Singapore firms with China ops optimistic

They cheer uptick in Chinese economy, say long-term prospects remain robust and consumer demand is stable

Singapore companies with a presence in China are cheering a recent uptick in the country's economy after a multi-year growth slowdown.

The going has been slightly rocky in recent years but long-term prospects in China remain robust, they told The Straits Times.

Official data shows that China's economy - the world's second-largest behind the United States - grew at an annual rate of 6.9 per cent in the first quarter of this year, its fastest in 18 months.

Growth was strongest towards the end of the three-month period, suggesting momentum was picking up going into the second quarter.

China is Singapore's top trading partner and export destination. Singapore is also China's largest foreign investor - the stock of direct investment in China by Singapore companies stood at $121.1 billion as at end-2015.

Mr Wilson Lim, executive director of international business at Commonwealth Capital, said the firm is seeing brisker business in China this year. The investment holding firm has stakes in home-grown food and beverage brands such as The Soup Spoon, Pastamania and ice-cream chain Udders.

Its presence in China is in the "start-up phase" with one Pastamania outlet in Shanghai. The outlet has seen sales rise 25 per cent in the first quarter of this year, compared with a year earlier.

"Over the last two years, the market has been really sluggish but things are picking up," said Mr Lim.

The company is looking to grow its presence in China this year through franchising.

"Singapore companies are familiar with Tier One cities like Shanghai - it's an easier landing point.

"But growth may come more from second- and third-tier cities like Chongqing and Changsha, which are very promising," he added.

Mr Chris Leong, managing director of Leung Kai Fook (Guangdong) Medical, said revenue in China rose 8 per cent in the first quarter, compared with last year.

The company makes and distributes Axe Brand Medicated Oil and other pharmaceutical and healthcare products in China.

Mr Leong expects sales to rise about 10 per cent this year.

"Being in the low-priced medical products line, we are rather insensitive to the overall economic situation, so sales are more related to our marketing efforts.

"However, we do not see a deterioration in consumption confidence, to say the least," he added. "China being a huge market, we have been taking steps to expand and shall keep doing so."

Another Singaporean businessman, Dr Richard Yen, whose company Ednovation runs a chain of pre-schools in China, said performance in his sector has been more of a "mixed bag".

The end of the one-child policy has helped lift demand, with the first wave of children entering pre-schools next year. Recent regulatory changes to liberalise the education sector also spell good news for private operators, he noted.

However, the appeal of the sector, coupled with the slowdown in many traditional businesses such as manufacturing and real estate, has resulted in rising competition for facilities as well as talent.

The firm runs 63 pre-schools in total, 22 of which are in China. It expects to have at least 30 pre-schools in China by the end of this year.

Ednovation began its operations in China a decade ago when it opened its first ChildFirst pre-school in Chongqing.

"We are bullish on China," said Dr Yen. "We believe the slowdown is a good time for China to clean up some of the excess accumulated during the many years of rapid growth. Once the clean-up is completed, the growth will resume."

A version of this article appeared in the print edition of The Straits Times on May 01, 2017, with the headline 'Singapore firms with China ops optimistic'. Print Edition | Subscribe