Singapore has cemented its position as Asia’s top financial center, according to the Global Financial Centers Index produced by Z/Yen Partners. In September, the GFCI placed Singapore first in Asia, just ahead of Hong Kong. Globally, the top five are New York, London, the two Asian cities, and San Francisco.
Z/Yen has produced the GFCI report in collaboration with the China Development Institute since 2007, drawing on data from organizations including the UN and the World Economic Forum to rate financial center competitiveness across categories ranging from telecomm infrastructure to regulation to human capital.
When Singapore first bagged Asia’s lead position in September last year, it was expected to be a one-off, given the imminent lifting of the Covid-19 lockdown imposed on Hong Kong. Now, there are reasons to believe Singapore will hold the top spot, not least its pre-eminent position as a hub for ASEAN, which is on a growth trajectory, as well as the island nation’s rising status as a center of wealth management and private banking.
“The difference between [Singapore and Hong Kong] remains slender, with only one point separating the two,” observes Heron Lim, economist at Moody’s Analytics in Hong Kong. More notable, he adds, “Singapore holds a persistent lead over Hong Kong in all five areas of competitiveness used to assess the financial centers: business environment, human capital, infrastructure, financial sector development, and reputation.”
Singapore has increasingly performed well in key metrics, now second in three of the five—business environment, infrastructure and financial sector development. “Only London’s good showing in human capital and reputation put the city in second overall, ahead of Singapore,” Lim says. “This is therefore a testament to Singapore improving its attractiveness to financial institutions.”
Hong Kong’s Loss, Singapore’s Gain
With doubts growing about the independence of Hong Kong institutions, Singapore is seen as offering a transparent and reliable common-law legal system; stable and efficient government that aims at neutrality between competing Western and Chinese business interests; and a low-tax environment that has encouraged a raft of companies to set up regional bases, including BlackRock, Sony Music, Dyson, Tencent, and TikTok.
In the process, Singapore has enjoyed an influx of expatriates, along with newcomers to the Chinese diaspora. Lianhe Zaobao, the Singapore Chinese daily, reported in April that up to 3,500 high-net-worth individuals are set to become Singapore citizens this year, most from China. A report published the same month by New World Health and Henley & Partners named Singapore the world’s fifth wealthiest city, with some 2,800 plus resident millionaires more than last year. Singapore also leads Hong Kong in the hi-tech stakes as the latter’s aspirations are hindered by China’s “great firewall,” which monitors online content and has blacklisted websites such as Wikipedia, Facebook, and X (formerly Twitter).
Singapore’s wealth management industry is booming, led by single family offices—more than 700 have set up shop there over the past few years. One attraction is the city-state’s offering of a tax-advantaged variable capital company structure. Meanwhile, a rush of capital into Singapore’s private banks has enabled them to offer sophisticated, artificial intelligence-aligned client services and high bank-parent credit ratings. In the wake of the US mini bank crisis earlier this year, demand for Singapore bank services from US customers has been notably strong.
Unintended consequences of Singapore’s rise include higher domestic inflation in the real estate sector—residential rents have soared as much as 100% over the past two years—and the certificate of entitlement required to own a no-frills car and which costs a mid-boggling S$105,000 (some $77,000 US dollars).
Neither is Singapore immune to the risks that tend to crop up in any fast-growing finance sector. “The unfolding money laundering scandal is the latest to have utilized Singapore’s position as an international financial center for illegal activities,” says Lim, “while Singapore has been named as a key location in ongoing cross-border litigation over tax evasion in the US and UK.” An investigation is underway in Singapore involving Chinese nationals accused of laundering S$2.8 billion, which second minister for home affairs Josephine Teo described as “one of the largest anti-money laundering operations not just in Singapore, but likely in the world.” Singapore has set up an inter-ministerial committee to review safeguards. Such responses show its commitment to earning the trust necessary to be a world financial center.