What a difference a strong currency can make. CFOs reviewing HR-recommended increases in compensation packages and evaluating expats hiring plans take note: Singapore is now Asia's 6th most expensive city for expats, and No. 31 globally.
This is due to Singapore's strong dollar against major currencies, as well as the actual price of goods and services in the cost-of-living basket monitored by ECA International, the research group that tracks these things. That basket of goods and services, which includes food and general and basic items purchased by corporate assignees (i.e., expats) in 400-plus locations worldwide, is up an average of 5.7% over the last 12 months.
Among Asian cities, Singapore is now a more expensive place for expats than Hong Kong, which slipped from 6th last year to 9th regionally, and dropped from 32nd position globally in 2010 to No. 58 today. That's largely because the Hong Kong dollar, which is pegged to the US dollar, has weakened against major currencies in the past 12 months.
Currency strength or weakness can even trump the impact of inflation, said Lee Quane, ECA International's Asia regional director. "For example," he points out, "despite dramatic price increases in Vietnam, the devaluation of the dong earlier this year has caused locations there to drop down the ranking. So while locals will see their costs going up, the spending power of assignees will have increased due to the effect of exchange rates."
Of course, cost of living is just one of many factors companies consider in making assignment and expansion decisions. "The fact that the cost of living may be high or low is not the only consideration that companies need to take into account," said Quane.
Other factors, such as quality of living, availability of good staff, rule of law, and ease of conducting business, are also important.
Beijing, Shanghai most pricey mainland locations
This year, Beijing (35th position globally) and Shanghai (41st position globally) have become the most expensive locations in mainland China (compared to Hong Kong at the 58th position). Of the Asian locations surveyed, Chinese provincial capitals have experienced the largest jumps up the global rankings: Chengdu climbed 21 places to 144th place, and Wuhan was up 20 places to 146.
On average, the actual prices of goods and services commonly purchased by international assignees have risen by 9 percent in China in the last 12 months.
In contrast, the price of the items in Hong Kong's cost-of-living basket has risen by more than 7% on average in the past 12 months.
The renminbi has also strengthened against the Hong Kong dollar -- RMB100 can now be exchanged for HK$121, versus HK$116 a year ago. That's a 4% appreciation over 12 months.
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