DMR News

Advancing Digital Conversations

Chinese AI startups move to Singapore to drive global expansion

ByYasmeeta Oon

Jul 1, 2024

Chinese AI startups move to Singapore to drive global expansion

When Wu Cunsong and Chen Binghui founded their artificial intelligence startup, Tabcut, two years ago in Hangzhou, China, they quickly encountered numerous challenges, including a lack of venture capital. This past March, they followed the path of many Chinese AI firms by relocating their company 2,500 miles southwest to Singapore.

The business-friendly environment in Singapore provides Wu and Chen with greater access to global investors and customers at a time when heightened geopolitical tensions discourage many US and international firms from engaging with China. Crucially for an AI startup, Singapore offers access to Nvidia Corp’s latest chips and other cutting-edge technologies, which are inaccessible in China due to US export controls.

“We wanted to go to a place abundant with capital for financing, rather than a place where the availability of funds is rapidly diminishing,” Wu said in an interview.

Singapore is emerging as a favored destination for Chinese AI startups aiming to go global. The city-state, with its ethnic Chinese majority, has long attracted companies from China. However, AI entrepreneurs, in particular, are accelerating this shift due to trade sanctions imposed by the US, which block their access to the latest technologies in China.

Reasons for RelocationBenefits in Singapore
Access to Global InvestorsBusiness-friendly environment
Access to Latest TechnologiesAbility to purchase advanced AI chips
Lower Regulatory BarriersLess stringent AI regulations compared to China
Political StabilityStable political climate and ease of business setup

A base in Singapore also allows companies to distance themselves from their Chinese origins, a tactic often called “Singapore-washing.” This strategy aims to reduce scrutiny from customers and regulators in countries that oppose China politically, such as the US.

However, this strategy does not always succeed. Beijing-based ByteDance Ltd moved its TikTok business headquarters to Singapore but still faced US laws requiring the sale or ban of its American operations over security concerns. Similarly, Chinese fashion giant Shein, which also relocated to Singapore, faced intense criticism in the US and now plans to go public in London instead of New York.

For AI startups, more is at stake than just perception. AI companies need to accumulate large amounts of data and rely on cutting-edge chips to train their systems. If access to these resources is restricted, the quality of their products will suffer. The US has blocked sales of the most sophisticated chips and other technologies to China to prevent their use for military purposes. OpenAI, the American generative-AI leader, is also limiting China’s access to its software tools.

China’s strict approach to AI-generated content further complicates matters. The country ensures that AI complies with the ruling Communist Party’s policies and propaganda. Last July, China became one of the first countries to regulate AI significantly, requiring companies to register their algorithms with the government before rolling out consumer-facing services.

“AI developers won’t be able to engage in free explorations if they are in China,” said Adam, founder of the consulting firm Linkloud. He estimated that 70% to 80% of Chinese software and AI startups target global customers, with many now choosing to bypass China altogether. Linkloud is building a community for Chinese AI entrepreneurs exploring global markets.

Singapore’s AI regulations are less stringent, and it is known for its ease of setting up a company. The country aims to be a bridge between Asian entrepreneurs and the world, according to Chan Ih-Ming, executive vice president of the Singapore Economic Development Board.

“Many businesses and startups, including Chinese ones, choose Singapore as their hub for Southeast Asia and see Singapore as a springboard to global markets,” Chan said. By the end of 2023, Singapore was home to more than 1,100 AI startups, although the city-state does not disclose data by country. Nonetheless, evidence of China-based AI companies setting up shop in Singapore is mounting.

Jianfeng Lu is a pioneer of this trend, having moved to Singapore from Nanjing to establish his AI startup, Wiz Holdings Pte, in 2019. With backing from Tiger Global, GGV Capital, and Hillhouse Capital, he built its speech recognition AI engine and sold customer-service bots to clients in Latin America, Southeast Asia, and northern Africa. He did not sell in China, a move his peers now see as prescient.

Today, Lu is a sought-after mentor for Chinese entrepreneurs looking to set up businesses in Singapore. An online chat group Lu runs for Chinese entrepreneurs wishing to relocate to Singapore has 425 members, though not all are AI founders.

“If you want to be a global startup, better begin as a global startup,” the 52-year-old entrepreneur said. “There’s complete predictability about how systems work here.”

Meanwhile, fundraising in China has become increasingly difficult due to the country’s slowing economy and rising tensions with the US. This situation has prompted global venture capital firms to reduce their exposure to China.

Wu and Chen’s experience with Tabcut was frustrating. They found it arduous to secure backers in China, with local venture capital firms demanding extensive financial and operating details for months before making a decision. Eventually, Tabcut opted for Singapore-based Kamet Capital, raising $5.6 million from the firm late last year. The startup moved its global headquarters to Singapore in March and launched a beta version of its AI video-generating tool for global users.

Climind, a startup that builds large language models and productivity AI tools for professionals in the environmental, social, and governance field, is preparing to move from Hong Kong to Singapore. Co-founder and chief technology officer Qian Yiming is already based in Singapore, where the company has a small team of 10.

Beyond cultural and linguistic affinity, Singapore is attractive due to government support, including financial backing and technical assistance, Qian said in a video call. His company has received funding from the state, and startup incubators are abundant in the country.

“Access to global markets is easy, the environment is good, and politics is stable,” Qian said.

Some Chinese AI companies have succeeded domestically and chosen to stay in China. The country itself is pushing for AI, robotics, and other deep tech startups to remain domiciled and eventually list on local stock markets. Beijing supports the most promising companies with capital, low-interest loans, and tax breaks.

However, such companies will find it challenging to expand globally since their services are typically tailored for the Chinese audience and regulatory environment, said Yiu-Ting Tsoi, founding partner of HB Ventures, which invests in Chinese and regional tech and AI startups. The more successful an AI startup is in China, the more difficult it is to go global, Tsoi noted.

This is a reversal from a decade ago when China’s technology giants like Alibaba Group Holding Ltd and Didi Global Inc aggressively expanded outside the country, amassing customers for their consumer-friendly apps. Now, escalating geopolitical tensions force young Chinese AI companies to choose between growing under Chinese rules or expanding abroad—a combination that is increasingly impossible.

“More regulations are coming out, and navigating all of that becomes complicated,” said Karen Wong, Climind’s chief executive officer. “From branding, PR, regulations, and compliance angles, Singapore makes sense.”

  • Geopolitical Tensions: Increased tensions between China and the US affect technology access and investor interest.
  • Business Environment: Singapore offers a stable, supportive environment with easier access to global markets.
  • Regulatory Differences: Less stringent AI regulations in Singapore compared to China’s strict policies.
  • Investor Accessibility: Better access to venture capital in Singapore.
  • Community Support: Established network of Chinese entrepreneurs in Singapore.

By understanding these factors, Chinese AI startups can make more informed decisions about their global expansion strategies, leveraging Singapore as a pivotal hub for their international ambitions.

Featured Image courtesy of TechCrunch

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.

Leave a Reply

Your email address will not be published. Required fields are marked *