Singapore leapfrogs the US to become the most attractive destination for overseas investments from China

Singapore is officially the most attractive destination for overseas investments from China.

According to findings from the China Going Global Investment Index 2017, the US came in second followed by Hong Kong (No.3), Malaysia (No.4) and Australia (No.5).

The city-state leapfrogged the US to take the top spot, a position the latter held in previous editions of the index (in 2013 and 2015).

The index was released by The Economist Intelligence Unit (EIU) on Thursday (Dec 7), and ranks 60 major economies in terms of their attractiveness to Chinese firms. It covers the  automotive, consumer goods, energy, financial services, and healthcare sectors.

The EIU is the research and analysis division of The Economist Group.

The report stated that Singapore’s superior business environment, access to South-east Asian markets and close links with China were integral to its top ranking.

Additionally, higher trade tensions between China and the US, coupled with the rejection of several Chinese investments by the government’s Committee on Foreign Investment in the United States (CFIUS) contributed to its drop in ranking.

While developed markets dominated the top ranks, the report noted that numerous emerging markets had risen significantly since the last rendition of the index in 2015.

As an example, Malaysia was ranked as No.21 in 2015, and came in fourth in 2017.

These jumps can be attributed to an increased stability of commodity prices which have improved economic prospects for many developing economies, and China’s Belt and Road Initiative (BRI) which has provided additional incentives for Chinese firms to invest in these regions.

Heightened regulation over ODI also serves as a push to prioritise investment in BRI countries.

As such, the government is trying to reduce the risks associated with the BRI to increase investment, and entice more domestic private enterprises into the BRI by stressing its policy significance.

According to the report, Malaysia and Singapore stand out as attractive BRI destinations as they provide opportunities as well as low levels of risk.

In contrast, most BRI countries fall under the “high risk, high opportunity” category.

China Going Global Investment Index 2017

“The BRI presents significant potential opportunities, but firms should be selective about the regions, countries and industries that they choose to engage with under its umbrella,” said the report.