BOC: Singapore and Chinese Enterprises Should Establish Mutually Beneficial Relationship in ASEAN and Beyond

Introduction:

As China's national development initiative, the "Belt and Road" Initiative's influence has grown exponentially in recent years. Infrastructure and energy development in the ASEAN region has also been given a major boost.

In an interview with Lianhe Zaobao last month, Mr Qiu Zhikun, General Manager, Country Head, Bank of China Singapore Branch, highlighted Singapore's importance as a financial hub and foreign exchange trading centre within ASEAN.

He said that Singapore has close trading and investment relations with South Asia and thus can play a key bridging role for Chinese companies to enter the South Asian and Southeast Asian markets.

For local companies in Singapore, Qiu opined that the "Belt and Road" Initiative provides many development opportunities for countries along the route. This is especially so in developing countries and regions such as Southeast Asia and South Asia, where the initiative offers immense investment opportunities related to infrastructure, such as roads, water, power and industrial parks.

He suggested Singapore companies should actively tap on their geographical advantage, to establish mutually beneficial relationship with Chinese companies that are going global, and seek high-quality investment targets to achieve a “win-win” long term profit model.

The following is the interview transcript:

Lianhe Zaobao Belt and Road Portal: What role can Bank of China Singapore Branch play with regards to the "Belt and Road" initiative?

Mr Qiu Zhikun: ASEAN plays an important role in the Maritime Silk Road under the “Belt and Road” initiative. China has now become ASEAN’s largest trading partner and its 4th largest source of foreign investment. Whereas, ASEAN is China’s third largest trading partner as well as the biggest contractor in the field of construction and engineering.

Singapore, being an important financial hub and foreign exchange trading centre within ASEAN, is also the ASEAN chair for 2018. Singapore also has close trading and investment relations with South Asia and thus can play a key bridging role for Chinese companies to enter the South Asian and Southeast Asian markets.

Bank of China Singapore Branch has been in Singapore for over 80 years and has built up a strong customer network and market reputation within Southeast Asia.

The Branch actively plays a role to promote “Belt and Road” related business opportunities, supporting “going global” projects, encouraging Chinese companies to invest in this region as well as Singapore companies to venture overseas.

In recent years, our business coverage has rapidly expanded from “Singapore, China, ASEAN” to markets in Northeast Asia, the Middle East, Australia, Europe, and Africa by working closely with Singapore and China financial institutions.

Through close collaboration with other stakeholders in this “Belt and Road” initiative, we have achieved promising results.

As at the end of 2017, the Bank has participated in over 500 major overseas projects in countries along the “Belt and Road” route, providing credit support of approximately USD 100 billion.


Lianhe Zaobao Belt and Road Portal: How does Bank of China provide investment and financing services to countries along “Belt and Road”? What are the related financial products and services?

Mr Qiu Zhikun: Bank of China is able to leverage on our strong global network, comprehensive banking platforms and our specialised products to meet the banking requirements of our clients.

Bank of China Singapore Branch also recognises Singapore’s potential in playing a crucial role as an international financial centre along the Maritime Silk Road.

The Branch is able to provide customised solutions for “Belt and Road” projects, including provision of diversified financial products such as commercial banking, investment banking, insurance, equity investment funds as well as aviation leasing in ASEAN and South Asia.


Lianhe Zaobao Belt and Road Portal: In your opinion, what are the investment projects, industries, countries, and regions that are worthy of local enterprises to participate in the "Belt and Road Initiative?"

Mr Qiu Zhikun: At present, the Bank is actively involved in providing financial services for companies involved in construction of renewable energy, water treatment, public infrastructure, and telecommunications in countries along the “Belt and Road” route.

At the end of 2017, Bank of China Singapore Branch has successfully provided support to the “Belt and Road” initiative by financing projects in more than 10 countries and regions along the route with a cumulative amount of over USD 10 billion. The projects spanned across various fields such as infrastructure, construction, food processing and power generator.

