystem are: Beijing (for artificial intelligence (AI) and deep tech), Shanghai (for medtech, fintech and broad-based consumer services), Suzhou (for nanotech and biotech) and Shenzhen (for hardware innovation).
Singapore tech companies can look at China in two ways: (i) as an end market due to its sheer size; or (ii) as a partner for tech sourcing or internationalisation. Due to intense competition in the Chinese tech scene, Singapore companies are strongly encouraged to develop a clear unique value proposition, understand what they are using the market for and the local needs, and find a strong partner to scale up quickly.
4 https://www.enterprisesg.gov.sg/blog/what-singapore-tech-startups-need-to-know-when-going-to-china
China's retail scene is highly driven by e-commerce, which has been growing at an accelerated rate. To date, there are more than 730 million internet users, of which more than 500 million are internet buyers. In 2017, total e-commerce transactions reached RMB7.18 trillion (S$1.43 trillion) in sales, a growth of 32% from 20165.
Cross border e-commerce surged 80.6% in 2017 to RMB90.24 billion6 (S$17.94 billion), with e-commerce imports up 116.4% to RMB56.59 billion (S$11.25 billion), while e-commerce exports increased by 41.3% to RMB33.65 billion (S$6.69 billion). With these exponential growth rates, it is very important for Singapore brands to continue tapping on the e-commerce landscape in China and grow with it. With increased spending power, Chinese consumers yearn for foreign products, which they associate with quality.
With 42% of today’s global e-commerce happening in China, Singapore companies should pay attention to this space. But take note: China’s e-commerce scene evolves rapidly. Companies and retailers are advised to stay on top of the latest trends and keep up with the changing preferences of Chinese consumers. With the huge variety of products in the e-commerce space, it is important for Singapore companies to build their brands through key e-commerce multipliers and agents.
The latest of such trends is New Retail, a concept made popular by Alibaba’s Jack Ma. New Retail is a strategy of using data technology to integrate e-commerce, physical retail and logistics to create an ecosystem that enhances buying, selling and the customer’s shopping experience. The concept became popular after findings in 2016 revealed that e-commerce does not replace physical retail in China. Instead, it is important to connect both online and offline experiences to drive sales.
How can Singapore companies ride the New Retail wave? Singapore retailers and exporters can consider both online and offline strategies when devising their market entry into China. This can be done by combining physical shopping with digital technology – for example, opening a pop-up store in China while allowing for quick payment solutions and easy delivery of goods to consumers’ doorsteps. It is important for Singapore companies to engage in partnerships with Chinese distributors who are experienced in New Retail, and can share their local networks and know-how.
Next, Singapore companies and retailers must not only tap data, but also translate it into memorable experiences for consumers. For example, Singapore retailers can use data technology to track customer purchases and personalise in-store experiences; or e-commerce companies can analyse online purchases from data and curate the most relevant products for physical stores. The possibilities are endless.
5 China Ministry of Commerce 2017 6 General Administration of Customs