Introduction

Since the establishment of diplomatic relations between China and Singapore in 1990, the bilateral economic relation has witnessed rapid and spectacular growth that has been beneficial to the two countries. In particular, Singapore's total foreign direct investment (FDI) in China has grown rapidly since 1985 from a tiny S$60 million to a huge S$70.6 billion in 2010. In terms of FDI volume, Singapore ranks eighth among the major investment sources for China, accounting for 4.5 per cent of China's total paid-in foreign investment. Moreover, Singapore has the largest share of China's FDI from ASEAN countries.

Not only did the total size of investment experienced two periods of rapid expansion in 1992–98 and 2005–10, the portfolio of investment has seen a major diversification, covering almost all the important sectors of the Chinese economy, from traditional sectors like trade and commerce services, industrial parks, real estate, financial services to new emerging areas like education, healthcare and clean energy. In terms of regional distribution, Singapore's investment in China has been spreading from China's coastal regions to inland and western provinces, especially since the early 2000s, and that fully align with China's central and western development schemes.

At the crossroad of world economy and global network of Chinese diaspora, the city state of Singapore enjoys many advantages in accessing the Chinese market. These are its cultural proximity with China, strategic position in Asian and global trade network, and an active developmental government always bent on seeking new markets across the world. Relying on these strategic advantages, the Singapore government and thousands of private enterprises have so far invested very extensively in China by taking advantage of an increasingly open economy.

Singapore's investment activities in China have encountered some difficulties since China is a far larger and much more complex environment for Singapore investors. There are as many challenges as opportunities in this huge market. Although most Singapore enterprises have so far fared well, there are many perils in China's informal regulations and institutional complexities.