Chinese AI startups are making Singapore their home to escape US sanctions, go global

Singapore is becoming a prime destination for Chinese AI startups aiming for global reach. Historically attractive to Chinese companies due to its ethnic Chinese majority, the city-state is now seeing a surge in AI entrepreneurs moving in, driven by US trade sanctions that limit access to the latest technologies in China.

Setting up in Singapore allows these companies to distance themselves from their Chinese roots, a tactic often referred to as “Singapore-washing.” This helps reduce scrutiny from customers and regulators in countries that are politically opposed to China, such as the US, as reported by Bloomberg.

Wu Cunsong and Chen Binghui, who founded the AI startup Tabcut in Hangzhou two years ago, encountered numerous obstacles, including a lack of venture capital. In March, they relocated their company to Singapore, a move undertaken by many Chinese AI companies.

The move provided them with better access to global investors and customers, especially at a time when geopolitical tensions deter many US and international firms from engaging with China. In Singapore, they can also purchase cutting-edge technology like NVIDIA Corp.’s latest chips, which are restricted in China due to US export controls.

“We wanted to be in a place where capital is abundant rather than diminishing,” Wu said.

However, relocating doesn’t guarantee success. For instance, ByteDance, the Beijing-based company behind TikTok, moved its TikTok headquarters to Singapore but still faced US legal challenges requiring the sale or ban of its American operations. Similarly, Chinese fashion giant Shein, which also shifted its base to Singapore, faced intense scrutiny in the US and is now planning to go public in London instead of New York.

For AI startups, the stakes are even higher. These companies rely heavily on large datasets and advanced chips to train their systems, and restricted access to these resources can significantly impact their product quality. US regulations block the sale of sophisticated chips and technologies to China to prevent their use in military applications. OpenAI, a leader in generative AI, also restricts China’s access to its software tools.

Additionally, China has strict regulations on AI-generated content to ensure compliance with the Communist Party’s policies. This regulation means AI developers in China can’t freely explore new innovations. Adam, the founder of consulting firm Linkloud, estimates that 70% to 80% of Chinese software and AI startups now target global markets, often bypassing China altogether. Linkloud is building a community for Chinese AI entrepreneurs seeking to go global.

Singapore, with its less stringent AI regulations and ease of setting up businesses, aims to be a bridge between Asian entrepreneurs and the global market, said Chan Ih-Ming, executive vice president of the Singapore Economic Development Board. At the end of 2023, Singapore hosted over 1,100 AI startups. While the country does not disclose data by origin, there’s increasing evidence of China-based AI companies establishing themselves there.

Jianfeng Lu, who moved to Singapore from Nanjing in 2019, was one of the first to make this shift. His AI startup, Wiz Holdings Pte., backed by Tiger Global, GGV Capital, and Hillhouse Capital, focuses on speech recognition AI and serves clients in Latin America, Southeast Asia, and North Africa, avoiding the Chinese market entirely. Lu’s success has made him a mentor for other Chinese entrepreneurs looking to settle in Singapore, with an online group he runs having 425 members.

In China, raising funds has become more challenging due to the slowing economy and rising US tensions, prompting global venture capital firms to reduce their exposure to the country. Wu and Chen of Tabcut struggled to find backers in China, with local VC firms demanding extensive financial and operational details before making decisions. They ultimately secured $5.6 million from Singapore-based Kamet Capital and moved their global headquarters to Singapore.

Climind, another AI startup, is preparing to move from Hong Kong to Singapore. Co-founder and CTO Qian Yiming cites Singapore’s supportive government, which offers financial backing and technical support, as a key attraction. Singapore’s stable political environment and ease of access to global markets also make it an appealing destination.

While some Chinese AI companies have found success in their domestic market, expanding globally remains a challenge due to services tailored for the Chinese audience and regulatory environment. The escalating geopolitical tensions mean young Chinese AI companies often have to choose between growing in China or abroad, as a combination of both is increasingly difficult. With more regulations on the way in China that are very much likely to stifle their growth, and with the US set to escalate its tensions with China and impose more sanctions a country like Singapore starts making much more sense.