The Internationalization of Singaporean Firms into China: Entry Modes and Investment Strategies

Abstract

The promotion of overseas investment was mounted when, in 1985, Singapore registered its first GDP decline since independence. At that time, the Economic Committee for Overcoming Recession (ECOR) identified overseas investment and the development of offshore business opportunities as a long-term solution to the lack of investment opportunities in Singapore. One basic rationale for the need of overseas investment by Singaporean firms is that geographic and demographic factors are limiting domestic economic growth potential (Asian Intelligence, 1993; Régnier, 1993; Tan, 1995; Yeung, 1998a, 1999b). Singapore is limited by its small population size and small market, as well as limited labour and land. Hence there is a need to develop an ‘external economy’ for Singapore. The plan in 1985 was to globalize Singaporean firms into Europe and North America. By the early 1990s, however, there was a change in the geographical focus of overseas investment from an international to a regional scale because of the lack of success in Singapore’s globalization drive and the emergence of the growth potential in many East Asian and Southeast Asian countries. As a result, it was considered wise to promote Singaporean investments in Asian ‘countries with which Singapore has close historical and cultural links, which are achieving steady economic growth, and which have adopted policies welcoming foreign investment’ (Kanai, 1993, p. 21).