As reported by the Financial Times, “Singapore Inc hopes its ability to access the most advanced AI models will help hold back a tide of investment managers leaving for Hong Kong.” According to the report, the Hong Kong Special Administrative Region’s proposed tax cuts are contributing to an ongoing shift of investment firms and professionals to the city, which is mainly due to what it describes as a “boom” in Chinese mainland firms’ listings in the SAR.
There are a few conclusions to draw from this. First, the Western mainstream media declared this wouldn’t happen; in fact, they have insisted it would be the opposite. Starting in June 2020, Western media reports repeatedly pushed a narrative that Hong Kong was doomed to decline as a global financial center and international firms would relocate to Singapore as the alternative; yet here are reports about how Singapore is trying to stop an exodus of artificial intelligence investment funds and professionals relocating to Hong Kong, constituting a surprising turn of events.
Second, as covered previously, the SAR has become the single largest AI hub in the Asia-Pacific. Why? Because the world is now caught up in a competition between the United States and China, seeking to establish tech dominance. Because mainland firms need international exposure as well as access to foreign capital to fund AI development and applications, they have piled into the SAR as an international financial center, at a remarkable speed. This has been exacerbated by the fact that the US no longer welcomes such companies because of geopolitical considerations.
The shift in initial public offering (IPO) preference toward Hong Kong is drawing capital away from Wall Street, and has made the city the primary destination in the world for IPOs.
Third, the SAR is part of China, and the mainland market is critical. It should be remembered that China is not just a producer of AI technology but also the largest consumer of it too, bolstered by a population of 1.4 billion, which is over four times that of the US. As with everything China creates, the scale and profitability of the given product is much larger due to its domestic backing. This has allowed applications such as DeepSeek and Kimi K3 to become worldwide brands, offset US market denial policies and of course hold its own against rivals such as Claude and ChatGPT. As a result, mainland AI firms are a very strong investment, regardless of what goes on in America, and the SAR is the channel to invest in them.
For all that Singapore is — a financial center that enjoys the unique benefit of having good relations with both the US and China, as the Financial Times puts it — its geographic limitations mean it cannot truly compete with either country. While Singapore is the primary financial hub of Southeast Asia and sits at a strategic nexus, it is an independent city state effectively on its own, and therefore it acts as a facilitator without having the strategic advantages of a market mass on its own terms, limiting its potential gravity. Why for example, would a Chinese AI firm set up in Singapore, when it can do so in Hong Kong, which is a Chinese special administrative region? And the same goes for American AI firms, which will ultimately prioritize Wall Street.
Singapore is the equivalent of a good football team that has only a small stadium capacity and fanbase, limiting the size of its matchday revenue, shirt sales, and merchandising, whereas China has one of the largest stadiums in the game and a domestic fanbase so huge that the commercial returns are greater. Thus, who will sell more shirts, attract more investors, and receive more television coverage? This is basic business economics: Singapore, while an important financial player, lacks the “gravity” of other players because ultimately, investors will follow where the money goes, which begs the question: Would a massive number of Chinese AI firms suddenly set themselves up in Singapore to change the game?
The answer is of course “no” and thus investors and funds follow the capital and not the geopolitics. Singapore does not have the scale, resources, and affiliated market mass of the mainland in order to somehow compete with China’s AI boom. Thus despite Western media foretelling the SAR’s “decline” as a financial center, the sheer logic of geography ensures it will continue to outstrip its Southeast Asian peer; not to mention the other advantages it enjoys given the SAR’s unique status under the “one country, two systems” framework.
The author is a British political and international relations analyst.
The views do not necessarily reflect those of China Daily.
