Now is the time to take a fresh view of the Singapore-China trade corridor opportunities
Freddy Ong Head, Client Coverage, Singapore, Corporate, Commercial and Institutional Banking
16 Jul 2021
Singapore’s economic recovery is well on the way. The country posted a rebound in GDP growth in the first quarter and Standard Chartered research projects the economy will expand 6.3 per cent for the whole of 2021.
While the country is still dealing with some of the challenges related to COVID-19, Singapore’s success in managing the pandemic and reopening the economy positioned it well to reap the benefits of the global recovery. To help spur growth and create new opportunities, the government has announced a number of new initiatives including providing SGD1 billion for digital transformation schemes1 and launching its Green Plan 2030.
As Singapore creates new innovative ways to drive the recovery, it needs to look at how to collaborate with its trade partners more closely. For these reasons, I believe now is the time to take a fresh view of the Singapore-China corridor and the opportunities for businesses.
Growing stronger and sustainably together
China was among the first to bounce back strongly from the COVID-19 lockdowns and is now firmly back on a path to growth. It is forecast to grow 8 per cent this year, according to Standard Chartered research.
And it’s worth noting that the Singapore-China trade relationship stretches back more than three decades2 and during that time both nations have become among the largest foreign investors and trade partners in each other’s economies. Indeed, the Singapore-China corridor provides plenty of opportunities for new collaboration and innovation.
Let’s start with how both countries are embarking on committed sustainability journeys and have ambitious targets to reach net-zero carbon emissions. Singapore’s Green Plan 2030, when successfully implemented will place the city and its homegrown champions at the forefront of sustainable development.
Businesses are already playing their part. For example, Standard Chartered, along with DBS Bank, Singapore Exchange and Temasek, recently announced the upcoming launch of Climate Impact X, a global exchange that will help companies around the world create a holistic climate mitigation strategy.3
In addition, the transformation spurred by the Green Plan will bring numerous opportunities for Chinese companies in areas including green energy, negative emissions technology and rail expansion.4
Capturing the demand from ecommerce
It’s also well known that China and Singapore both provide access to a region of fast-growing consumer bases, with the World Bank revealing last year that China had overtaken the US for GDP when based on purchasing power parity. Having access to a growing pool of consumers is particularly advantageous for companies in sectors such as retail, food and beverage and consumer product manufacturing. In fact, a number of Singapore’s homegrown names including BreadTalk, TWG Tea, Jinlongyu, and Charles & Keith, are already expanding fast in China.
But perhaps the clearest example of how Chinese and Singapore companies are collaborating to capture opportunities from growing consumer bases is in ecommerce. The volume of ecommerce transactions has grown rapidly in recent years and is only set to accelerate. Between 2020 and 2024, China and Singapore are set to experience a compound annual growth rate of 14 per cent and eight per cent respectively.5
This is an area where Chinese and Singaporean companies have already developed strong partnerships. Lazada and Shopee, two of ASEAN’s largest ecommerce platforms, have been able to accelerate their growth and expansion in recent years thanks to investment and know-how from Chinese technology giants Alibaba6 and Tencent, respectively.
The inexorable rise of ecommerce is part of a wider trend of digital transformation which is changing every facet of our lives, businesses and societies and accelerated the push for cross-border digital payment solutions.
Building smart cities with smart collaboration
Interestingly, one area where we see the trends of sustainability and digital transformation overlap is in the development of smart cities. This is certainly a realm where Singapore is at the cutting edge of innovation and development with the country ranked as the world’s leading smart city in multiple surveys.7 And with China recently announcing that six cities – Beijing, Shanghai, Guangzhou, Wuhan, Changsha and Wuxi – will be part of a pilot for smart city infrastructure and smart vehicle networks,8 there will be plenty of opportunities for Chinese and Singapore businesses to swap expertise and share best practice.
Finally, as an established financial hub, Asia’s largest foreign-exchange centre and one of the world’s top offshore renminbi hubs, Singapore is well placed to help Chinese corporates accelerate their overseas expansion.
Partners in prosperity
While COVID-19 has posed challenges, it has also created new innovations and exceptional opportunities for countries to work with their key trade partners in areas such as sustainability and digital transformation.
Singapore’s trade relationship with China has been one of the most important in the past three decades and as both nations look to accelerate their post-pandemic recoveries, the Singapore-China corridor will drive future growth and prosperity.
The sooner businesses recognise these promising trends and focus their strategy on how they can tap into new growth opportunities, the more they will stand to benefit.
2 https://eresources.nlb.gov.sg/history/events/4181dd20-df08-4ff5-8d93-620350b639fd
3 https://av.sc.com/sg/content/docs/sg-dbs-sgx-temasek-to-take-climate-action.pdf
4 https://www.greenplan.gov.sg/key-focus-areas/vision/
5 https://worldpay.globalpaymentsreport.com/en/
6 https://techcrunch.com/2018/03/18/alibaba-doubles-down-on-lazada/