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US Retaliation has Forced China to Take Its Tech to Singapore

Ming Loong Leong by Ming Loong Leong
April 15, 2022
in Community, International, Singapore
US Retaliation has Forced China to Take Its Tech to Singapore

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TikTok’s ban by Trump’s administration has led its owner, ByteDance Ltd., to establish a data centre in Singapore, thus creating more than 200 new jobs for locals.

Meanwhile, other Chinese tech giants like Alibaba and Tencent Holdings have sealed their presence on local shores, leading to a sanguine outlook for skilled jobseekers and real estate investors alike.

China is not the first country to leave its mark on Singapore’s tech industry

The US preceded China in establishing reputable tech ventures in Singapore, with Google setting up its APAC headquarters here in 2016 and Amazon launching its Prime and Prime Now locally in 2017.

The Indonesian ride-hailing company, Gojek, which had been funded by Tencent, also opened its first data science office in Singapore in 2017 to take advantage of the local talent pool and technological infrastructure.

Singapore has adopted a neutral, diplomatic stance

Minister for Trade and Industry, Chan Chun Sing, clarified Singapore’s stance on the growing Sino-US tensions at the Singapore Summit virtual conference, stating that Singapore is not concerned with the clash of personalities (between Xi Jinping and Trump) but with the possibility of such a conflict spurring misunderstandings between the leaderships and younger generations on either side of the rift.

He also called for both leaderships to come to a mutual understanding on how they could effectively collaborate with one another without letting their competitiveness get the better of them.

Why Singapore, of all places?

The Singapore FinTech Association (SFA), which is a cross-industry, non-profit initiative, is at the heart of Chinese tech firms’ interests.

Huawei — whose telecommunications equipment was banned by Trump on 15 May 2019 — expressed its interest in joining the SFA so as to expand its cloud computing unit to provide artificial intelligence and cloud services to other companies.

The geographical proximity of Singapore to China has played a crucial role too.

Furthermore, when the comparative advantage that the city-state has over its Southeast Asian counterparts as an innovation hub is considered, its tech industry stands increasingly in favour with Chinese tech giants’ expansionist plans.

Nick Redfearn, the deputy chief executive of UK-based consultancy Rouse, suspects that Chinese tech firms could be using Singapore as a base to hide their affiliations to mainland China in order to appear more credible regionally.

The next Silicon Valley?

To date, Singapore houses the largest number of Chinese tech companies outside of China, together with Silicon Valley.

Moreover, Singapore’s foreign direct investment (FDI) inflow from China has seen a rising trend from 2008 to 2018, peaking in 2015 at 10.45 billion USD and stabilising towards 2018 with a marginal increase of 0.09 billion USD from 2017.

Yet, the US remains as Singapore’s top source of investment (as of 2018) as China is nowhere to be found in the city-state’s top 10 list of FDI from abroad.

China stands to gain from Singapore’s tax schemes

Not only can they benefit from Singapore’s tax incentives, but also, they can use the country as a springboard to launch themselves into the greater ecosystem, that is, the rest of Southeast Asia.

Tax exemption schemes rolled out by the Singaporean government mean that Chinese tech firms which set up subsidiaries (e.g., Lazada which is owned by Alibaba Group) here can enjoy substantially reduced tax rates in their first three years of operation.

Chinese tech firms are here to stay in the long term

At the same time, Chinese tech companies have been looking to expand beyond their home borders due to stiff competition within the mainland’s fintech sector (especially in the wealth management and digital payment fields).

Alibaba’s Ant Group, formerly known as Alipay, has already bid for one (out of five) digital banking licenses released by Singapore’s central bank earlier this year.

Singapore a gateway to SEA

But commitment from these tech firms has also been drawn, in part, by the effort of the Singapore Exchange (SGX) to get them listed.

By backing the financing and investment needs of these companies, the SGX has been hoping to rope in homeward, US-listed Chinese firms that have lost the inclusivity of tightening US capital markets.

Given that Southeast Asia’s digital economy will triple in size by 2025 and that Singapore serves as a gateway to the rest of Southeast Asia, Chinese tech firms are unlikely to leave anytime soon.

The general disillusionment of Chinese tech giants with the US government has been soothed by the more conducive business environment over here. This should, at the very least, rattle Trump.

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