Businesses of all sizes worldwide, particularly those from Mainland China, face growing trade barriers. Chinese companies have seen US tariffs spike repeatedly in recent months, with rates fluctuating wildly. This instability makes planning difficult as export costs seemingly change week by week.
Beyond the volatility of the tariffs, the level of the tariffs themselves is making exporting a non-starter for many firms. The situation pushes towards a rethinking of global supply chains, forcing affected companies to reassess their operations.
Against this dismal backdrop, one region emerges with promise and potential – Southeast Asia. With a population of around 690 million, many of whom are young, educated, and tech-savvy, it brings with it a plethora of benefits attractive enough to woo companies from the rest of the world.
In this blog, we explore the boundless opportunities that this dynamic region brings, delving into the crown jewel, Singapore, and how companies can leverage its strategic location, technological advancement, and business-friendly environment to mitigate the impact of the tariffs.
Southeast Asia, a Beacon of New Opportunities and Growth
Southeast Asia remains a significant opportunity for Chinese companies despite ongoing trade tensions. It is well-positioned to become a global business and financial hub with world-class facilities in research and development (R&D), access to a myriad of Free Trade Agreements (FTAs), and a young and educated workforce expected to rise to 40 million by 2030.
As is, it is home to numerous international firms, such as Dyson, Micron, Shell, Foxconn, and Procter & Gamble, making it evident that Southeast Asia is an attractive destination for foreign investment.
Here are more reasons why SEA is the ideal destination:
Favourable Trade Agreements
The proliferation of regional and international trade agreements has further enhanced Southeast Asia’s appeal. Notably, the Regional Comprehensive Economic Partnership (RCEP) simplifies trade across Asia-Pacific countries, including China and several Southeast Asian nations.
Reduced tariffs and streamlined customs procedures facilitate cross-border trade, making it economical and efficient for Chinese companies to establish and maintain operations in the region.
Related Read: Beyond Borders: Looking at the Singapore Free Trade Agreements
Growing Consumer Markets
Southeast Asia is home to an expanding middle class with increasing purchasing power. By 2030, when 70% of ASEAN’s population is expected to have attained middle-class income levels, the consumer market could reach US$4 trillion.
According to a joint report by Temasek and Google, the digital economy in the 6 largest economies of the region – Indonesia, Thailand, Singapore, Vietnam, Malaysia and the Philippines – was worth an estimated US$218 billion in gross merchandise value in 2023 and is on track to reach US$600 billion by 2030.
Resilient Growth Forecast
ASEAN is set to become the 4th-largest economy in the world by 2030. Economic growth is expected to continue rising steadily at 4.9% in 2025 and 4.7% in 2026 compared with a global average of 3.3% according to the IMF.
Government Incentives and Support
Governments across Southeast Asia actively encourage foreign investment by offering tax breaks, subsidies, and other incentives. Special economic zones, such as the Johor-Singapore Special Economic Zone (JS-SEZ) and Vietnam’s industrial parks, provide manufacturers with business-friendly environments. These incentives reduce the financial burden of entry, enabling Chinese companies to establish footholds with minimal upfront investments.
How Does Singapore Support Expansion to SEA?
As a leading industrial and business powerhouse, Singapore is primed to support companies in attaining high-yield operations and innovation from a reliable and stable base. It can be a key partner and springboard for businesses looking to capitalise on the vibrant SEA region as a growth market and as a production base. More reasons for this include:
A Winning Value Proposition
Singapore offers a strong value proposition – a strategic location, pro-business government, advanced infrastructure, and a highly educated workforce. Over decades, it has also established a cutting-edge manufacturing sector, especially in chemicals and electronics.
Under its Manufacturing 2030 grand plan, it is pursuing the goal of becoming a leading industrial hub while ramping up its manufacturing output by 50% by the end of the decade. To achieve its aim, it has been focusing on digital and physical transformation, speeding up innovation in advanced electronics and implementing Industry 4.0 technologies such as AI and robotics.
A Resilient Research Community
Singapore has a strong network of research institutes and centres that support the rapid implementation of advanced technologies, improving efficiency and product quality. Its Research, Innovation and Enterprise 2025 plan (RIE2025), for example, saw the city-state invest S$25 billion – with an additional S$3 billion committed in 2024 – in 4 strategic domains.
Under this plan, the nation has used R&D to reinforce the manufacturing sector’s competitiveness, enhance its capabilities, and ensure that Singapore continues to be a global business and innovation hub for advanced manufacturing and connectivity.
A Broad Network of Dependable Contract Manufacturers
Singapore’s robust network of contract manufacturers enables companies to scale production, maintain compliance, and enhance market agility without significant upfront costs. Ranked as the 5th largest exporter of high-tech products, it provides a dynamic ecosystem for global manufacturers. By outsourcing operations, businesses can access cost-effective solutions and leverage the expertise of experienced local manufacturers.
Twinning to Win
Singapore acts as the ideal control tower for regional expansion in neighbouring locations with cost-competitive manufacturing advantages. Companies can establish regional headquarters in the city-state and use it to manage operations.
