CG Ong's speech at the DBS China "Shanghai FTZ Connecting Asia" Forum

Mr Zheng Yang, Director-General, Shanghai Municipal Financial Services Office

Mr Shi Liya, Deputy Director-General, RMB Cross-Border Business Department, The People’s Bank of China Shanghai Head Office

Mr Li Jun, Deputy Secretary General, China (Shanghai) Pilot Free Trade Zone Administration Committee

Mdm Chng Sok Hui, CFO, DBS Group

Mr Neil Ge, CEO, DBS Bank (China)

Distinguished Guests

Ladies and Gentlemen

·        I am pleased to be here today.  As we all know, DBS is among the first financial institutions, and one of only two foreign banks, to be granted a license in the China (Shanghai) Pilot Free Trade Zone (SFTZ) on the very first day of its inception.  Since then, all of Singapore’s major banks have set up operations in the Free Trade Zone in a matter of weeks and months.  This reflects our confidence in the long-term prospects of the Free Trade Zone, of Shanghai and of China.

·        Today’s forum is a very timely one.  The Shanghai Free Trade Zone’s inauguration last year has certainly raised strong interest, both within China as well as globally.  Many investors, domestic and foreign, have come in.  Many more are watching with close interest, waiting for more policies to be announced or further clarified.  I am sure more foreign investors will come into the Free Trade Zone as more details become available.

·        Today’s panel discussion and sharing sessions on potential opportunities engendered by the FTZ will be very useful.  Some scholars in China have hailed the FTZ as the most significant reform initiative since the establishment of China’s first Special Economic Zone in Shenzhen in 1980 and its WTO accession.   The FTZ is significant as China finds a path towards a new growth model focused on modern services and reduces its reliance on investment-led growth and low-cost manufacturing. 

·        Reforms and opening up is a continuing process of experimentation.   Or as Mr. Deng Xiaoping used to say: “feeling the stones while crossing the river”.  (摸石头过河).  Policymakers are well aware that liberalization cannot be rushed out in one go.  They need to manage the attendant risks.  And this is especially true in the financial sector. 

·        But there is no doubt of the vision of China’s policymakers – to further liberalize the economy including the financial sector; internationalize the RMB; avoid the “middle-income” trap and catalyze the development of the modern services sector; restructure the economy from one driven by investments to one led by consumption; and generally achieve a “moderately well-off society” or 小康社会 in the medium term.

·        Singapore is confident that Shanghai will succeed.  That is why our banks have already come into the FTZ.    

·        This confidence is also reflected in the latest statistics from the PRC Ministry of Commerce.  In 2013, Singapore overtook other advanced economies as the largest foreign source of FDI in China.  In Shanghai, Singapore was the third largest investor last year in terms of actual investments, coming after only Hong Kong and Japan. 

Ladies and Gentlemen,

·        Finance has been seen by many analysts as one centerpiece of the Shanghai Free Trade Zone, as it is pivotal to the development of other sectors.  Here, Singapore can be a partner for Shanghai.  The SFTZ will facilitate two-way investment flows.  DBS and other Singapore banks can play their part in promoting inward investments by acting as platforms for global investors seeking funding and investment opportunities in China.  With the allocation of a RMB 50 billion quota under the Renminbi Qualified Foreign Institutional Investor (RQFII) in October last year, Singapore has seen keen interest from financial institutions and asset management companies seeking to invest in capital markets in China. 

·        For outward investment, Singapore as the hub of Southeast Asia is well-poised to contribute to Chinese enterprises seeking to “Go Global”.   We provide an easy and low-risk environment for companies to conduct their businesses, a mature legal framework, strong intellectual property protection laws and global connectivity, evident in our comprehensive network of Free Trade Agreements and Investment Guarantee Agreements.  In fact, Singapore currently has the most extensive network of free trade agreements in Asia. 

·        Given Singapore’s competitive advantages, it is no wonder that as of today, Singapore has already attracted some 4,500 Chinese companies.  As of December 2013, 137 Chinese enterprises have been listed on the SGX, with a combined market capitalization of about S$32.6 billion. 

·        There is further room for financial cooperation between Singapore and Shanghai.  Some of you would be aware that since the designation of the Industrial and Commercial Bank of China (ICBC) as the RMB clearing bank in Singapore in May last year, Singapore became the first offshore RMB clearing centre outside greater China.  As of December 2013, total RMB deposits in Singapore stood at RMB 200 billion, a 70% increase over deposit levels in March last year.  The start of RMB clearing arrangements in Singapore has also helped to promote RMB-denominated loans, mainly for trade financing purposes, which grew by almost 25% to reach RMB 300 billion last year.  To put this figure into perspective, Singapore now accounts for about 60% of RMB trade finance outside Mainland China and Hong Kong.

·        Since the launch of the RMB market in Singapore, we have seen six successful issuances of Lion City bonds totalling RMB 7.5 billion.  These Lion City bonds have been very well subscribed, and saw strong demand among investors in Singapore, as well as the region.

·        Let me conclude.

·        In the process of restructuring itself, Shanghai will come across exciting opportunities and myriad challenges, both within the SFTZ and financial sector and beyond. 

·        As open, highly globalized and urbanized cities, Singapore and Shanghai share many common challenges.  These include an ageing population, restructuring the economy and creating good jobs for our people, providing adequate and high-quality public services to an increasingly sophisticated and demanding population, all within an urban environment with rapid information flows in the new social media age.

·        Singapore is happy to share our experience and exchange learning points in this regard.  We have engaged in several rounds of economic restructuring and manage an open and highly globalized economy.  As a city-state operating a Free Trade Zone, we survive and thrive by remaining relevant to the global economy, operating as an international shipping, trading, financial and commercial hub for the region and the world.  We were thus happy to host Mr. Dai Haibo in Singapore in January this year and glad that he had found the visit fruitful, and look forward to further exchanges of visits to exchange views, learning points and engage in cooperation.

·        With this, I thank the organizers for inviting me today and wish the forum great success. 

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(6 May 2014)