As Global Scrutiny Grows, Chinese Firms Look To Call Singapore Home

Key points:

A growing number of Chinese companies are looking to domicile in Singapore, betting a move to the trade-focused city-state would reduce risks their operations get disrupted by Sino-U.S. geopolitical tensions.

The trend, billed as "Singapore washing" by some analysts, started gaining traction near the end of U.S. President Donald Trump's first presidency and has since accelerated, spreading to various sectors from critical minerals to tech and biotechnology, analysts and experts said.

"Demand has always been rising...and the key thing right now is that it's probably going to accelerate at a more rapid pace," said KG Tan, CEO of InCorp Group, which helps companies relocate or expand in nine Asia-Pacific locations.

There is no official data on how many Chinese companies are domiciled in Singapore, but Tan said interest from Chinese firms is "very strong" with about 15-20% more inquiries now year-on-year.

Singapore-domiciled companies include optical products maker Terahop, backed by China-based Zhongji Innolight, which set up shop in the city in 2018.

More recent additions include data centre operator DayOne, spun off from GDS Holdings; Manus AI, an artificial intelligence agent from China's Butterfly Effect; and ChemLex, an AI-powered chemical synthesis company.

Neither Manus AI's nor Terahop's websites make reference to their Chinese backers. ChemLex CEO Sean Lin said he considers his Shanghai-founded startup a Singapore company.

DayOne CEO Jamie Khoo said in July that it always intended to split from its Chinese parent, as both companies operate under different regulatory regimes. Manus AI and Terahop did not respond to requests for comment.

SINGAPORE PROVIDES A STRATEGIC SWEET SPOT

Singapore offers an attractive base for firms looking to navigate U.S. tariffs and maintain access to key American technologies whose sales are restricted in China. Washington imposes tariffs of just 10% on goods from Singapore.

"The Singapore brand is trusted worldwide. Singapore is valued for its international flavour, neutrality, and is culturally easy for Chinese firms and their expats to adapt to," said Maybank China economist Erica Tay.

"With a whopping 28 free trade agreements, it is also a good base from which to grow markets outside China."

But that advantage has also left Singapore on a tightrope, as the U.S. steps up its scrutiny over Chinese firms and as some of those foreign entities have been involved in criminal activities.

Singapore-based data centre firm Megaspeed, which split from a Chinese gaming firm in 2023, faces a U.S. probe for allegedly diverting Nvidiachips used for AI.

The Asian country also had its biggest money laundering case involving foreigners of Chinese origin in 2023, and is investigating a conglomerate, owned by a Cambodian citizen of Chinese origins and accused of running vast scam centre operations.

The U.S. Department of Commerce and China's Ministry of Commerce did not respond to requests for comment. Reuters has asked the Singapore government for comment.

TOO BIG TO HIDE

While a relocation in theory offers businesses more flexibility in managing tariffs, export controls and other protective trade policies, such moves do not guarantee firms freedom from political or regulatory heat.

Fast fashion firm Shein and short video platform TikTok, among the early movers to Singapore, notably failed to shield their operations from Western scrutiny.

Shein ran into political opposition in the U.S. and the UK over its efforts to go public there and also had to seek Beijing's nod for its listing plans, despite having moved its headquarters from Nanjing to Singapore.

It is now seeking China's blessing for a stock market debut in Hong Kong, and reportedly considering relocation back to China.

TikTok, owned by China's ByteDance, saw its Singaporean CEO Chew Shou Zi repeatedly grilled over his links to the Chinese government at a Congressional hearing in Washington in 2024.

ByteDance, which is required to sell its U.S. operation to a consortium of American and global investors to meet national security requirements, signed off on the sale deal, TikTok said on Thursday.

A failed effort by Yuxiao Fund, a Singapore-registered Chinese investor, to boost its stake in Australian rare earths miner Northern Mineralsin 2024 due to its China link also highlights the limits of being based in Singapore.

Experts argue the strategy mostly works for smaller firms but provides less wriggle room for big businesses.

"It's the low-profile entities like family offices and trading companies which tend to have an easier time avoiding attention," said Chong Ja Ian, political scientist at the National University of Singapore.

Some have already taken note of the growing scrutiny.

Dou Changlin, the chief operating officer of Shandong Boan Biotechnology, which provides clinical services for global drugmakers, said its Singapore subsidiary is used to fund the company's U.S. operations.

While the structure has helped it meet funding needs from Singapore, not from China which has stepped up scrutiny of capital flows, Dou cautions U.S. authorities could eventually draw a connection with its Chinese parent company.

"We are very small in the U.S., I don't think we're on the radar of the U.S. government yet," he said.

Source: TradingView