Singapore companies are putting their bets on China's rising wealthy millennials to drive future sales despite the ongoing trade war between China and the United States and a cyclical downturn in electronics, a survey has found.
A majority of the 120 Singapore firms surveyed in September by British bank HSBC said competing on price is not a sustainable strategy in the Chinese market.
They feel regional trade pacts such as the Asean-China Free Trade Area (ACFTA) will likely help them with their businesses in China.
The Singapore firms were among the 1,205 small and large companies from 11 key economies, including Hong Kong, France and Mexico, surveyed in HSBC's inaugural Navigator: Made for China report.
Among the Singapore companies polled, 49 per cent say China is currently a sales destination. Out of these firms, 69 per cent say it is among the most important destinations.
More than 80 per cent of the Singapore companies see millennials as the driver of future sales.
Nearly half feel that technology services will be the fastest-growing industry followed by medical care and high-end intelligent equipment.
NOT JUST 'CRAZY RICH ASIANS'
Much has been said in recent years about the opulence of China's new rich, and their outsized impact on anything from Swiss luxury watches to designer handbags to super yachts. But China isn't just about 'Crazy Rich Asians'. Indeed, less recognised is how consumption is becoming more sophisticated and inclusive, as wealth spreads from urban centres to rural heartlands, bolstered by better-educated new generations who are both Web-savvy and worldly-wise.
MR DAVID LIAO, HSBC China chief executive.
Mr Tony Cripps, HSBC Singapore chief executive, said "the cyclical downturn in electronics and current trade tensions cannot be ignored" by an open and trade-dependent economy like Singapore.
"But it seems like businesses are looking beyond these short-term headwinds to the structural macro-economic opportunity that China's burgeoning tech-hungry millennial consumer can bring."
China has been Singapore's top investment destination since 1997 as well as the Republic's largest trading partner since 2013.
While export growth from Singapore to China grew 17 per cent last year, the trade numbers for this year present a more mixed picture.
According to official data by Enterprise Singapore, the Republic's overall trade grew 8 per cent year-on-year in September, but exports to China had dropped by 17 per cent, with a 5.3 per cent slide in electronics exports and a 21.3 per cent fall in non-electronics.
The HSBC survey showed a mixed response among Singapore businesses as to how they intend to grow their China exports.
Some 36 per cent of current exporters say price has historically been the key sales driver, but nearly half of them say China's growing consumer wealth will create new opportunities.
About 41 per cent of these current exporters say they are focused on delivering new products and services to capture a bigger market share. Among the aspirant exporters, 41 per cent say creating superior products will drive sales.
HSBC China chief executive David Liao said: "Much has been said in recent years about the opulence of China's new rich, and their outsized impact on anything from Swiss luxury watches to designer handbags to super yachts.
"But China isn't just about 'Crazy Rich Asians'. Indeed, less recognised is how consumption is becoming more sophisticated and inclusive, as wealth spreads from urban centres to rural heartlands, bolstered by better-educated new generations who are both Web-savvy and worldly-wise."
HSBC's report finds that Singapore businesses are more supportive of trade pacts that enhance the regional prospects of trade with China.
Nearly two-thirds feel that ACFTA is likely to help them grow their businesses in China, and nearly half feel similarly about the Regional Comprehensive Economic Partnership.
In contrast, fewer Singapore businesses, or 37 per cent, think that the bilateral free trade agreement between Singapore and China is helpful.
HSBC says sentiments may change after Singapore and China upgrade the existing free trade pact later this month.