Singapore's MAS: Asia can mitigate trade tensions' impact by deepening integration

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The inaugural China-Singapore Connectivity Initiative Financial Summit (CCI-FS) took place in China's southwest Chongqing municipality on Friday.

With Chongqing as a gateway to western China, and Singapore to that of ASEAN, both China and Singapore have vowed to strengthen financial cooperation and cross-border flows -- further leveraging each other's strengths and advantages.

Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), kicked off his keynote speech by addressing the global trade environment.

"Trade conflicts are bad for confidence," Menon said.

“If the current trade conflict persists, the more serious casualty is perhaps not trade but investments. A decline in investments would reduce productive capacity and delay technological upgrading,” he added.

However, while trade tensions have clouded the short-term outlook, Menon pointed out the Asian growth story remains intact -- that fundamentals for growth for China and the Association of Southeast Asian Nations (ASEAN) remain strong.

"Asia is increasingly trading within itself as a source of imports and final destination of exports," he said.

Indeed, Menon highlighted that the best response to trade restrictions is to further liberalize trade among ruling economies.

"And this is exactly what Asia is doing. If we can deepen and broaden the integration between our two regions, it will mitigate impact of trade tensions and help to sustain Asia's dynamism and long-term growth."

China-Singapore Connectivity Initiative Financial Summit (CCI-FS) took place in China's southwest Chongqing municipality. /CGTN Photo

China, Singapore to strengthen financial cooperation

China is Singapore's largest trading partner, and Singapore is among the biggest foreign direct investors in China.

In 2015, relationship between the two countries was boosted by the set-up of Chongqing Connectivity Initiative (CCI), which has enabled Chongqing companies to raise funds from Singapore's financial center at a reduced financing cost.

According to reports, as of the end of 2017, Sino-Singapore cross-border financing reached 7.56 billion US dollars.

The weighted average financing cost for these deals was 4.73 percent, 115 basis points lower than that of RMB loans in Chongqing, and has saved financing costs amounting to 300 million yuan.

Kng Hwee Tin, CEO of OCBC Bank (China) said Singaporean banks play a crucial bridging role in this regard -- bringing Chinese customers and banks overseas for their financing needs.

"In a lot of western part of China here, Chongqing being the base again, a lot of the banks would not have the ability or current channels to reach out to Southeast Asian markets in terms of financing opportunities for their clients," said Kng.

A total of 36 cooperation agreements were reached between 46 Sino-Singapore entities. This is expected to bring about 950 billion yuan in financial support to Chongqing in the next five years.

BRI-related companies urge to raise funds

The theme of the CCI-FS is "Open, innovative and connected financial services to support the Belt and Road Initiative (BRI)".

In this regard, China's top securities regulator, China Securities Regulatory Commission (CSRC), urged enterprises to make full use of domestic and overseas markets to raise funds in the construction of the BRI.

"CSRC plans to broaden channels for direct financing," said Fang Xinghai, vice chairman of the commission.

"Since 2016, we have approved the initial public offerings (IPO) of 62 related One Belt One Road companies, raising 58.8 billion yuan. 90 enterprises have also completed rounds of refinancing and raised 406.2 billion yuan," he added.

Fang said the CSRC is willing to deepen bilateral capital market cooperation with Singapore's MAS within the framework of the BRI -- to actively promote cross-border investment and financing, as well as strengthen cross border supervision and law enforcement cooperation.

(Video filmed by Li Yang)