As part of our commitment to supporting the “Belt and Road” financial artery, Bank of China established the Debt Capital Market Centre (Asia) in Singapore in June last year.

The Centre provides a full range of offshore bond financing services for local and regional companies in Singapore, assisting issuers and investors in the region to further understand the domestic bond market in China, as well as acting as a one-stop financing platform for clients.

On 20 March 2018, Bank of China successfully acted as a lead underwriter and assisted the Republic of Philippines in the issuance of 3-year Panda Bonds of RMB 1.46 billion on the Chinese interbank bond market with an annual coupon rate of 5%.

This was the first sovereign Panda Bond issued in Southeast Asia, and is a successful model for international issuers who are trying to raise funds in the Chinese capital market.

As the most integrated and internationalised Chinese commercial bank, Bank of China has actively participated in the issuance of offshore bonds issued by various institutions. Bank of China ranks first for the number of Panda Bonds issued, and third in Asia (excluding Japan) for the issuance of G3 currency bonds.


Lianhe Zaobao Belt and Road Portal: The Chinese think tanks once listed Singapore as the most investment-worthy country along the “Belt and Road”. In your opinion, what is the attractiveness of investing in Singapore for Chinese companies? How can the local companies work with these Chinese investors to capitalise on business opportunities?

Mr Qiu Zhikun: (1) Singapore being an important financial hub in the ASEAN region, China companies can leverage on the following advantages for investments:

Singapore has a good macro investment environment as it is economically and politically stable, with a highly efficient and clean government. With good relationship between China and Singapore, Singapore is among the top choices for Chinese-funded enterprises to expand into internationally.

Singapore remains a top choice in Southeast Asia and the Asia Pacific region for companies to tap into the numerous acquisition opportunities in the region. For example, a Chinese company can set up a Special Purpose Vehicle (SPV) in Singapore to facilitate the acquisition of companies in Singapore, Southeast Asia, Australia and even in Europe. There have been many recent successful cases reported.

Comprehensive and reliable legal system. Singapore has a sound internationally recognised legal system including privacy law, data protection, customer rights, and a large number of well-known legal firms have also established their presence here to provide legal services to the region.

Established global financial market. Singapore is well recognised as an international financial hub with numerous established financial institutions and experienced financial advisors. There is also an established and active secondary market for syndicated loans.

Preferential tax policy. Corporate income tax and dividend tax are relatively low in Singapore. With existing bilateral tax treaties signed with other countries, acquisition and financing through Singapore companies can effectively reduce taxation cost.

(2) For local companies in Singapore, the “Belt and Road” initiative has provided many development opportunities for various countries along the “Belt and Road” route.

This is especially in developing countries and regions such as Southeast Asia and South Asia, where the “Belt and Road” initiative has brought in huge investment opportunities related to infrastructure developments such as roads, industrial parks, utilities, etc.

Local enterprises should actively tap on Singapore’s geographical advantage to establish mutually beneficial relationship with the Chinese companies that are “going global”, and seek high quality investment opportunities so as to achieve a “win-win” long term profit model.

In the past two years, Bank of China Singapore Branch had successfully participated in PT Well Harvest’s USD 425 million syndicated loan in financing an aluminium refinery situated in Indonesia; assisted China’s State Development & Investment Corporation to raise USD 240 million for acquisition of Indonesian Bantam Power Plant via a syndicated loan.

In January 2018, the Bank led the financing and privatisation of Global Logistic Properties Limited (GLP) as the Mandatory Lead Arranger (MLA); assisted COSCO International (Singapore) in the buyout of Singapore listed company, Cogent Holdings Limited, as an exclusive lending bank, account bank, collateral agent bank and financial advisor.

The above successful cases are the result of close collaboration between China and Singapore, benefiting both China and Singapore companies.

Bank of China plays an active role in promoting cooperation between Chinese and Singapore companies, providing not only financial support for the development of Singapore local companies, but also investment opportunities for investors in Singapore’s financial market.