[Big read] How Chinese enterprises de-risk by 'Singapore-washing' amid China-US tensions

Several international businesses and investment firms have re-registered or set up headquarters in Singapore to avoid the geopolitical risks stemming from the ongoing China-US trade tensions. These businesses include social media platform TikTok, fashion giant Shein, electric vehicle manufacturer Nio, investment company Sequoia Capital and venture capital firm GGV Capital.

These companies have either moved their global headquarters to Singapore, listed on the Singapore stock exchange, or created a corporate spin-off to target a specific market.

Interviewed academics and industry insiders commented that Singapore has become a key hub for many international businesses that are "de-sinicising" and "de-Americanising", or trying to reduce their business ties to China or the US, in what has been dubbed "Singapore-washing". This could lead to some countries tightening supervision of international businesses registered in Singapore.

On the whole, the interviewees did not think that the Singapore-washing move by international businesses would have much impact on the country's reputation, but would in fact further emphasise Singapore's long-held advantage as a buffer zone for East-West clashes, and attract even more international firms.

Tan Khee Giap, chair of Singapore's National Committee for Pacific Economic Cooperation, told Lianhe Zaobao that Singapore's strategy is to leverage the strengths of its political and economic system, internationalisation, talents, governance and legal transparency, and benefit from both sides amid the worsening geopolitical tensions and rising de-globalisation.

He added that such a pragmatic strategy requires careful calculation and balancing of risks, and the country may even need to bear the cost of a negative reputation. Tan said, "However, the key is that in promoting and implementing this pragmatic strategy, can our government still be professional and transparent in supervising and handling the complex and sensitive issues that crop up?"

Tan cited the example of TikTok. Although its parent company ByteDance is a Chinese tech firm, TikTok's global headquarters are in Singapore and Los Angeles, and the company also appointed Singaporean Chew Shou Zi as its CEO.

According to media reports, this is part of TikTok's efforts to distance itself from China. Tan stated, "This highlights Singapore's advantage of imbibing East and West and having a wealth of talented people. It increases the soft power of Singapore's international talents, and demonstrates the country's ability to handle the scrutiny of various governments with different interests. If this is considered a facet of negative risk, I feel that talents such as Chew Shou Zi, who has won Singapore a wave of positive reviews, are an outstanding feature of Singapore."

The term "Singapore-washing" first appeared in a Financial Times article published in November 2022. The article stated that due to worsening China-US relations, many Chinese firms were setting up companies in Singapore for "whitewashing" to avoid geopolitical risks.

The report stated that "Chinese businesses setting up in Singapore is not a new phenomenon, but senior bankers say there is now an 'acute' rush by mainland groups to establish holding companies to future-proof their businesses as the west steps up its scrutiny of corporate China".

The report also estimated that in 2022, more than 500 new Chinese companies had set up in Singapore, an increase from previous years.

In March 2023, the Mercator Institute for China Studies, a German think tank that specialises in research on the impact of China on Europe and the world, released a report that included an analysis of the Singapore-washing phenomenon by analyst Aya Adachi.

She pointed out that some foreign firms in China are trying to make their local operations separate from their global operations, and some to even look as "Chinese" as possible to mitigate an increasingly politicised global business ecosystem.

Adachi added, "Just like their foreign counterparts, Chinese firms are future-proofing their businesses, specifically, by using Singapore as a hub to camouflage links to China or adjusting their takes to globalization in various ways."

Adachi told Lianhe Zaobao that there are various reasons why Chinese firms see Singapore as a hub to expand their businesses. Some view Singapore as a regional base to expand operations in Southeast Asia. Others may be concerned that the "Made in China" tag would draw controversy for their brand, and thus choose to "de-sinicise" by distancing themselves from China.

She said, "Amid tense geopolitics and intense trade and technology competition, businesses, regardless of their country of origin, will take preventive measures to avoid getting caught up in the whirlwind of geopolitics. Chinese companies are no exception."

She added that Singapore is politically neutral and known as the "Switzerland of Asia", which makes it an increasingly attractive haven for many businesses.

Loh Kia Meng, chief operating officer and senior partner at Dentons Rodyk, said that it is not unlawful for foreign companies to establish themselves in Singapore to facilitate market entry.

He said, "They would face obstacles if their entity is based in their home countries. Most companies are operating legitimately, but due to restrictions or considerations based on geopolitics, macroeconomics, taxation or culture, they decide to establish entities in Singapore to enter certain markets. The motivations of these companies are based on business and strategic considerations, and they have nothing to hide or 'whitewash'."

He emphasised that Singapore is the regional headquarters for over 37,000 international companies, including 7,000 multinational corporations. And it is not just Chinese companies setting up in Singapore; many European and American companies are also using Singapore as a springboard to enter the Chinese and ASEAN markets.

He also shared that he is opposed to the term "Singapore-washing", as he feels that it carries a negative or even criminal connotation, like "money laundering", whereby funds from illegal sources are made to appear to have come from legitimate sources. He prefers more positive terms such as "Singapore-stamping" or "Singapore-pivoting".

