Singapore courts Chinese growth

China remains a top investment destination for companies from Singapore as they seek to capitalize on China's potential market opportunities rather than lower production costs, a report released Monday showed.

Around 80 percent of the Singaporean companies surveyed said the market potential in China was the most common key factor in first deciding to do business in the world's second largest economy, said a report by International Enterprise (IE) Singapore, an agency for promoting trade under the Ministry of Trade & Industry Singapore.

Only about half of those surveyed cited lower costs as a reason for doing business in China, the report showed.

"There are compelling reasons for our companies to stay in China. These include a growing domestic consumer market that is becoming more differentiated, as well as the potential of emerging and fast-developing provinces and cities," said Yew Sung Pei, assistant CEO of IE Singapore.

"The gradual liberalization in policies and changing socioeconomic trends also present new opportunities that were not available before," Yew said.

Even when faced with the challenges of intense competition and rising labor costs, Singapore companies still listed China as a key priority market, the report said. Around 86 percent of the companies surveyed are not considering moving any of their investments in China to other markets despite attractive market conditions that have emerged in many Southeast Asian countries in the past few years, it said.

"Most Singaporean companies invest in cutting-edge technologies in Suzhou Industrial Park in East China. They hire skilled workers whose salary is already relatively high. So they can easily absorb the pressure from rising labor costs," Zhao Yumin, a researcher with the Chinese Academy of International Trade and Economic Cooperation (CAITEC), told the Global Times Monday.

"Compared with other markets in Asia, China has noticeable advantages such as better infrastructure for trade and investment," Zhao said.

The IE Singapore report also showed that around 40 percent of Singaporean companies surveyed have made it their primary strategy to produce not only in China, but also for China in order to capture the demand generated by the fast-growing market.

Around 11 percent are also importing goods and services into China to serve the domestic market, it said.

"As cost is rising in China, the personal income of Chinese residents is also rising, and so is their consumption ability. Singaporean companies see the potential of Chinese markets fueled by surging domestic consumption," Zhao from CAITEC said.

In 2012, Singaporean firms invested a total of US$6.33 billion into China, up 3.4 percent from a year earlier, making Singapore China's third largest investor, data from IE Singapore showed.