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SINGAPORE – The recent influx of Chinese investments into Singapore – some coming with hometown suppliers in tow – is putting the squeeze on small and medium-sized businesses here.
To help local players avoid being flattened out, the Association of Small and Medium Enterprises (ASME) is urging them to get into the Chinese supply chains, and to find growth overseas.
At a media briefing on May 20 to address business concerns sparked by the trade war, ASME president Ang Yuit noted that Singapore firms, despite having witnessed foreign investors come in from around the world, have yet to meet competition at the level of intensity posed by the Chinese.
He said: “When they come in, they bring a long, whole supply chain. That’s very distinctive of the Chinese... They have a whole manufacturing base all the way to China. It isn’t that they don’t try to integrate, but there’s language, there’s the speed at which they do things. They move very fast, and Singapore companies are much slower.”
The heat is turned up by some of these investors, who are willing to trade losses for market share, or brook losses for the chance to diversify capital outside China, said Mr Ang.
He added: “They are not looking at making money in the first two, three years. They are investors, so they’re willing to spend a lot more to outlive you.”
Chinese firms have been raising stakes here in recent years, led by geopolitics and enhancements to the China-Singapore Free Trade Agreement completed in 2023.
China’s Ministry of Commerce noted that in 2018, cumulative investment from China in Singapore was US$50 billion. By 2022, it had risen to US$73.5 billion (S$95.3 billion).
To help local players, ASME will study opportunities for these firms to enter into partnerships with Chinese businesses in China that have yet to reach global scale. This will give local firms a chance to partner and learn from them, and potentially give them a foothold in the Chinese supply chain.
The association, which has over 7,000 members, is also stepping up its outreach to peers in the region to promote links. It has gone on a trade mission to Taiwan with the Small and Medium Enterprises Association Malaysia, and is hoping to engage its Indonesian counterpart next.
As the Government reviews measures to help local businesses with the impact of the US tariffs, Mr Ang hopes perennial business challenges such as high rental costs will also be evaluated.
With policymakers believing that the world has entered a new anti-trade era, the organisation is also urging the Government to tilt towards protecting local small and medium-sized enterprises (SMEs).
Mr Ang said: “Very often, because we signed free trade agreements, we cannot be seen to subsidise the operating expenditure of our companies, or cannot have preferential treatment of the companies. But in this new global order, does it make more sense to show a bit of preference for local companies?”
He cited the example of an SME being eligible for government funding to help it expand overseas as long as it meets 30 per cent local shareholding. That criterion can be met by a Chinese citizen holding permanent resident status. The applicant may be a large company in China, operating a small outfit in Singapore, tapping the government grant, he said.
Mr Ang also hopes the Government will look beyond traditional economic metrics to preserve SMEs, which account for 99 per cent of Singapore’s 300,000 enterprises and 70 per cent of employment.
While the influx of Chinese investments may look good on paper, they may erode the foundation of Singapore’s economy, he said.
He added: “In the short run, you may see that, overall, FDI (foreign direct investment) is doing well, but in the medium term, our ecosystems get replaced by Chinese ecosystems.”
He noted that local SMEs may bear the brunt of criticisms for inefficiency, but they maintain the base on which Singapore unicorns and bigger enterprises are built.
“SMEs are the bedrock that sustains the economy. It’s important that we keep this segment well taken care of,” he said.
Source: https://www.straitstimes.com/business/spore-smes-need-to-partner-chinese-firms-for-access-to-their-supply-chains-says-asme