“Crazy Rich Chinese" in Singapore
“Crazy Rich Chinese" in Singapore
Why are Chinese netizens angry over Jack Ma's Wife buying Singapore properties; Chinese entrepreneurs' Singapore sojourns, and what's so great about Singapore?
The word of the week is Singapore.
Jack Ma’s wife, a Singapore citizen, recently went viral in China because she spent around $40M buying properties that look like the ones in the iconic Crazy Rich Asians scene; Hillhouse Capital's founder Zhang Lei switched his nationality from Hong Kong to Singapore; Shein and Hongshan’s founders are Singapore permanent residents. Other high-profile Chinese companies like Bytedance, Tencent, Alibaba, and iQIYI have set up international headquarters in Singapore. Notably, Dianping's founder, Zhang Tao, Tencent's co-founder, Zhang Zhidong, and ByteDance's founder, Zhang Yiming, have also relocated to Singapore in recent years.
What’s so great about Singapore? Why are Chinese companies expanding and growing their business there?
In my The Wire China op-ed, “The Dilemma of the China Shedding Strategy,” I talked about Hillhouse Capital and GGV Capital moving their Asia HQ to Singapore. Hillhouse took a whole floor in the Marina Bay Financial Centre Tower 1—a whopping 20,000 square feet—and re-registered its fund to Singapore.
In my newest FT Chinese Column, I went deeper about the following questions:
Why are Chinese investors and netizens mad about Chinese entrepreneurs and investors becoming Singaporean citizens?
From a business perspective, what are some of Singapore's advantages and favorable policies?
The Controversies of “Chinese” Singaporeans
Chinese business figures giving up their Chinese citizenship has long been a subject of fascination in China. In 2018, China's leading hotpot chain Haidilao, famous for its noodle dances, saw its founder Zhang Yong named the wealthiest person in Singapore by Forbes; many Chinese netizens quipped, "So it turned out Haidilao is a foreign company."
Hillhouse’s founder, Lei Zhang, is a Singaporean citizen now, and Hillhouse’s Asia HQ is in Singapore. The timing of its HQ move to Singapore coincided with its fundraising cycle. After its record private equity raise four years ago, Hillhouse’s hedge fund performance has since been lackluster. According to U.S. regulatory filings, Hillhouse’s public investment arm, HHLR Advisors, saw its assets tumble by a third last year. Aside from performance, Hillhouse has had its fair share of scandals in China.
In November last year, Hillhouse's HHLR was investigated by the China Securities Regulatory Commission for an alleged violation during the share transfer in Chinese solar giant Longi Green Energy Technology Co. Hillhouse reduced its stake from 5.85% to 4.98%, which sparked market suspicions it attempted to circumvent disclosure requirements for shareholders with holdings above a 5%. Hillhouse’s strategy to liquidate a portion of its stake adversely impacted small and medium Chinese investors. It led to negative public sentiment and prompted regulatory intervention. According to 36Kr, Hillhouse aimed to discreetly cash out, minimizing market disruption, despite the investment resulting in an overall loss of 51 billion RMB. The Chinese solar industry is being hit by production cuts and layoffs due to fierce competition. Longi’s chairman Zhong Baoshen, a delegate attending the National People’s Congress this week, urged the Chinese government to award firms that can provide “long-lasting, reliable products” as some manufacturers are winning bids with below-cost prices and “big companies are very distressed about this issue.”
With unfruitful bets in Solar and China’s education companies（TAL, New Oriental), and to hedge its underperformance, Hillhouse’s Lei Zhang has to find ways to keep its investor base happy. Hillhouse manages a vast portfolio and has long marketed itself as a conglomerate of brands: VC operations are conducted under Hillhouse Capital, PE investments under Hillhouse Investment, RMB secondary market activities under Lingren, and U.S. dollar QFII under HHLR. The managing entities and teams operate relatively independently. Ultimately, the Hillhouse brand's appeal is the investment thesis that it will continue to make money for its Limited Partners throughout the investment life cycle.
As for Lei Zhang becoming a Singaporean citizen, Chinese netizens view it as enjoying the spoils of victory from two decades of lucrative investments in China's technology and e-commerce sectors, only to leave the market that made it all possible. Hillhouse further hit a nerve by helping other high-net-worth individuals move to Singapore. Hillhouse is a designated fund for the Global Investor Programme (GIP) run by the Singapore Economic Development Board to attract those who can invest 25 million Singapore dollars (approx.18.5 million U.S. dollars) to apply for residency.
For Fast-fashion online retailer Shein, the move to Singapore and its founder becoming a permanent resident has more practical reasons. According to Reuters, Shein’s strategy could simplify the compliance process for overseas listing. Of course, such schemes only apply to retailers like Shein that only export their products and do not sell them in China. Even with this workaround, new rules passed by China's securities watchdog in 2023 allow the China Securities Regulatory Commission to vet and block offshore listings that could threaten the country’s national interests. Shein recently requested approval from Beijing for a prospective (stalling) U.S. IPO. (Remember what happened to Didi?)
Is Singapore worth it? What are Singapore’s advantages?
For entrepreneurs taking their companies global, Singapore serves as a foothold in Asia with many advantages. Funds like Hongshan and GGV and companies like PDD, Tencent, and Alibaba all have a presence in Singapore. Last year, Hongshan opened a small office in Singapore due to compliance requirements, but the fund's registration remains in Hong Kong. After Sequoia Capital announced the separation of its business in the Americas and Europe, China, and India into three fully independent operations last year, Hongshan said on the record it’s committed to the Chinese market and continues to focus on supporting Chinese founders and their globalization efforts.
Singapore is one of the most developed economies in Southeast Asia. It has signed free trade agreements with many countries, making it convenient for Chinese companies to set up offices in Singapore as a gateway to Southeast Asian and Western markets.
Singapore also has a strategic transportation advantage. It takes no more than 4 hours to reach any other major city in Southeast Asia. Businesses based in Singapore can access the market of 650 million people across the entire Southeast Asian region and further "go global.”
Singapore also has business-friendly policies: low corporate tax rates, a simplified tax structure, a tiered corporate income tax policy with rates ranging from 4.25% to 17%, tax incentives, and offshore exemptions.
As of 2022, Singapore, with a population of 6 million, has 26 unicorn companies and ranks third in the Global Financial Centres Index (GFCI), only behind New York and London. With advantages, Chinese businesses seeking to expand overseas, including investment funds, are redefining their international strategies in Singapore.
Ivy Yang is the founder of Wavelet Strategy, specializing in thought leadership and strategic PR consulting for Chinese companies in the global marketplace.
I met up with a Singaporean friend of mine the other day for some beers. He recently graduated and started working for a Hong Kong based risk management firm that is opening up an office in Singapore. I made the joke that the biggest job creator in Singapore is now the Chinese Government. He thought it was funny