Expanding into China? Move in phases, says KPMG’s Leo Yang

KPMG’s Leo Yang warns that Chinese companies expanding into Singapore should approach their entry into the market in phases rather than rushing headlong. While Singapore has attracted significant Chinese capital, Yang cautions that not all of this inflow translates into genuine operational expansion. He notes that Chinese firms are increasingly setting up real operations, treasury hubs, and regional headquarters in Singapore, rather than merely routing money through the city-state.

This shift is driven by global tax reforms demanding genuine substance and Singapore’s incentive regimes tied to local employment, expenditure, and investment. As a result, Chinese groups are establishing operating and R&D entities alongside holding and treasury companies as they scale up in the region.

Singapore's appeal as the default entry point for Chinese outbound investment lies in its stable legal framework, transparent regulations, mature financial ecosystem, and international talent pool. However, Yang emphasizes that Singapore’s role is as a regional hub, not as the final destination for every part of a company’s value chain.

Many Chinese firms are adopting a "Singapore+1" model, concentrating headquarters, regional management, and capital functions in Singapore while placing manufacturing, supply chains, R&D, or market-facing operations in neighboring countries.

Yang warns against the misconception that Singapore’s business environment represents the entire Southeast Asian region. He stresses that each market must be assessed on its own terms, taking into account local regulations, compliance requirements, and management practices. Chinese firms often underestimate the compliance and talent needs in Singapore, which include corporate income tax, GST filings, transfer-pricing documentation, employment, anti-money-laundering, and data compliance obligations.

While Singapore’s governance framework is clear and consistently enforced, Chinese companies should invest in compliance and governance early rather than treating it as something to address only when issues arise. Talent acquisition also presents challenges, as Chinese firms need to navigate local employment requirements and adjust their mindsets from simply transplanting their headquarters team to Singapore. Yang emphasizes that this requires a learning curve, new playbooks, and changing mindsets.

Despite China’s recent economic headwinds, Yang says Southeast Asian companies continue to show interest in China. This interest has become more calculated, as firms weigh domestic competition against China’s evolving growth trends. Nevertheless, Yang advises that Chinese firms should learn from the experiences of local players and earlier waves of Chinese outbound investment, while adapting their approaches to fit local contexts.