Singapore firms reacting to China’s development

Plans to revitalise the west, north-east are providing them with opportunities

By TEH SHI NING
22 March 2010

Foreign investments flowing into China increasingly head for its rapidly developing non-coastal regions. Singapore companies have been part of this shift – though not as quickly.

Western and northern provinces such as Tianjin, Sichuan and Shaanxi ranked among the top 10 destinations for Singapore investments in China in 2008, according to figures from the respective provinces and municipal cities. Just five years ago, none had made that list. Others such as Liaoning and Shandong have also risen in the ranks.

But there is much potential yet for Singapore’s investments to grow in these regions. In west China, Singapore is now Sichuan’s top country investor as investment growth mirrored the recent sharp spikes in worldwide foreign direct investment (FDI) into the province. But Singapore investment into Shaanxi, whose capital Xi’an is set to be a high-tech base, and high growth Chongqing, has not risen as quickly as total FDI from elsewhere in the world.

China’s central government’s regional development plans – the ‘Go West’ strategy and preferential policies to revitalise the north-east – have a large part to play in the shifting FDI flows. IE Singapore group director for China Ignatius Lim observed three sweeping trends parallel to these developments, which Singapore companies might capitalise on: rapid urbanisation, changing demographic anchors of consumption, and shifts in the geographical centres of production.

‘As manufacturing heads northwards and westwards because of cost pressures, larger MNCs like HP and Intel are shifting production centres. This creates space for Singapore companies to enter, companies which have strengths in areas like logistics and warehousing,’ he said.

For instance, logistics company YCH, which has over the past two decades set up operations in coastal cities such as Shanghai, Hangzhou, Guangzhou and Xiamen, has headed for second-tier cities such as Chengdu. YCH China CEO Goh Yong Seng said that his company found that it could ‘bridge the gaps’ as west China develops, by introducing supply chain processes – warehouses, reefer trucks and cold chain facilities – that could meet the standards of international MNCs and fast-moving consumer goods businesses moving West too.

Soh Swee Ping, IE Singapore’s regional director for West China, China Group, said that changes in local authorities’ stance are favourable to Singapore’s SMEs too: ‘In the past, they were more focused on the big MNCs and huge projects, but now they are willing to speak to congregated players from a single country as the government recognises that these companies’ good experiences of investing in the city would be a good marketing tool for the city as well.’

For north China, key opportunities arise out of the rising urbanisation and affluence of the population.

Prime Group, which has been in east China’s tourism and leisure industry for 15 years now, recently invested in an integrated tourism project offering golfing, holiday resort and spa facilities, high-end property and a winery in Shandong province where key wine-producing Yantai City is.

Spokesperson Carrie Tan said that it was a great investment opportunity because of the region’s wine-making brand, established market and distribution channels. She added though that some challenges of investing in the North and North-east parts of China include the fact that ‘these regions tend to be more agriculturally intensive’, ‘away from major international trade routes’, and have ‘relatively less robust international markets than their southern counterparts’. Singaporeans also tend to be less accustomed to the unique northern cultures, she said. Ms. Soh said: ‘Every market has varying levels of business transparency. Where development is still in earlier stages, the investment environment could be different and possibly less transparent than other regions in China. But savvy businessmen know how to manage this, especially those which already have business in the other parts of China.’

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