Discussing the potential impact of foreign companies "whitewashing" in Singapore, Loh said that the gathering of many companies into Singapore will bring synergised growth to the country's status as a multi-hub, enrich and diversify its talent pool, and nurture top talents with international work experience, such as Chew Shou Zi, and Milton Cheng, global chair of Baker McKenzie.

He also admitted that there are risks to having more foreign companies set up in Singapore. He said, "If Singapore is seen as being too lenient, allowing foreign companies with questionable business records to establish themselves here, it will undermine people's confidence in the country's strong regulatory system, low levels of corruption and clean reputation."

Adachi believes that Singapore becoming a favoured business hub for foreign companies may come at a cost, including soaring real estate demand, leading to increasing dissatisfaction among local residents.

She said, "Singapore must ensure the well-being of its people while maintaining its role as a neutral hub for all parties, and this will become an increasingly tough challenge, especially against the backdrop of the high-profile development trajectories of China and the US."

With the European Union concerned about the impact of Chinese companies "going global" and paying attention to the different forms of globalisation of the Chinese enterprises, Adachi suggested that Singapore should ensure its legal system remains fair to companies from China and other countries, to preserve its reputation and credibility as a business and financial centre.

Despite the risks associated with "Singapore-washing", both Tan and Loh believe that Singapore must continue to maintain an open business environment.

Tan said that Singapore is not only competing in high-tech, high-investment semiconductor manufacturing, but also striving to secure a place in emerging technology companies and financial innovation, including the controversial field of cryptocurrencies. It must be able to see future trends, be unafraid of risks, and be willing to lead and accept the challenges of failure.

Loh said, "The challenge for Singapore now is how to maintain its competitiveness and openness as other countries gradually close themselves off and focus on domestic development. In fact, Singapore cannot rely solely on its domestic market. We must have a global perspective and always remain open."

Shein

Founded in Nanjing in 2008, Shein is now a global fashion company.

Over the past five years in particular, following its successful entry into the American and European markets, Shein's market valuation skyrocketed, from US$5 billion in 2019 to US$100 billion in early 2022.

Although it has since dropped to US$64 billion, Shein's market valuation still ranks highest among global startups, making it a growing threat to traditional fashion giants such as H&M and Zara.

But because Shein is not a listed company, its corporate transparency has always been much discussed among industry practitioners. Although rumours of an IPO have been flying since 2020, Shein has always denied them.

Notably, Shein de-registered its main Chinese entity in 2021 and moved its global headquarters to Singapore last year. The company's website no longer makes any mention that it was founded in Nanjing.

Nio Inc.

Global smart electric vehicle company Nio was founded in November 2014 in China and listed on the New York Stock Exchange on 12 September 2018.

Last year, Nio was officially listed on the Hong Kong and Singapore stock exchanges, becoming the first automaker to be listed in the US, Hong Kong and Singapore.

Analysts pointed out that amid the China-US trade war, many China concept stocks listed on the exchanges on Wall Street became worried that they could be delisted if their auditors failed to comply with US accounting standards, thus seeking other platforms to de-risk. Nio's listing in Hong Kong and Singapore gives it an additional financing channel and protection against risks.

In December 2020, the US Securities and Exchange Commission issued the Holding Foreign Companies Accountable Act, which stipulates that an enterprise will be banned from trading on all US stock exchanges and forced to delist if the Public Company Accounting Oversight Board cannot conduct inspections of audits of the enterprise for three consecutive years starting 2021. In May 2022, over 80 China concept stocks were placed on a preliminary delisting list, including Nio.

TikTok

Although TikTok's parent company is Chinese tech enterprise ByteDance, its global headquarters are in Singapore and Los Angeles, and it has a Singaporean CEO Chew Shou Zi.

With TikTok's growing popularity, its relationship with the Chinese government gradually came into question, and government officials of several countries are concerned that TikTok user data could land in the hands of Chinese authorities. For example, India banned TikTok in 2020 over data privacy and national security concerns.

This March, Chew testified at a congressional hearing over concerns about TikTok's data security and privacy protection, as well as its alleged ties to Beijing.

Quoting five people familiar with the matter, The New York Times reported last year that Chew "straddles the Western and Chinese business worlds, with Singapore offering a hedge against any potential crackdown from China or the US".　

GGV Capital

Established in 2000 and headquartered in California, GGV Capital is a venture capital firm focusing on seed- to growth-stage companies.

This September, the company announced its plans to split into two independent businesses focused on Asia and the US respectively. Headquartered in Singapore, its Asia partnership is led by Singaporeans Jenny Lee and Foo Jixun, and will focus on investments in China, Southeast Asia and South Asia.

The company said in a statement, "Over the last decade, the investment landscape has shifted significantly and the operating environment has become highly complex. Against these new realities, GGV is also evolving."

The Wall Street Journal reported in July that some American venture-capital firms are being investigated by a congressional committee over their funding of Chinese tech companies, with GGV being one of them.

This article was first published in Lianhe Zaobao as "规避中美交恶风险 外企赴新洗白前尘".

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