Key Insights:

• Chinese AI firms are moving to Singapore to escape geopolitical tensions and access global investors.
• Favorable regulations and support make Singapore ideal for AI startups seeking global growth.
• Singapore offers a neutral, business-friendly hub for AI startups to bypass China’s regulatory challenges.

Chinese artificial intelligence startups are increasingly relocating to Singapore, seeking better access to global investors and advanced technologies. Founders Wu Cunsong and Chen Binghui, who established their AI startup Tabcut in Hangzhou two years ago, exemplify this trend. Facing challenges such as limited venture capital in China, they moved their company 2,500 miles southwest to Singapore this March.

Singapore’s business-friendly environment and neutral political stance offer these startups an advantageous platform for growth. Wu and Chen, like many others, found it increasingly difficult to secure funding and access the latest technologies due to heightened geopolitical tensions and US export controls. In Singapore, they can purchase Nvidia Corp.’s latest chips and other cutting-edge technologies, enabling them to enhance their AI capabilities.

Singapore: A Hub for Global AI Expansion

Singapore is rapidly becoming a preferred destination for Chinese AI startups aiming for global expansion. The city-state’s ethnic Chinese majority and favorable regulatory environment make it an attractive hub. AI entrepreneurs are drawn to Singapore to tap into global markets and mitigate the scrutiny they face due to their Chinese origins. This relocation, often termed “Singapore-washing,” helps companies distance themselves from geopolitical issues that affect China.

Not all attempts to relocate have been successful, as seen with ByteDance’s TikTok, which faced regulatory challenges in the US despite moving its headquarters to Singapore. Similarly, Chinese fashion giant Shein moved its base to Singapore but faced criticism in the US and opted to go public in London instead of New York. 

However, for AI startups, the move to Singapore is more than just about perception; it is essential for accessing the necessary technology and data to develop their products.

Navigating Regulatory Challenges and Market Opportunities

AI startups amass large amounts of data and rely on cutting-edge chips for training their systems. US restrictions on selling advanced technologies to China have made it difficult for Chinese AI companies to maintain product quality if they remain in China. 

Furthermore, China’s strict regulations on AI-generated content, which require compliance with the ruling Communist Party’s policies, stifle the free exploration essential for AI innovation. This has led many startups to seek a more conducive environment for growth.

The US has also imposed stringent measures on Chinese access to software tools from companies like OpenAI. In contrast, Singapore offers a more relaxed regulatory framework and supports the ease of setting up businesses. 

Chan Ih-Ming, executive vice president of the Singapore Economic Development Board, noted that many businesses, including Chinese startups, choose Singapore as their Southeast Asia hub and see it as a gateway to global markets. By the end of 2023, Singapore was home to over 1,100 AI startups, indicating its growing importance as a global AI hub.

Singapore’s Supportive Ecosystem for AI Startups

Singapore provides a supportive ecosystem for AI startups, offering financial and technical support. Jianfeng Lu, who moved from Nanjing to Singapore in 2019 to establish his AI startup Wiz Holdings Pte., has benefited from the support of investors like Tiger Global, GGV Capital, and Hillhouse Capital. His company developed a speech recognition AI engine and sold customer-service bots globally, bypassing the Chinese market entirely. Lu’s success has made him a mentor for other Chinese entrepreneurs seeking to establish businesses in Singapore.

The Singaporean government’s support attracts AI companies, including funding from state-backed programs and numerous startup incubators. Qian Yiming, co-founder and chief technology officer of Climind, a startup focused on large language models and productivity AI tools, highlighted the cultural and linguistic affinity, stable political environment, and ease of accessing global markets as key reasons for relocating to Singapore. Climind, initially based in Hong Kong, is preparing to move its operations to Singapore, where it has already received state funding.

Funding Challenges and Strategic Decisions

Chinese AI startups face increasing difficulties in securing funding due to China’s slowing economy and rising tensions with the US. Global venture capital firms are reducing their exposure to China, making it harder for startups to find backers. Wu and Chen’s experience with Tabcut underscores this challenge. They faced a frustrating process with local VC firms in China, leading them to opt for Singapore-based Kamet Capital, which invested $5.6 million in the startup.

This move allowed Tabcut to launch a beta version of its AI video-generating tool for global users. Similarly, Climind is leveraging Singapore’s supportive ecosystem to develop its products for a global market. The move to Singapore enables these startups to bypass the stringent regulations and funding challenges in China, positioning them for global growth.

While some Chinese AI companies have achieved early success in the domestic market, expanding globally remains a significant challenge. Beijing supports domestic AI, robotics, and deep tech startups with capital, low-interest loans, and tax breaks, but these companies often struggle to adapt their services for international markets. 

Yiu-Ting Tsoi, founding partner of HB Ventures, emphasized that the more successful a Chinese AI startup is domestically, the harder it is to go global due to tailored services for the Chinese regulatory environment.