Multinational companies are choosing Singapore over Hong Kong as a business hub
Singapore and Hong Kong have competed for many years to attract multinational companies and lead as one of Asia’s top financial and business hubs.
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The backstory: Singapore and Hong Kong have competed for many years to attract multinational companies and lead as one of Asia’s top financial and business hubs. But with challenges like COVID, geopolitical tensions and talent shortages, the lead position has been gradually shifting.
In 2020, the Singaporean government introduced a new type of legal framework called Variable Capital Companies (VCC), which provides tax and legal incentives for hedge funds, venture capital and private equity firms to set up shop in the city-state. More than 600 companies took advantage of the program in 2022.
On the other hand, Hong Kong has maintained the lead as a trading center and base for global banks to gain access to business in China, the world’s second-largest economy. And although Singapore and Hong Kong are both in the top five of the world’s most expensive cities to live in, Hong Kong is a great option for finance employees because they’re typically paid more than those in Singapore. Also, employees for these multinational companies, especially those in finance, have said that Hong Kong trumps Singapore for their lifestyle due to its nightlife and fast-paced buzz. All in all, these factors have made it difficult for Singapore to take the lead.
The development: According to a Bloomberg Intelligence report published on Wednesday, Singapore has now surpassed Hong Kong as Asia’s premier business location. In 2023, 4,200 multinational firms had their regional headquarters in Singapore, while Hong Kong only had 1,336. Many Chinese companies have also chosen Singapore over the nearby city of Hong Kong for expansion, like China’s electric vehicle (EV) maker Nio and tech groups like Alibaba and Huawei. Because of its more diversified economy and many corporate companies flocking to it, Singapore could attract more global business than Hong Kong in the next five years, according to the report.
Key comments:
“Hong Kong has lost the race to be international business’ preferred choice for Asia headquarters, as more global and even Chinese companies choose Singapore because of its better relations with the West, broader talent pool, diversified economy, and tax incentives,” according to the 50-page report. “Companies may rank Singapore higher in terms of political stability and freedom amid elevated geopolitical risks in the region.”
“Banks and financial-services firms in general have opened up bigger operations in Singapore or are going for kind of a dual hub-type strategy in Asia,” said John Mullally, a Hong Kong-based managing director at the recruiting firm Robert Walters.
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