Chinese companies race to dominate Southeast Asian market


Chinese technology giants such as ByteDance and Alibaba are increasing their presence in Singapore to compete with US rivals, in a race to dominate the Southeast Asian market.

Recently, ByteDance - the owner of the short video creation and sharing app TikTok - said it would move its operations from a shared office to much larger offices in the One Raffles Quay office building in Singapore's Central Business District this year. ByteDance is also preparing to recruit more personnel in the Lion Island as TikTok application is increasingly popular in Southeast Asia.

The firm has recruited Arjun Narayan, head of Google’s Trust and Safety - Asia-Pacific, to take on a similar position of ByteDance.

In a Reuters interview in March, ByteDance founder Zhang Yiming did not hesitate to reveal his vision of making ByteDance a global company like Google and Facebook.

In November last year, Huawei, China's major telecommunications equipment and smartphone maker, opened a cloud computing and artificial intelligence laboratory in Singapore.

Southeast Asia is also a major focus for Alibaba of billionaire Jack Ma after the group conducted big acquisitions including those of two major e-commerce companies in Singapore namely Lazada and Redmart, in recent years. Alibaba has also invested in Tokopedia - an Indonesian e-commerce startup unicorn.

In a most concerned deal in early May, Alibaba bought 50% of the shares of the 50-storey AXA Tower building in Singapore's Central Business District valued at 1.2 billion USD. The transferor is a group of investors led by Perennial Real Estate. This has been the largest commercial real estate deal in Singapore since 2017.

The move also marked Alibaba's first major international real estate acquisition and AXA Tower building will become Alibaba's headquarters outside of China. AXA Tower is also the head office of Lazada, Alibaba's e-commerce platform in Southeast Asia.

Vicky Wu, Chinese economic analyst at ICBC International, said Alibaba is using Singapore as its operation centre in Southeast Asia. This is the most developed area in the Asian region, so in terms of attracting talent and other services in general, Singapore is the best choice to place its headquarters.

Besides ByteDance and Alibaba, a startup in the field of artificial intelligence named SenseTime, online travel booking platform Ctrip, social network YY, and telecommunications service provider China Telecom are among Chinese companies either expanding its office space or planning to employ more people in Singapore.

The trend comes amid deteriorating US-China relations, and as companies from the world's two largest economies compete for influence in new technologies in Southeast Asia.

Ashley Swan, director of commercial real estate at Savills Singapore, said Southeast Asia has been a major focus for Chinese companies for the last 18-24 months and now Singapore has become a battlefield between American and Chinese technology companies when both sides see the island nation as a springboard to penetrate deep into the Southeast Asian market.

Chinese tech conglomerates are still trying to catch up with US rivals like Facebook, Google, Microsoft and Amazon, which had been in Southeast Asia earlier and are continuing to expand their presence.

Southeast Asia is one of the few regions where American and Chinese companies openly compete for influence in technology areas such as cloud computing. It is the fastest growing cloud market in the world, with cloud computing spending expected to reach $76 billion by 2023, according to market research firm IDC.

The rise of Chinese cloud service providers like Ali Cloud (Alibaba's subsidiary) has prevented Amazon's Web Services and other cloud companies from taking over the Asia-Pacific market, Wu said, adding the entry of Huawei cloud services into this market will make the competition even more intense.

According to Ashley Swan, Southeast Asia, with 650 million people, is moving rapidly into the Internet economy and provides a huge potential customer base with large markets like Indonesia. A research report by Google, Temasek Holdings and Bain & Company last year showed that Southeast Asia's Internet economy will reach $300 billion by 2025, a 200% growth compared to 2019.

Benjamin Cheong, a partner of law firm Rajah & Tann, said that the US-China tension is making Chinese technology corporations to strengthen their workforce in Singapore but more importantly, the expansion of their presence in this Lion Island will help them extend the portfolio of products and services into Southeast Asia in the coming years.

Benjamin Cheong said Chinese companies put a lot of faith in Singapore in terms of political stability and a strong legal framework despite the high cost of office space and personnel salaries in the country.

Chinese venture capital firms are also busy in Singapore as they increase investment in Southeast Asian startups. Along with the Silicon Valley of the US, Singapore has become a centre gathering the largest number of Chinese technology companies abroad, according to real estate company JLL.

By APD writer Alice