Increasing number of China technology firms boost local tech ecosystem
Singapore
IN ADDITION to tax contribution and job creation, the rising inflow of China technology companies enhances Singapore's position as a hub for tech enterprises, and as a draw for more foreign investment.
A report by the United Overseas Bank (UOB), PwC and the Singapore FinTech Association says that 65 per cent of the fintech funding in South-east Asia flowed to Singapore between 2015 and 2019. The total value amounted to some US$2.498 billion, putting the country ahead of Indonesia, the Philippines and Thailand.
"Local businesses, through working with tech companies from China, can produce a positive ripple effect, boosting exchange and development in the tech ecosystem," said Suan Teck Kin, head of global economics and markets research at UOB.
As an example, he said, China tech firms own many cutting-edge technologies in artificial intelligence, big data, fintech and other sectors. Through partnerships, local businesses can raise their own capability and catalyse more creative solutions, bringing about more opportunities for growth.
A spokesperson from Alibaba said that since forming a Singapore connection, the group has been supportive of the development of Singapore's business ecosystem. For instance, Alibaba launched Project Sprout Up in June last year to provide a platform for local businesses to access more business-to-business (B2B) buyers globally. Alibaba's Tmall platform also provided assistance in digital transformation to small and medium-sized enterprises.
While investments by Chinese tech firms have brought economic benefits, they have also led to some negative impact.
"The short-run impact on Singapore could be mixed, such as inflated rentals and real estate prices," said Wang Yanbo, strategy and policy assistant professor of NUS Business School. "Local firms may also feel the pressure to raise salaries and bonuses of their top-calibre employees."
OneConnect Financial Technology chief executive officer Tan Bin Ru said the tech talent crunch is part of a global trend that is not limited to local companies; companies from China face the same challenge.
Like many others in the tech sector experiencing a pandemic-fuelled demand growth last year, OneConnect's ability to meet that surge in demand was clipped by a talent shortage. "Last year, there was a wave of Chinese tech companies that decided to set up shop here," she said. "These companies help to make the local tech sector more vibrant and robust. But at the same time, it causes a huge spike in staff cost. Many tech talents' salaries were at least doubled, some were being poached . . . So we do need to fill this tech talent gap immediately in order to satisfy tech companies' rising demand for talent."
The global tech talent shortage is expected to hit 4.3 million people by 2030, said a report by Korn Ferry. And if the financial and business services sectors in Singapore fail to address the talent gap, it could miss out on US$29.2 billion worth of economic growth. To help develop more tech talent in Singapore, OneConnect in 2018 partnered SIM Global Education to set up the Ping An Academy, where students will be offered a one-year course in fintech.
Alibaba Cloud general manager Derek Wang and Ms Tan pointed out that the pandemic had accelerated the pace of digitalisation. Since the start of the outbreak, their employees have become busier, and businesses have expanded. They will continue to explore opportunities thrown up by digitalisation.
Toru Yoshikawa, professor of strategic management at Lee Kong Chian School of Business, Singapore Management University, also felt that in spite of the Chinese government's push to prioritise domestic consumption, the companies will continue to head for Singapore.
"Not only do Chinese tech companies need to consider their current development, but also to look at the longer-term plan in the next five or 10 years," he said. "They may have accelerated their expansion in their domestic market but at the end of day, they must go overseas and become a global company. This is a far-sighted approach and also an inevitable path."
In the midst of geopolitical uncertainty, Singapore has remained neutral, maintaining good relations with China and many countries in the West. But will the influx of tech companies from China have an impact on Singapore's neutral stance, or will it lead to the nation becoming a battleground between tech companies from the US and China?
Prof Wang of NUS Business School said it is becoming increasingly difficult for Singapore to remain impartial. "Purely from the tech perspective, China and the US may have different technical standards; and this is an 'either with me or against me' situation - which will make it hard for Singapore businesses to operate in a neutral environment."
Mr Suan, however, said Singapore has always attracted international companies - from Europe, the US, Japan, South Korea and South-east Asia - but this has never affected the country's neutrality. Instead, it has a made Singapore an attractive spot for global enterprises to congregate.
He added: "From a pragmatic point of view, Chinese or American tech companies are focused on commercial activities; as long as they are not a threat to Singapore's national interest or security, we have no reason to turn them away."
Dr Wang of Alibaba Cloud said technology itself is borderless, and the US-China tech war would not detract from the tech itself: "Alibaba Cloud is a tech company, we are focused on using technology to serve our corporate clients and using digital means to help companies transform and upgrade, and create value for them."
READ MORE: Singapore a popular base for China tech firms
- Chew Boon Leong is a senior business correspondent with SPH Chinese Media Group NewsHub. This article is part of a collaboration on a series of weekly features translated from Lianhe Zaobao. The original story first appeared on May 16. The next article will examine why more high net worth individuals from China are choosing to set up their family wealth management offices in Singapore.
