Today GM decided that it would move the international operations headquarters from Shanghai to Singapore. This is a huge blow to
Shanghai, which has been making efforts to encourage more international businesses to open their Asian headquarters in the city.
Shanghai has recently been losing out to Hong Kong and Singapore for the international headquarters. Other companies have made the same decision to house their international headquarters in Singapore. Singapore is close to ASEAN, India, the Middle East and Africa, which allow the companies to have a greater proximity to these emerging markets. Furthermore, residents of Singapore speak English, are skilled workers, and have high standards of living. GM expects to hire 120 employees to deal with the key international issues that arise in the nearby regions. These workers will be in charge of sales and marketing, government relations, human resources, IT, legal functions and finances. Although Singapore has a high corporate tax rate (17%), some companies have been able to get a lower rate by meeting certain criteria. If they provide jobs to residents and spend a specific amount of money in the country, then they can usually have a lower tax rate.
Officials in Shanghai are still surprised by this move however, as the nation is one of the most expensive country’s in the world to own a car, and therefore is not a popular place for car makers.
The decision to move to Singapore comes after GM decided to split its Chinese operations from the international unit. GM wanted the opportunity to focus more on the Chinese car market, which is the biggest in the world by having the country have its own division.
Hopefully the decision does not affect the relationship between GM and China. I believe that because the nation still relies so much on GM for its lucrative car market, this will not harm the guanxi too much.
Singapore is underestimated, in my opinion, as an attractive place for business and finance. I think Singapore is taking several steps to make it a highly attractive city for investment, out of all the worlds great cities. As a financial center, its credibility continues increasing, especially as it does not have quite the same level of restriction on investment, etc. as China. For instance at the new airport, there is a free trade zone with a massive vault facility built for storing precious metals and fine art. It is now full. If the worlds richest trust their priceless assets to Singapore, it is an indication of confidence.
In terms of its location, I do think Singapore is better located geographically in terms of positioning to all of Asia and Southeast Asia. As SAIC controls GM in China, I wonder if GM is doing this as a play to reassert some power?
Not too sure that it’s a power play. In 2004 China moved it’s Asia-Pacific headquarters from Singapore to Shanghai because of the importance of China as a market, but now that GM is established in China. The attractiveness of Singapore as a place of business has caused the re-relocation along with the importance of now focusing efforts on markets where GM has a less established presence.
http://www.detroitnews.com/article/20131113/AUTO0103/311130039
This just shows how big of a role geography can play in the business world. This is unfortunate news for Shanghai, and could be an indicator of a possible trend for future years pending the success of the GM headquarters in Singapore. The language barrier is also an interesting issue that they seem to have solved by this move. Singapore is strategically using their location to appeal to large corporations, and are increasing their appeal by using tax incentives.
GM moving its International Headquarters does not mean it views China as less profitable… it was always the goal of Shanghai to be autonomous and learn to make its own cars. Possibly this means that Shanghai sees itself on par with the Brazilian GM Headquarters in the book we read. Shanghai-GM could even use it’s parents positioning to reach markets in Africa, and elsewhere in Asia.