New deal allows Chinese firms to use S'pore as launchpad into Asean

BEIJING — Singapore’s stock exchange operator and its third largest bank have entered into an agreement with China’s national businesses association to help Chinese companies expand into markets within the Association of South-east Asian Nations (Asean).

The agreement enables Chinese firms to seek advice on Asean countries’ rules and regulations, link up with relevant government agencies and organisations, as well as get help in project financing through the United Overseas Bank’s (UOB) foreign direct investment advisory unit and the Singapore Exchange’s (SGX) financing services.

UOB, SGX and the China Chamber of International Commerce (CCOIC) announced the signing of the agreement in a joint media statement on Sunday (April 28), saying it will better connect CCOIC’s 180,000 members to such services.

This agreement is an extension of an earlier one UOB had with CCOIC two years ago, but with SGX now joining the partnership.

The media release stated that UOB’s existing collaboration with CCOIC has led to 50 per cent more Chinese companies expanding into Asean in 2018, compared with the previous year. This has resulted in a 31 per cent increase in cross-border business flows over the same period.

At a media conference on Sunday, UOB’s head of foreign direct investment advisory unit, Mr Sam Cheong, said the diversity of the Asean market is a challenge for many Chinese companies.

“The economic structure, the growth opportunities, the challenges getting government incentives — these are all very diverse,” he added.

Hence, the need for them to work with partners like Singapore so that their expansion plans will face fewer hiccups.

With about 45 per cent of China’s investment in Asean (close to US$90 billion) concentrated in Singapore, Mr Cheong said it’s a “strong message” that Singapore is a “very attractive hub” for Chinese companies.

With the agreement, Mr Cheong hopes that Chinese companies will work with Singapore firms to “jointly invest into a third country”.

“In fact, we are already seeing a lot of interest in this,” he added.

With SGX joining this partnership, the bourse operator’s head of equities and fixed income, Mr Chew Sutat, said that Chinese manufacturers and exporters can not only seek financing through SGX but also reduce their expansion risks through hedging. A hedge is an investment to reduce the risk of adverse price movements in an asset.

“What is currently very topical is this whole thing about trade wars. … Many CCOIC members are exporters. If you don’t hedge your freight, with the margins being so fine right now, a trade war tariff can kill your complete business model,” he said.

Mr Chew also said that he expects more Chinese firms to consolidate their overseas businesses in Singapore as having Asean as an export destination would help address ongoing challenges resulting out of the trade war.

The signing of the agreement is in conjunction with the second Belt and Road Forum for International Cooperation, which just concluded in Beijing.

Trade and Industry Minister Chan Chun Sing and Senior Minister of State for Trade and Industry Koh Poh Koon, who were both in Beijing to attend the forum, witnessed the signing.

Prime Minister Lee Hsien Loong is also in Beijing to attend the forum and meet with other heads of state. He delivered two speeches — one during a high-level meeting on Friday and another during the leaders’ roundtable on Saturday.

The brainchild of Chinese President Xi Jinping, the Belt and Road initiative is an ambitious project to reconstruct an ancient trade route connecting Asia and Europe — known as the Silk Road — through large scale infrastructure projects.