For many investors, Singapore was once the gateway to the market of emerging economies in East Asia. Many years ago, the island-country was in stiff competition with Hong Kong for the status of Asian financial center. In the International Institute for Management Development (IMD) World Competitiveness Yearbook (WCY) 2018, the United States ranked 1st, Hong Kong 2nd and Singapore 3rd. In the World Economic Forum's Global Competitiveness Report 2018, the United States ranked 1st, Singapore 2nd, and Hong Kong 7th, while Mainland China ranked 28th. In the 2018 Index of Economic Freedom of the American Heritage Foundation, Hong Kong ranked the 1st in the world and Singapore ranked 2nd.
In terms of investment environment, Singapore as a city-state economy still maintains an efficient, sophisticated, attractive investment environment and commands international competitiveness. However, the capital market portrays a different picture. In the past five years companies including Singaporean ones have delisted from the country's stock market, while more and more investors are unwilling to venture into Singapore.
In 2014, the number of companies delisting on the Singapore Exchange ("SGX") exceeded the number of listing for the first time, and the market value of the year evaporated by SGD 8.4 billion. Since then, more and more listed companies have begun to withdraw from the SGX. In 2018 the money raised from the 15 SGX initial public offerings fell to just SGD 710 million, while 19 companies delisted, accounting for a net outflow of SGD $19.2 billion in market value. Bloomberg quoted a capital-markets lawyer who has two decades of experience, saying that he decided to move out because he "saw the decline" in Singapore.
Why is there a "decline" in Singapore? Bloomberg analyzed that this is related to the rise of China. With the rise of Mainland China's market and Singapore's own structural problems, the Singapore stock market is inevitably shrinking, and its status as a financial center is gradually being marginalized. A Singaporean equities fund manager is quoted saying that "if you think about the center of gravity in Asia and where it's going, it's all shifting to Mainland China".
According to the market community's logic, the rise of the Chinese economy is making China the new Asian center, and Singapore is marginalized because it is far from the center. What then is "China-as-center"? Is the "center" measured through the size and scale of the economy, or is it comprehensive national influence? Concerning this, Anbound's Chief Researcher Chan Kung's view is that there is a "Greater China Economic Interaction Community" in the current world, with Mainland China as the nucleus, interconnected with certain economic sectors in Hong Kong and Taiwan.
The impact of this Greater China Economic Interaction Community cannot be underestimated. In terms of the economic scale, the GDP of Mainland China in GDP was US$ 12.25 trillion, Taiwan US$ 573 billion, Hong Kong US$ 334.104 billion and Macau at US$ 48.31 billion. In total, the economy of the region was about US$ 13.2 trillion in 2017, accounting for 16.61% of the global GDP in that year. Such a large economic scale has formed a considerable market space in the world.
One should also look at economic interactions and industrial relations. Chan Kung pointed out that the Greater China Economic Interaction Community not only emphasizes on the accumulation of economic scale, but also the mutual support of the economy and its influence. The complementarity of industrial chains and resources is also an important factor. China-as-center will not be able to achieved by China alone. From the perspective of economic freedom and legal perfection, Hong Kong is indeed an important part of the Greater China Economic Interaction Community. Without Hong Kong, China cannot do a lot of things. As for Taiwan, there are close interactions between certain economic sectors of Taiwan and the Mainland Chinese economy, forming mutual markets for both sides. The upstream and downstream industries of the two sides are closely related, and at the micro level of the enterprises, they are supporting each other. With this, China, Hong Kong, Taiwan and Macao constitute the main body of the Greater China Economic Interaction Community.
Such a Greater China Economic Interaction Community would have tremendous impact throughout the world, influencing both the "world factory" and the "world market" from the perspective of scale and complementarity. Chan Kung emphasized that the significance of studying this issue is that we can more accurately define the relationship between Mainland China, Hong Kong and Taiwan. It now appears that this relationship already has a structural sense and these different regions are interdependent on each other. Conversely, the lack of structure will cause huge problems and form mutual negative effects.
Despite China forming the Greater China Economic Interaction Community, Hong Kong and Taiwan will still have great impact. The Greater China Economic Interaction Community's influence should not be over-exaggerated, otherwise it will easily lead to misjudgment. Objectively speaking, the Greater China Economic Interaction Community will not have absolute dominant influence in the world market. The influence of this dominance still belongs to the United States. In the past two years, under the waves of anti-globalization in the world, the United States single-handedly caused turmoil in the world and broke the globalization rules established for seventy years after World War II. One can see this in the economics of the world, in which the United States holds dominant influence on the global market.
It should also be seen that the Greater China Economic Interaction Community formed by China, Hong Kong and Taiwan is mainly reflected in the economy, partly in industrial relations and the complementarity of resources. Because of the differences in the political and the legal system between these four sides of the Taiwan Straits, the Greater China Economic Interaction Community would exist mainly at the micro level, and it is possible to support certain key policies, but it will not have a strong macro significance. The Guangdong, Hong Kong and Macao Greater Bay Area, which the Chinese government has just announced and promoted vigorously, might weaken the impact of such institutional differences to a certain extent, but it is none other than institutional differences that pose challenges to the Greater Bay Area.
Final analysis conclusion:
The cooperation and division of labor between the four sides of the Taiwan Straits in geo-economics and industry has formed a Greater China Economic Interaction Community that is mutually supportive, closely linked, and has a tremendous impact on the world market space. However, this impact is currently still insufficient to challenge the U.S.'s dominant influence on the global market for the foreseeable future.
