Singapore is only just going back to the pre-pandemic days in terms of opening to tourists and getting back to normalcy in terms of its businesses and way of doing things. Aside from this, the country is gaining a lot of financial impetus from one vital source thanks to a host of geopolitical reasons.
Singapore, as it stands, is the number one priority and choice for high-net-worth families and individuals (HNWs and HNIs) and highly successful business families belonging to mainland China. Most of them are now turning towards Singapore for investment and permanent residency to escape possible crackdowns (political and Covid related) and unease concerning China’s escalation towards Taiwan and the US.
China’s rich are also wary of how large players like Alibaba have been treated recently, and there are growing concerns when communist ideas like common prosperity are mentioned by its political establishment. This has been one of the reasons why many government agencies have gone after business empires like Alibaba and other upcoming entrepreneurs in recent times.
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Recently, Singapore increased the minimum investment requirement for family offices to qualify for tax exemptions on the income from their investments. This was widely viewed as a measure to reduce the number of foreigners using Singapore as a tax haven. Singapore officials announced that investors must now shell out a minimum of S$10mn (US $7.1mn) locally in Singapore, or something amounting to 10 per cent of their assets (whichever is lower). Earlier, it was only S$5mn. This was primarily to limit the number of Chinese conglomerates and large billionaire families from using Singapore as their safety net.
India Today spoke to numerous private wealth managers and wealth management firms in Singapore, who have seen an increasing number of requests from Chinese investors and businesses to move their assets to the city-state via the family office structure. A family office structure refers to the setting up of a private entity in Singapore which can handle investment and wealth management for the family investing in this.
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It is said that the number of family offices in Singapore doubled between 2019 and 2020 and the current number is around 400 family offices. This is expected to explode further after the pandemic.
Mano Chugani, who has been a wealth management expert trusted by foreign investors for close to two decades, feels “the strong financial structure of Singapore” has always been an attractive proposition for foreigners.
“In this current context, China is also Singapore’s largest trading partner. With China’s grip tightening on Hongkong, and China going after its business leaders within China, Singapore is a natural choice for Chinese HNW players,” he said.
Recently, China also decided to tax its upper middle class by levying a whopping 45 per cent tax on year-end bonuses. This will come into effect from the end of 2023.
Three-fourths of the Singaporean population is of the ethnic Chinese race. While the average Chinese Singaporean would not see themselves as similar to the Mainland Chinese population, the common ethnicity does matter for China-based investors.
Another wealth manager in Singapore, Jeremy Chong, feels racism-related events and the growing anger towards China and its policies have made the USA, the EU, and the other western regions not conducive enough. Russia’s war against Ukraine showed how the USA and the EU levied sanctions against Russian investments and investors. This is a major reason as to why Chinese billionaires do not want risks attached to their pursuits overseas. In these regards, Singapore is a much safer place to be invested.
In early August, Lianhe Zaobao reported that more than 500 HNIs from China were looking at Singapore for permanent residency options, thereby bringing in an estimated US $2.4 billion (S$3.3 billion) in investment.
The Economic Development Board of Singapore (EDB) has been making a lot of efforts to attract additional investment into Singapore. They estimate 54% of the existing global family offices to increase asset allocations in the Asia Pacific over the next five years and that 68% of family offices in the Asia Pacific engaged in sustainable investments in 2020.
It is not the first time China’s highly rich have seen Singapore as a viable second home. For years, Singapore has been the place many rich Chinese families visit for holidays or to gamble and play in casinos. It is key to note that China bans any sort of gambling and hence does not operate any casinos.
The Mothership reported a lot of moves made by Singaporean permanent residents in their realty market recently. Earlier this year, an entire floor at the Suntec city (a famous commercial establishment) was bought by a Singaporean PR. Similarly, a few other Chinese families bought huge blocks of apartments (20 apartments each) across multiple high-end luxury condominium spaces in Singapore.
With Singapore known as a low-tax business hub, having ample places for the wealthy to stay and enjoy, numerous travel destinations within hours from the country and English being the common medium of education; it is a perfect place for Chinese HNIs to reside and invest.
Ray Ng, who is working in a school as a tutor feels “It will be better served if Singapore looks to increase its share of middle to upper-middle-class people resourced with specific intellectual know-how and general probity. The increase in the share of ultra-rich will give rise to increased inequality and more of them are likely to bring in a host of other issues including the potential for corruption.”
A few others spoke on this issue (under the condition of anonymity) saying they were not so sure with “more mainland Chinese HNW families coming to Singapore”.
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“Singapore has not been debt-trapped by China like other countries. I fear if this will be something else to fear about as I feel China’s intentions are never at the surface level and may always have hidden agendas,” said a local resident.
Jasmine Koh works for an insurance firm and feels Singapore must use this to levy higher taxes on the ultra-rich and use that for nation-building. Finally, Alex Lim, who works for a Management Consulting firm feels the “Identity of Singapore as a nation may be put to test with the rising number of Mainland Chinese families”.
“It is no wonder that I see a lot more expensive SUVs and cars driven around the roads like a headless chicken with no respect to the traffic lights, not good,” he added.
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