Rich China tycoons park family offices in S'pore

Singapore

MAEGAN Zhao, 37, came to Singapore with her young son three years ago to assess its living and education environment. She decided to enrol him in United World College, where he will start studying next year.

Ms Zhao's family is involved in the business of private equity and mergers and acquisitions. A large part of their investments are focused on opportunities in Beijing and Shenzhen, with property holdings in Hong Kong as well.

She had originally wanted her son to attend school in Hong Kong. But having considered the prevalence of Cantonese and traditional Chinese characters in Hong Kong, she decided that Singapore was more ideal due to its focus on bilingual education.

Having settled on where her son should attend school, Ms Zhao decided to move to Singapore too. She transferred some of the family's assets from Hong Kong to Singapore and set up a single family office (SFO).

"I decided to incorporate our family office here primarily to safeguard our assets and their value," Ms Zhao told Lianhe Zaobao. "Singapore is also the economic high ground of Southeast Asia, the vantage point to the region gives us a clearer view of the investment opportunities."

For instance, there are more opportunities to come into contact with the high tech companies in the region when she is in Singapore, than if she were to be in China.

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Ms Zhao is not alone. In recent years, there have been more families from China like hers who have decided to set up their family offices in Singapore. Many chose to keep a low profile and are seldom featured in the media.

Among the few high-profile individuals are Haidilao co-founders Zhang Yong and his wife Shu Ping, who have been named the wealthiest Singaporeans for a few years since taking up citizenship in 2018. Ms Shu was reported to have set up Sunrise Capital Management, an SFO where she is its sole shareholder and director.

Spike in family offices

Singapore is home to a total of 400 SFOs as at the end of last year, according to the Monetary Authority of Singapore (MAS). And banks here testify to the growth.

"In the past three years, we have seen double-digit growth in clients from the Greater China region," said Lee Woon Shiu, regional head of wealth planning, family office & insurance solutions at DBS Private Bank.

"We have prioritised our resources into seizing this market opportunity, and we are confident that this upward trend will continue for the next five years."

Three years ago, customers from the Greater China region made up 25 to 30 per cent of DBS Private Bank's family office clientele. This has now grown to 45 per cent, making the Greater China region the largest of its customer base. The remaining 35 per cent of the bank's family office clientele are from South-east Asia, while 20 per cent are from Europe and the US.

Joanna Ho, head of wealth planning, Greater China and North Asia at Bank of Singapore, OCBC's private banking arm, said that the number of new customers incorporating family offices in 2020 was at least three times that of 2019. Among them, the most pronounced growth was seen among clients from the Greater China region, which surged three-fold from 2019.

Seeing immense potential in the sector, Helen Wong, OCBC Group CEO, said at the bank's annual general meeting at the end of April that it would expand its family office business significantly.

Augustus Xu, founder and CEO of SG Royal Group, a firm specialising in providing legal, taxation, and asset management consulting services for family offices, said that the company has assisted more than 10 customers with setting up family offices, including Maegan Zhao's.

At the start of the Covid-19 pandemic, when travel became restricted, Mr Xu had thought that business would nosedive. However, when the pandemic eased in the second half of the year, more of the wealthy headed to Singapore. Since July last year, more than 60 have looked into setting up family offices. Among them, 70 per cent were from China. Their initial capital investments are in the range of US$10 million to US$20 million.

Dean Advisory, a wealth management consultancy from China, officially established its Singapore office in September last year.

In the six months since, it has helped 10 customers from China set up family offices here. Dean's minimum capital investment requirement is S$5 million, but Lucy Chen, director of Dean Advisory, said this was just a sum that its clients could mobilise in the short term; their actual wealth is far greater, and they tend to raise their investments after operations are on track.

Ms Chen said that many are still in the planning stages. Among her clients are some who are looking to make arrangements for their family or children to settle in Singapore. Some wanted to make their decisions only after spending time here. The pandemic had, however, affected cross-border travel, and quarantine requirements would be too disruptive to their work, thereby delaying their plans and decision-making.

Policy strengths

Industry insiders have observed that the surge in the number of Singapore- based family offices set up by the China rich is mainly due to the city state's favourable tax regime and legal environment.

Mr Lee of DBS Private Banking said that after the OECD's Common Reporting Standard was adopted by many countries around the world between 2017 and 2019, the advantages of incorporating an asset management company in the British Virgin Islands, Cayman Islands and other tax havens were blunted. And, to remain a tax domicile at these locations, one also has to hire local employees and meet other operating conditions.

"The implementation of these standards brought about a fundamental change," he said.

"Many people realised that Singapore was a more ideal base. First, because everything is transparent; second, if the value of the assets is high enough, they would be eligible for perpetual tax exemption."

Mr Xu of SG Royal Group said that after the adoption of the Common Reporting Standards, his company's Chinese customers increased significantly in 2019.

Under the structure set by MAS, a family office here would be eligible for tax exemption scheme 13R and 13X of the Income Tax Act. Single family offices do not require a capital markets services licence issued by MAS to operate; asset managers of these entities are not required to hold professional financial qualifications and would also be eligible for employment passes.

The Singapore Economic Development Board's Global Investor Programme (GIP) is another channel which foreign entrepreneurs can tap to set up their family offices. However, a net minimum investment of S$200 million is required. Few SFOs have been set up through GIP, said Dino Tan, vice-president of the Family Office Development Team at EDB.

To boost Singapore's attractiveness as the location of choice for family offices, MAS and EDB established the Family Office Development Team in 2019. According to EDB's Mr Tan, the alliance would build a more conducive operating environment; expand the professional capabilities of various professional sectors; and strengthen the connection between SFOs and the local and international markets, so as to facilitate the development of the whole family office ecosystem.

In addition to preferential policies, the independence of the Singapore judiciary has also been considered an advantage internationally.

Director of Zico Insights Law Qiu Yang pointed to an example of an international case that the firm had handled recently. Neither party was a Singaporean entity, and there were no local aspects in the deal. But both parties had insisted on basing their agreement on Singapore laws.

"This is because they believe that Singapore's legal system is more pragmatic, predictable, transparent, stable, and neutral."

Pang Kia Nian is SPH Chinese Media Group NewsHub's associate business editor. This article is part of a collaboration on a series of weekly features translated from Lianhe Zaobao. The original story first appeared on May 23. The next package on June 7 will take a look at Chinese e-commerce companies in South-east Asia.

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