Bilateral relations between Singapore and China

Singapore's growing bilateral ties with China makes the city-state the perfect launchpad for firms seeking corporate expansion in China and for Chinese firms that are extending their global footprint.

Singapore's central bank, the Monetary Authority of Singapore (MAS), states that Singapore-China bilateral trade totalled to S$95.3 billion in 2010, marking a 26% increase as compared to 2009. China is reported to be Singapore's third-largest trading partner, second-largest source of tourist arrivals, and is also Singapore's biggest investment destination. Singapore and China share symbiotic economic and trade relations and both the economies serve to complement each other rather than being competitive. With China poised to play a key role in the global economic order the Singapore-China link has gained significance in recent times.

China presents a large and affluent consumer market and most international companies that want to tap into this market are fast expanding in Asia. In this regard, Singapore incorporation is a preferred channel for doing business with China. For instance, its takes as little as 24 hours time to incorporate a Singapore company whereas it can take anywhere up-to 2-3 months to set up an enterprise in China. Foreign investors are not treated on an equal footing as domestic investors in China and often need to deal with bureaucratic hurdles and red-tape. Taxes are another area where Singapore outweighs China. Singapore's corporate income tax rate of 17% is undoubtedly more appealing than China's tax rate of 25%. Moreover, the Singapore-China Free Trade Agreement breaks down trade barriers enabling businesses from both the countries to extend their reach in each other's markets. Singapore's strategic geographic location makes it an important destination for companies and entrepreneurs that want to operate in a business-friendly environment and at the same time have access to China.

China's unprecedented growth also opens up opportunities for Singapore companies to do business in China. China's National Development and Reform Commission claims that rapid urbanization will continue in China for the next 15-20 years and by 2025 China's urban population will touch 1 billion. This will spur a demand for infrastructure, urban solutions, education, health-care and other services; areas in which Singapore companies are market leaders. In fact, as of December 2010, Singapore had invested in more than 18,000 projects in China amounting to US$47 billion. Singapore companies such as Singapore Technologies Engineering, CapitaLand, Yanlord, BreadTalk Group, and DBS are making significant inroads into China. Singapore has also set up business councils in seven provinces in China to help Singapore companies enter the Chinese market. Last year, Singapore and Chinese companies and industry associations are reported to have signed 18 business deals and MOUs.

Singapore's position as a key trade and commercial hub also serves to attract Chinese firms eyeing global expansion. Chinese companies can use Singapore an ideal base to access the Southeast Asian market by either setting up a Singapore subsidiary company or a Singapore branch office. Today, there are more than 3,000 Chinese companies that have set up shop in Singapore. Most companies operate in the trading, consultancy, and construction sectors. According to Singapore's Minister for Trade and Industry Lim Hng Kiang, "From here, many companies have found access to resources and consumer markets. They appreciate the pro-business climate that enables them to set up centers for high-tech innovation, intellectual property management and research and development. China has set up an internationalization center here for Chinese high-tech enterprises to grow their businesses on the world stage." Singapore is also proving to be a popular destination for China to raise international funds. There are about 157 Chinese companies listed in Singapore and the the market value of these listed companies was US$43 billion as of October 2010.

Strong Singapore-China ties has opened up a host of opportunities for Singapore companies to tap into the China market, for foreign companies to use Singapore as a regional headquarter base to enter into China, and for Chinese companies to expand in the regional and global market.

On May 12, 2011, in Doing Business in Singapore, General News

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