China’s second tier citizens are a first-class opportunity for a savvy Singapore

Super-rich Chinese tourists from the country’s provincial capitals and special administrative areas offer a lucrative opportunity for Singapore.

By Phoebe Yixian, edited by Francesca Ross

There are more super-rich Chinese living outside the country’s first tier cities than in them, new data shows. These individuals live in China’s second and third tier cities, often the provincial capitals and special administrative areas.

Singapore should pay attention to these people. Chinese tourists are bringing huge amounts of money into the island-nation’s economy, and could bring much, much more. Mr Oliver Chong, executive director of marketing capability at Singapore’s Tourism Board, said, “China’s potential is huge. It is going to be there for us to unlock.”

Easier visa policies and more frequent and direct flights mean Chinese tourists are choosing to visit Singapore over neighbouring countries like Malaysia, Vietnam and the Philippines. This brings money into the tourism and service sector, but also allows Singapore to present its shop window for bigger deals. More than 80% of super-rich Chinese say they will invest abroad by expanding their businesses overseas or transferring assets.

China’s provincial cities have been growing steadily

The most developed, or first-tier, areas of China are considered the centre of main economic activity and have experienced high growth as the epicentre of waves of foreign direct investments. However, the second and third-tier cities have not missed out on new opportunities.

“The China story is increasingly about Tier Three cities,” explained Andy, a China macro strategist. “It’s where much of the growth is coming from, and where a lot of spending on public projects and low-income housing is going. And you’re seeing an increasing number of foreign and local companies expanding out there,” he added.

Global firms are looking to these sites for growth as the “Open Door Policy” unlocks the country for overseas players. Fourteen of China’s second tier cities serve as points of entry for more than half of all imports from the US. This has brought rapid industrialisation and development which, in turn, is increasing the purchasing power of tourists from these places.

This trend will continue, say experts, and the future of the country is in these smaller urban areas. These locations will experience the most rapid growth over the next few years, especially in industries like pharmaceuticals, manufacturing and machinery. For example, Chongqing in southwest China is now a powerhouse for motorbikes, while Shenzhen in Guangdong Province is an electronics hub.

Chinese tourists spend a lot of money overseas

Chinese tourists often buy luxury goods and their per capita expenditure is about 20% higher than an average visitor to Singapore. The country’s healthcare, education and finance industries are also appealing for this group.

The latest trends show that the number of tourists arriving in Singapore from China increased in 2016 (2.64 million) thanks to an improvement in the investment climate in China, following a dip between 2013 (2.3 million) and 2015 (1.7 million). The falling numbers were due to China’s poor economic outlook and lower spending by business travellers. The average business traveller spends about twice as much as a leisure visitor (S$526) so a fall in their numbers has a significant economic effect.

Michael Chiam, senior tourism lecturer at Ngee Ann Polytechnic, explained the increase in tourist numbers from second tier Chinese cities is due to the Singapore Tourism Board’s efforts to draw visitors. This has included extensive digital marketing efforts.

Increasing numbers of people needing medical treatment are coming from China as their incomes grow, a recent analysis of travellers showed. Chinese patients say they visit Singapore for treatment as services at home have been slow to catch up to global standards. The people making this trip are often those with chronic diseases, or those undergoing surgery, and are likely to stay in their medical tourism destination for a long period.

A large portion of this group said they would consider bringing their money into the country long-term by buying a home to stay in to recuperate after their treatment. This property can then be rented out, or used as a holiday home.

Singapore’s economy is closely connected to China’s

China is expected to surpass the United States as the dominant global economic power by 2018 and Singapore should plan now to effectively capture a slice of this prosperity. Growing the numbers of people coming from overseas  is essential to the economy, says the local tourist board. It is vital for the country’s services and facilities to continue to attract Chinese tourists.

Mr Yang Wenhui, General Manager of UnionPay International Southeast Asia, has some ideas on how to make Singapore an attractive location to visit, saying, “We hope to be able to bring fresh experiences, more choices and excitement for shoppers

” Mr Peh Ke-Wei, vice-president of passenger development at Changi Airport Group (CAG), acknowledges this is a growth market for his operation explaining, “China is an important market to Changi Airport and is currently our fifth largest source market in terms of passenger numbers.”

Singapore has an advantage in attracting Chinese tourists. Around 70% of the population has Chinese origins so communication is easy and the excellent infrastructure offers value for money for the savvy traveller. It also offers a refreshing alternative to China’s polluted and foggy cities.

Growth on the Chinese mainland will impact businesses and jobs in Singapore thanks to the two countries’ close links in commerce, investment and culture. Tourists from China’s booming cities, and their cash, can expect a warm welcome.