S'pore a key link in China's Silk Road ambitions

As the son of a man who journeyed from China to Singapore and founded a shipping business a half century ago, Mr Teo Siong Seng sees his life as one immersed in the ancient trading networks of Asia.

The managing director of the Pacific International Lines Group is seeking to benefit as China rejuvenates its Silk Road routes to the Middle East and Europe, setting up a joint venture with China Cosco Shipping Corporation to help China's largest shipping group build connections in South-east Asia and beyond.

"Chinese companies alone may not have enough experience to carry out their investments in other countries," said Mr Teo, who is also chairman of the Singapore Business Federation. "They have to learn the way we deal with local people and the way we do business."

The venture underscores Singapore's potential as a gateway to South-east Asia for China, as President Xi Jinping seeks to export excess industrial capacity while building influence overseas.

Exploiting Singapore's regional familiarity could help Chinese companies navigate local politics and avoid pitfalls. "From all the failures, Chinese have learnt that they need a local broker," said a board member of coking coal distributor Winsway Enterprises Holdings Gao Zhikai.

Singapore has the largest ethnic Chinese population in the region, at nearly 75 per cent, and is China's largest foreign investor. More than 20 per cent of its gross domestic product is linked to China, according to researcher Natixis.

CAUTIOUS APPROACH

Many countries in South-east Asia are becoming more cautious when dealing with Chinese companies, which have a relatively bad track record in implementing deals over the past decade... Given the growing tensions over the South China Sea, Chinese firms have to be even more careful in putting the deals into practice.

MR GAO ZHIKAI, a board member of coking coal distributor Winsway Enterprises Holdings.

Still, China should not expect an unconditional open door. "Many countries in South-east Asia are becoming more cautious when dealing with Chinese companies, which have a relatively bad track record in implementing deals over the past decade," said Mr Gao. "Given the growing tensions over the South China Sea, Chinese firms have to be even more careful in putting the deals into practice," he said.

China may look to Singapore to help smooth over the territorial frictions it has with some South-east Asian nations.

On a company level, Singapore's Ascendas-Singbridge Group created a joint venture last year with China Machinery Engineering Corporation to invest in industrial and technology parks in Asia.

"We find that trust is the most important element in the Chinese business culture," Ascendas-Singbridge chief customer solutions officer Aylwin Tan said via e-mail.

Still, there will be difficulties ahead, according to Mr Bernard Chan, president of Asia Financial, an investment holding company. Some nations in the region have relatively opaque - and complex - regulatory and financial reporting systems that can be harder for outsiders to navigate.

Also, Chinese companies in some cases "have absolutely no clue of what they are buying, but they have to buy", said Mr Chan. "Hopefully, Chinese companies could learn from them and minimise the mistakes."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 16, 2016, with the headline 'S'pore a key link in China's Silk Road ambitions'. Print Edition | Subscribe