China's investment appetite can benefit S'pore

MAS chief outlines four areas of potential partnership, including risk management

While global attention was focused on China's volatile stock markets in the middle of last year, the country quietly became a net exporter of capital investment for the first time, Singapore's central bank chief has noted.

China's growing outbound investment has important implications for Singapore and South-east Asia generally, and the Republic could prepare itself to benefit in concrete ways, said Monetary Authority of Singapore (MAS) managing director Ravi Menon.

Speaking at the second Industrial and Commercial Bank of China RMB Internationalisation summit, held at Marina Bay Sands yesterday, Mr Menon noted that China's economic restructuring poses challenges and opportunities for South-east Asia.

China is doing more high value- added production within the country, which competes with high value-added producers elsewhere in Asia, he said.

Meanwhile, Chinese investment in Asean rose sharply by an average of 25 per cent every year in the five years to 2014, noted Mr Menon.

While priority areas of the Sino-Chinese partnership now focus on the yuan business and the use of Singapore as a gateway for Chinese businesses to expand into South-east Asia, Mr Menon said future cooperation was likely to be more of a "broad-based financial partnership that will provide deeper support to China's growing connectivity with South-east Asia".

He outlined four areas of potential partnership: capital management, risk management, infrastructure financing and asset management. For example, he said that Singapore could offer Chinese companies ways to achieve more cost-efficient funding, through the Singapore bond market.

He also noted that Singapore has a critical mass of speciality insurers which can help to underwrite Chinese investment, particularly for infrastructure projects, which usually have a higher risk profile.

In his speech, Chinese Ambassador to Singapore Chen Xiaodong said Chinese investment here hit a milestone last year. "Singapore, for the very first time last year, became the second-largest destination for Chinese foreign investment."

Chinese investors have displayed a voracious appetite for outbound investment. A DBS research note showed that in the first quarter of this year, China recorded its largest quarterly share of global deal activity on record at US$97 billion (S$131 billion) - equivalent to 80 per cent of the total volume in the 2015 financial year.

A version of this article appeared in the print edition of The Straits Times on June 08, 2016, with the headline 'China's investment appetite can benefit S'pore'. Print Edition | Subscribe