Flow of China tech firms to Singapore bodes well for jobs, property sector

Tencent Holdings is the latest in a string of Chinese tech companies that have set up shop in Singapore. 
PHOTO: REUTERS

Updated from : The Business Times17 Sep 2020

TENCENT Holdings is the latest in a string of Chinese tech companies that have set up shop in Singapore.

But the Internet giant is not likely to be the last, with Charmian Aw, a Reed Smith lawyer who specialises in technology, calling the Republic “a highly attractive infocomm and digital technology hub for the region”.

As a confluence of factors brings more Chinese tech players into Singapore, the local job and property markets could get an uplift, analysts told The Business Times.

As such, the latest expansions were no surprise to watchers, who have noticed an uptrend in the Chinese presence in recent years.

Citing the Guangxi-based China-Asean digital trade centre unveiled in August, Maybank Kim Eng economist Lee Ju Ye said “stricter restrictions in the United States and European Union will likely divert and channel more Chinese money into Asean”.

To be sure, Andrew Tangye, head of office leasing at JLL Singapore, remarked that “these firms are not having a major impact on net take-up as they tend to be relatively small on average when they enter Singapore”.

He added: “But some are now starting to grow, and we expect to see more demand in the near future.”

Indeed, DBS real estate analysts Rachel Tan and Derek Tan on Wednesday called Chinese tech companies’ fresh demand for Singapore workers and office space “an emerging data point to track” over the next two years.

Official data most recently put the size of the information technology workforce at 109,000 people as at June, bucking the overall labour market trend of employment contraction.

Besides take-up of Grade A office space, “it will be positive for both data centres and even business parks if eventually Singapore develops into a tech hub in Asia”, Ms Tan told BT.

Meanwhile, Mr Tangye noted that investors might also turn to the logistics or industrial real estate market if it suits their business model – for example, for e-commerce platforms.

“Demand for data centres has certainly increased,” he added, although he noted that firms will have to go to third-party operators as Singapore’s urban planning policy frowns on over-allocating land for resource-light, power-hungry data centres.

But Kenny Liew, information and communications technology analyst at Fitch Solutions, said: “While the government does not disclose whether it provides tax incentives or land-based subsidies for foreign investors, it enacts zoning laws and clearly-defined guidelines for data centre construction, which will be attractive to any data centre or tech investor.

“Singapore also enjoys robust connectivity to other countries, owing to the considerable stock of submarine cables which land in Singapore and connect to major South-east Asian population centres, including Indonesia, the Philippines, and Vietnam.”

And the tech sector looks set to be the main investment beneficiary, especially as the Covid-19 pandemic drives digital transformation.

Ms Aw and Ms Lee named financial services and digital payments, e-commerce, ride-hailing, logistics, gaming and media, and data processing services as some areas that will expand.

Amid the US-China trade war, Singapore “stands out among the rest of the Asian countries” for its workforce, infrastructure and regulatory transparency – which are also factors that support high-technology sectors’ growth, said Ms Tan.

That’s as rivalry between the US and China prompts Chinese firms to rethink their business strategies and relocate to new markets – including Singapore, said Nanyang Technological University assistant professor Kaewkamol Pitakdumrongkit, who is deputy head of the Centre for Multilateralism Studies at the S Rajaratnam School of International Studies.

Dechert partner Boon Siew Kam added that Singapore is attractive as it does not have the same level of restrictions on foreign ownership that markets such as the US, Europe, India and Australia have been rolling out.

At the same time, analysts like Prof Kaewkamol say Chinese tech moves here are unlikely to affect Singapore’s ties with the US and China.

Said Ms Aw: “Singapore is committed to keeping firmly neutral, and has effectively straddled both the US, as its key strategic partner in South-east Asia and China, with whom it enjoys a close and strong relationship.”

Chinese businesses may even have been won over by this neutrality as they expanded in Singapore, added Ms Lee: “They have greater certainty that they would not be shunned over security concerns, as in the case of Huawei in some European countries.”

In the medium term, Ms Tan was optimistic about a “potential multiplier spillover impact” from the wave of Chinese tech investments, as adjacent businesses could also follow their corporate partners to Singapore.

Similarly, Xue Jing Cong, global equity analyst at Foord Asset Management Singapore, told BT: “We can certainly expect other tech companies to position themselves here as a base for South-east Asian expansion.”

Comparing the developing ecosystem in Singapore with Silicon Valley, Mr Xue added that, as more tech headquarters open here, “we can expect to see a positive reinforcement cycle that draws in more talent and investment, with the added support of a government that is developing supportive tax and other policies”.

Recent tech moves

Sept 2020

  • WeChat owner Tencent Holdings confirms plans for new Singapore office in South-east Asia expansion
  • E-commerce giant Alibaba Group reportedly in talks to invest US$3 billion in ride-hailing operator Grab
  • TikTok parent ByteDance ramps up Singapore hiring; reportedly also plans to invest “several billion dollars” and set up data centre here

Aug 2020

  • Video-streaming platform Bigo confirms plans to move its servers from Hong Kong to Singapore

June 2020

  • Huawei is picked as key vendor for TPG Telecom’s 5G millimetre-wave networks in Singapore

May 2020

  • Alibaba’s Singapore subsidiary inks deal for half-stake in Grade A office building AXA Tower

Jan 2020

  • Known suitors for Singapore digital banking licences include ByteDance; Alibaba-backed Ant Financial; a consortium involving fintechs Yillion Group and Hande Group; another consortium featuring Xiaomi Finance; and a separate consortium led by Chinese e-commerce group Zall

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