Hong Hao: How Singapore and Dubai Became Global Hubs for Transportation and Finance

In August, our educational tour took us to Singapore and Dubai, both significant global hubs for transportation, shipping, and finance, key destinations for Chinese capital [para. 1]. In Singapore, we visited globally renowned quant and private equity funds, including the nation's sovereign wealth fund. We discussed the differences in risk preferences and management philosophies between the Chinese and foreign markets, uncovering various investment opportunities and risks [para. 2]. The flow of global capital dictates asset price trends and influences risk preferences and capital movement. With capital chasing lucrative opportunities, Singapore has emerged as a magnet for millionaires worldwide [para. 3]. As a result, the city-state has seen skyrocketing asset prices and property values, even affecting local commodities like durians and cocktails, which have become unexpectedly costly [para. 4]. This phenomenon, often referred to as inflation, points to a high demand amid scarce supply. Moderate and orderly inflation is generally considered preferable to deflation, which poses a greater challenge for central banks [para. 5].

During our visit, Singapore unveiled a series of fiscal stimulus policies targeting birth rates, housing, education, and elder care, all aimed at bolstering economic growth. With urban infrastructure investments nearly complete, the nation now focuses on financial liberalization to attract more capital and talent, transitioning from rapid growth to more nuanced progress [para. 6]. From Singapore, we flew to Dubai and visited globally acclaimed sovereign wealth funds. Contrary to what we heard in China, these funds demonstrated a cautious stance toward Chinese investments, preferring instead to acquire distressed assets at lower prices [para. 7]. Devoid of oil, Dubai's success hinges on the convergence of global capital, talent, and goods, morphing it into a modern-day caravanserai akin to the ancient Silk Road. The golden visa offers 10 years of tax-free living, with renewal upon expiration, complementing relaxed financial regulations and turning Dubai into a global center for cryptocurrencies [para. 8].

We encountered a middle-aged Chinese entrepreneur who had closed his education business in China and started anew in Dubai, expressing optimism about business prospects there. The Dubai government facilitates new businesses by outsourcing various agencies to assist with licensing, visas, and office leases [para. 9]. Driving through Dubai's bustling roads, alongside heavy construction cranes and intricate elevated traffic systems, we realized that the city is in the midst of a high-investment economic development model, much like Shenzhen in the 1990s. However, there are concerns about an impending real estate bubble similar to the 2008 crisis due to rapid but potentially unsustainable growth [para. 10-11].

Bubbles, driven by excessive optimism, contain the potential to alter destinies dramatically. Though challenging, they encapsulate the risks and rewards of high-stakes economic development [para. 12]. Singapore and Dubai, both resource-scarce, have risen to global prominence by maximizing geographic and human capital advantages through financial deregulation, free capital flows, and welcoming talent, all while adhering strictly to laws and regulations. Despite their exponential growth, their economic journeys have seen setbacks, such as the 2008 global financial crisis for Dubai and the 1997 Asian financial crisis for Singapore [para. 13].

At night, as the sun set, the Dubai Mall buzzed with activity, reminiscent of the bustling days of brick-and-mortar retail. This vibrant scene stood in contrast to the post-pandemic quietness observed in malls across Hong Kong, New York, and cities on the Chinese mainland [para. 14]. There are essentially two economic development models: one driven by high income, consumption, and trade deficits, and the other by high savings, investment, and trade surpluses. These models adhere to market laws and rules, reflecting the natural progression of economic growth [para. 15-16].

Hong Hao is the chief economist of GROW Investment Group and a former MD & head of research at Bank of Communications International. Lu Zhenhua contributed to translating the article [para. 17-18].