A STUDY OF SINGAPORE'S DIRECT INVESTMENT IN CHINA

Abstract

China, with its one billion population, is no wonder a country that offers potentially lucrative opportunities. As a result of the economic liberalization and the open-door policy, there is an increasing number of both listed and unlisted Singapore companies flocking there to carve out a niche for themselves. In fact Singapore began to cement stronger ties as investment partners from 1983 onwards. The objective of this academic exercise is to provide a current inventory and analysis of Singapore's direct investment in China. This study covers areas on the investments' size, nature, performance and geographical spread as well as the extent of Singapore's participation in the Singapore-Chinese joint ventures. What is it that justifies Singapore's direct move into the Chinese investment scene? Certain concepts of a few foreign direct investment (FDI) theories are adopted to explain the rationale behind Singapore's outward investment into China. These include the fundamental ideas on the possession of firm-specific advantages found in the Superior Knowledge version and the International Product Life Cycle Model version of the Monopolistic Advantage Theory, as well as on the possession of country-specific advantages presented in the Eclectic Paradigm Theory. Besides cultural and social similarities, Singapore entrepreneurs also score well with their technological know-how (though not much) and good management skills over others which make them attractive as joint venture partners. Most investors who had the foresight to establish themselves in the country at an earlier date, have been enjoying reaping the best returns. On the other hand, there were also some ventures which did not pull through. Inevitably, with emerging economies like China, there are bound to be problems faced by the investors. However such problems still do not pose too great a hindrance for Singapore investors aiming to get a piece of business pie in the Chinese economy. So far, both countries' governments have in fact introduced several investment policies to attract / encourage more Singapore investors into China. On the whole, Singapore's direct investment in China has benefited both countries in many ways.