The SG+ twinning model, for example, is designed to enhance supply chain resilience and sustainable growth by enabling companies to merge the manufacturing and business advantages offered by Singapore and SEA.
Companies can pair Singapore’s advantages with the manufacturing capabilities of neighbouring production bases, such as Johor Bahru in Malaysia, and Bintan, Batam, and Karimun (BBK) in Indonesia.
Some benefits of this scheme are:
- Access to Diverse Supply Chain Offerings: At reputable industrial parks in Malaysia, such as the Nusajaya Tech Park, a mere 10 minutes drive from the Malaysia-Singapore Second Link, companies can enjoy customised end-to-end facilities and technology solutions
- Maintain Competitive Production: Companies can leverage a wider and educated manpower pool, alongside lower wages and rent and utility costs in Johor and BBK
- Tap into World-Class Infrastructure: Companies can use Singapore’s leading infrastructure to obtain operational resilience and engage in innovation
Related Read: Why is the SG+ Twinning Model a Winning Supply Chain Strategy?
Supporting Singapore’s Twinning Strategy: The JS-SEZ
The JS-SEZ is a major development in economic cooperation between these two nations. Signed on 7 January 2025 by Singapore’s Deputy Prime Minister and Minister for Trade and Industry, Gan Kim Yong, and Malaysia’s Minister of Economy, Rafizi Ramli, this agreement builds upon decades of cross-border collaboration and supports the implementation of Singapore’s twinning strategy.
Unlike past initiatives such as the 1990s SIJORI Growth Triangle or the 2006 Iskandar Malaysia project, the JS-SEZ creates more direct integration between Singapore and Johor. The zone covers Johor’s entire southern coast, expanding beyond previous economic boundaries.
The agreement focuses on three main goals: strengthening cross-border goods movement, easing people mobility between regions, and creating a more connected business ecosystem. This brings practical benefits such as streamlined customs procedures, special tax structures, and training incentives.
The JS-SEZ targets high-value sectors including manufacturing, business services, digital economy, and finance. With ambitious targets of 50 premium projects and 20,000 skilled jobs within 5 years, the initiative brings together federal and state authorities through a dedicated investor facilitation centre.
Companies based in Singapore can leverage this improved connectivity through overseas business expansion and dual business operations, using the complementing strengths offered by Singapore and Johor.
For manufacturers, this framework offers access to Singapore’s financial strength alongside Johor’s practical advantages, creating opportunities that neither location could provide alone.
Enhanced Benefits of the JS-SEZ
Tax Incentives: Businesses in the JS-SEZ can enjoy special tax arrangements, including a 5% corporate tax rate for advanced industries like AI, quantum computing supply chain, medical
devices and aerospace manufacturing, and a 15% personal income tax rate for skilled professionals for 10 years.
Lower Costs: Johor offers lower operational costs compared to Singapore, including cheaper labour and land prices. This can help to reduce business expenses as opposed to commencing operations fully in Singapore.
Diverse Sectors: The JS-SEZ focuses on a wide range of sectors including manufacturing, logistics, digital economy, green economy, and more, ensuring resilience and adaptability to global market trends.
Leveraging the Rules of Origin: The Rules of Origin determine the country of origin of a product for purposes of international trade. They are crucial for qualifying for preferential tariff treatment under various FTAs. Setting up operations in both Singapore and Johor may allow manufacturers to take advantage of the different Rules of Origin criteria.
Access to Markets: Through the JS-SEZ, you can benefit from Singapore’s extensive network of FTAs. This allows you to export products with reduced tariffs to multiple markets that have an FTA with Singapore.
How Can InCorp Help Chinese Companies Expand Their Operations to the JS-SEZ Zone?
The JS-SEZ zone exemplifies a compelling mix of opportunity and growth potential for Chinese manufacturing companies. By leveraging its geographical and economic advantages, businesses can expand their presence and create resilient operations that are well-positioned to thrive in the global economy.
With the right strategies in place and by leveraging schemes, the zone offers a sustainable pathway to growth, diversification, and long-term success.
At InCorp, we support Chinese businesses in evaluating operational costs and navigating Rules of Origin requirements to make well-informed decisions about setting up operations in the JS-SEZ. We also help them assess the applicable tax policies and incentives that they can benefit from.
Contact our team today to find out more and to get started!
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FAQs about Trade in Singapore
What is the Johor-Singapore Special Economic Zone (JS-SEZ)?
- The JS-SEZ is an economic agreement signed in January 2025 between Singapore and Malaysia that strengthens cross-border connectivity, eases people movement, and improves the business ecosystem. It offers special tax arrangements, streamlined customs procedures, and covers Johor's entire southern coast, creating opportunities for manufacturers to leverage both locations.
What services does InCorp provide for manufacturers using the JS-SEZ?
- InCorp offers complete setup services including Singapore company formation, Johor entity registration, tax planning across both countries, Certificate of Origin documentation, accounting services, and ongoing compliance management. Our cross-border team works as a single unit, providing seamless assistance across both countries.
Why is Singapore particularly attractive for Chinese companies looking to expand to the region?
- Singapore boasts a plethora of attractive business incentives, a supportive government, pro-business policies, and more.
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