The third China-Singapore government-to-government cooperation project, China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (“Connectivity Project”) has recently commenced, aiming to promote the “connectivity” between these two countries in the areas of financial services, aviation, transport & logistics and information & communications technology (“Four Areas”). The two existing projects between China and Singapore are Suzhou Industrial Park and Tianjin Eco-city.
I. Introduction to the Connectivity Project
In November 2015, Chinese President Xi Jinping visited Singapore and announced Chongqing as the operation site of the Connectivity Project. During President Xi’s visit, the project was formally launched when the two governments executed the project’s constitutional documents including the Framework Agreement on China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity and its supplemental agreement, as well as the Implementation Agreement on China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity. The project has kicked-off with Joint Implementation Committee meetings in both Chongqing (January 2016) and Singapore (February 2016) which included discussions relating to matters of the overall planning of the project and the specific planning of the Four Areas, and with the formal establishment of the Project Administration Bureau in January 2016 which included the signing of the MOUs in respect of twelve specific projects in the Four Areas.
Let’s interpret the meaning of “connectivity” by viewing the list of the signed MOUs for the projects in the Four Areas:
- in respect of financial services, three big Singaporean banks (DBS, OCBC and UOB) and five Chinese banks (ICBC, BOC, CCB, CITIC Bank and Shanghai Pudong Development Bank) were among the signing parties; their cooperation includes helping Chinese enterprises to finance in Singapore, facilitating China-Singapore cross-border clearance, and jointly launching innovative financial products;
- in respect of aviation, Singapore airport, Chongqing airport and several airlines were among the signing parties; their cooperation includes boosting the flight traffic from China’s western areas to Singapore, or to Southeast Asia or Southwest Pacific via Singapore, as well as establishing an airport commercial management joint venture;
- in respect of transport & logistics, Chongqing government and a subsidiary of the Singaporean developer CapitaLand agreed to jointly set up a China-Singapore Collaboration Centre at Raffles City Chongqing so as to attract good-quality investors from across the globe; and
- in respect of information & communication technology, a Singaporean e-government solution vendor agreed to provide e-solutions to the Chongqing Free Trade Port Area.
According to Chongqing Mayor Huang Qifan, “connectivity” can be interpreted as “tangible + intangible” and “Chongqing + inside or outside China”. In respect of “tangible + intangible”, on the one hand, the two states will build the project’s tangible sites, such as the China-Singapore Collaboration Centre and a logistic park located in Chongqing’s Liangjiang District with an area of over ten square kilometres; on the other hand, more importantly, in addition to foreign investors moving their offices to the project site, “connectivity” should be reflected by the intensive cooperation in respect of the Four Areas, the sharing of resources, and the collaboration of logistics and transportation facilities by and between Singapore (as Asia’s finance, aviation, logistics centre and a state having advanced information & commutations technology) and Chongqing (as a key city of western China). In respect of “Chongqing + inside or outside China”, with Chongqing being selected as the project site, “connectivity” will however not be restricted to the territory of Chongqing; the vast ASEAN enterprises (as well as the worldwide enterprises establishing their investment, financing, R&D or management centres in Singapore) and the vast Chinese enterprises (particular those of western China) are able to enter or exit China with greater ease via the bridge of Chongqing, so as to achieve mutual “connectivity” and share the opportunities created by the innovative and beneficiary policies and the Belt and Road Initiative.
II. Project’s Management Structure
A top-down and three-layer management structure covering the central and local levels of China has been established in relation to the Connectivity Project’s policy-making and implementation. The first layer is the Joint Steering Council co-chaired by Chinese Vice Premier Zhang Gaoli and Singaporean Deputy Prime Minister Teo Chee Hean, in charge of steering the policy-making and project coordination at the top level; the second layer is the Joint Working Committee co-chaired by Chinese Minister of Commerce Gao Hucheng and Singaporean Minister in Prime Minister’s Office Chan Chun Sing, in charge of supervising the policy-making and project coordination at the central ministry level; the third layer is the Joint Implementation Committee co-chaired by Chongqing Mayor Huang Qifan and Singaporean Minister in Prime Minister’s Office Chan Chun Sing, in charge of implementing the project at a detailed level.
