Singapore banks on AI edge as Hong Kong woos investment managers with tax cuts

Singapore’s financial institutions are banking on their artificial intelligence edge to retain investment managers in the face of Hong Kong’s fiscal competition.

For years, the rivalry between these two Asian financial giants has been about monopolizing global talent and institutional capital. At present, the two hubs are pursuing different strategies to attract talent: Hong Kong will provide tax incentives for fund managers and private equity professionals; Singapore’s focus is on facilitating access to advanced AI.

“This is all about offering certainty to businesses. With tax, you want to know how much you will pay to put your business on a firm footing. For AI, you need to make sure you have access to the latest tools,” noted Kher Sheng Lee, co-head of Asia-Pacific at the Alternative Investment Management Association (AIMA).

However, in July, AIMA raised concerns that the potential tax rollbacks are prompting Singapore’s top hedge fund and private equity executives to pack up and move to Hong Kong. 

Is there a huge tech gap between Singapore and China?

Hong Kong lawmakers are still reviewing legislation to introduce tax incentives for fund managers and family offices, while excluding proprietary trading companies. That would mean firms including Jane Street, Citadel Securities, and Jump Trading could be left out of the lucrative tax incentives.

According to the Financial Services and Treasury Bureau, proprietary trading businesses are excluded from the tax benefits because they fall outside the definition of a fund. However, reports suggest that Hong Kong is exploring ways to include certain proprietary trading firms, such as Jane Street, in the new tax regime. 

Despite the potential tax benefits, restrictions on advanced Western AI models remain a hurdle for local investment managers. China’s Great Firewall locks out Western AI giants like OpenAI and Anthropic, and while Hong Kong sidesteps mainland censorship, US tech firms block the region themselves. 

For quant funds that use sophisticated algorithms to beat the market, access to advanced AI could be crucial to staying competitive. LEK Consulting’s Justin Tan says the technology gap between Singapore and China is already prompting Hong Kong-based quant funds to consider moving key research and trading operations to Singapore. 

“In terms of access to technology, Singapore is seen as a bit of a sweet spot,” he commented.

Singapore offers access to China and America’s AI technology

Singapore’s relationships with Washington and Beijing allow companies in the city-state to tap into AI technology from both countries, including the latest models from Moonshot and DeepSeek. Ideally, Singapore has repositioned itself as a neutral jurisdiction designed to insulate capital from intensifying U.S.-China technology competition.

Kerry Goh, CEO of Kamet Capital, even asserted that establishing a business in Singapore can give global clients greater confidence that their intellectual property will remain independent of Chinese and US restrictions. 

More recently, the Major American hedge fund Citadel presented its Hong Kong-based quantitative research staff with an ultimatum: relocate or exit the firm. According to insiders, concerns about data security helped drive the decision to relocate staff responsible for the fund’s key intellectual property. Employees were offered the choice of moving to Singapore or Miami. 

With the tech gap, Chinese authorities hope to lure international finance professionals back with changes to the tax treatment of carried interest and performance fees. A number of Asian fund managers earned performance bonuses of more than $1 million last year, with the biggest earners taking home upwards of $50 million. That makes the proposed tax break particularly attractive. 

Speaking on the tax incentives, a spokesperson for the Financial Services and the Treasury Bureau said, “In particular, this would help further attract private credit investment activities in the region, while complementing Hong Kong’s development in areas such as digital assets and trading of precious metals and commodities.”

The rivalry shows how financial centers are increasingly competing through tax policy and technology. Hong Kong’s tax incentives could actually make working there cheaper and easier, but Singapore’s access to advanced AI models, computing infrastructure, and technology talent could make it so much better in the long run.

For quantitative funds, AI can help researchers analyze vast data sets, develop trading strategies, and improve risk management. This makes access to technology an increasingly important factor in firms’ decisions on where to locate their operations.

The competition, therefore, goes beyond taxes. Hong Kong has strong links to mainland China and deep capital markets, while Singapore is positioning itself as a technology-friendly hub with access to both Western and Chinese AI tools. For investment firms, the balance between lower taxes and better technology could determine which financial center wins the next wave of talent.

Benjamin Hung, chair of Hong Kong’s Financial Services Development Council, also contended, “Ultimately, Hong Kong needs to provide that platform where [you have] knowledge, information, rule of law, and the ability to move money in and out. That is our structural advantage — tax would be a tactical play to bring people in.”

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