Chongqing government has also formed a Project Management Commission, headed by Chongqing Executive Vice Mayor Weng Jieming , with four working committees administering each of the Four Areas. Officials and experts from both states are represented on both the Project Management Commission and each of its working committees and they are focused on the implementation of the project. A Project Administration Bureau has also been established under the Project Management Commission, headed by the former Deputy Director of Chongqing New North Area’s Management Commission Han Baochang and constitutes five offices: a general affairs office and four offices administering each of the Four Areas. In Singapore, in order to promote specific projects in connection with the Connectivity Project, the Economic Development Board (as the authority in charge of attracting overseas investors to Singapore) and the International Enterprise (IE) Singapore (as the authority in charge of helping Singaporeans to invest overseas) have established their respective working groups comprising officials with extensive experience in dealing with Chinese investors (including investors of western China) or the Chinese market (including the market of western China).
III. Announcement of Beneficial Financial Service Policies
In early March 2016, the People’s Bank of China (“PBOC”) issued the Approval on the Development of the Innovative Pilot Cross-border RMB Business in Chongqing allowing the pilot launch of certain innovative RMB-related business in Chongqing. This includes:
- allowing the equity investment fund formed in Chongqing to invest in RMB outside of China,
- allowing Chongqing enterprises to issue RMB bonds in Singapore, and
- allowing the provision of cross-border RMB clearance services in Chongqing to individual customers under the items of commodity trading, services and other current account items.
On 25 March 2016, PBOC Chongqing Operations Office, Chongqing Financial Affairs Office and Connectivity Project Administration Bureau jointly sponsored a launch conference for innovative pilot cross-border RMB business in Chongqing; and it was reported that PBOC Chongqing Operations Office had formulated certain administrative measures in relation to such innovative pilot business. The Monetary Authority of Singapore welcomed on its website the move by PBOC Chongqing Operations Office.
Given Singapore has for some time been the second largest offshore RMB clearance centre in the world, the purpose of such innovative policies is to enable Chongqing to become a sourcing destination for Singapore’s offshore RMB and simultaneously strengthen Singapore’s status as an offshore RMB clearance centre, so as to achieve the mutual “connectivity” in terms of financial services. Chongqing is not the first city to enjoy such innovative policies; for example, the Interim Measures on the Innovative Pilot Cross-border RMB Business in Suzhou Industrial Park promulgated by PBOC Suzhou Branch on 23 June 2014 described such policies. As per the Party Secretary and Head of PBOC Chongqing Operations Office Bai Hexiang said in his interview with the media, however, certain additional beneficial policies might be granted to the Connectivity Project as compared with those policies already granted to Suzhou and Tianjin. As explained by Mr. Bai, in respect of RMB bond issuance in Singapore, Chongqing enterprises might be able to repatriate the funds raised in full back to China, and use such funds for commercial activities and infrastructure construction in western China, and are not subject to the same restrictions currently imposed on Suzhou or Tianjin whereby the raised funds can only be partially repatriated back to China for the use of constructing projects inside Suzhou Industrial Park or Tianjin Eco-city.
IV. Profound Influence by the Connectivity Project
Chongqing is the only municipality located in western China and under direct administration of the Central Government. Selecting Chongqing as the operation site of the Connectivity Project will have profound influence. Singaporean or ASEAN enterprises or enterprises from other countries establishing their investment, financing, R&D or management centres in Singapore will take the opportunity to invest into Chongqing and other areas of China (particularly western areas); meanwhile, Chinese enterprises will take the opportunity to more intensively participate in the Belt and Road Initiative over the bridge of Chongqing by utilizing the funds, resources and technology provided by Singapore.
At present, because the two state governments are going to great lengths to promote the Connectivity Project, it is expected that the relevant authorities and the Chongqing local government will gradually announce more beneficial policies. Market commentary has stated that “Chongqing will be given whatever Suzhou or Tianjin has been given; something additional can also be expected”. But for now, we wait and see.
In comparison to Suzhou Industrial Park and Tianjin Eco-city, the Connectivity Project’s focus is on cooperation in terms of modern service sectors and the improvement of “soft power”. With more beneficial policies to be announced, we believe this project will promote a more comprehensive and intense level of cooperation between China and Singapore resulting in greater opportunities for the enterprises of both sides.