General Motors moved the headquarters of its international division to Singapore from Shanghai last month. Archer Daniels Midland, the agribusiness giant, is gradually doing the same with its Asian and Pacific operations. Other multinationals, like IBM, have shifted staff members there from China for a few functions, like treasury operations.
“I’m going to spend a lot of time going back and forth — the five-hour flight is going to be my monthly bus trip,” said Ismael Roig, the president of Archer Daniels Midland’s Asian and Pacific operations.
The moves reflect the broader evolution of China, the world’s largest market for cars, flat-panel televisions and scores of other products. The Chinese economy has become so large and affluent that companies increasingly treat it like Europe, with reports going directly to head offices in home countries and no longer lumped in with those from developing countries.
“We are big in China, and we want to be,” said Stefan Jacoby, the president of General Motors International.
His division, which officially moved to Singapore on Aug. 5, no longer includes the company’s China operations, but encompasses General Motors’ subsidiaries in Africa, the Middle East, Southeast Asia, Australia and South Korea.
The many frustrations of doing business in China have made some difference in the plans to move executives to Singapore — choking air pollution, countless regulations that favor local competitors and weak protection for intellectual property. A rising wave of economic nationalism has also manifested itself in large-scale raids on the Chinese offices of multinationals in the automotive, pharmaceutical and technology sectors. Police officials are copying large numbers of computer hard drives and interrogating employees without allowing access to legal advice.
More importantly, many multinationals are starting to pay renewed attention to Southeast Asia, which is showing signs of revival 17 years after the Asian financial crisis. They have found it hard to do that from Shanghai or Beijing. Each major city has no more than one flight a day to Jakarta, Indonesia, for example. And China’s diplomatic and trade ties to Southeast Asia have been strained by its increasingly assertive claims to control over practically all of the South China Sea.
Archer Daniels Midland has built a large team in Shanghai that can negotiate acquisitions of agribusiness factories in China, do due diligence and conduct audits, Roig said. So the priority for the company in Asia is to develop the same capability in the growing Indonesian and Vietnamese markets.
Singapore is a two-hour flight from Jakarta and from Ho Chi Minh City, Vietnam. Singapore also has tax laws that favor commodities trading operations and agreements with other countries.
However, most of Roig’s subordinates remain in Shanghai. Similarly, only 40 General Motors managers and executives have moved from Shanghai to Singapore, and the entire international operations headquarters occupies a single floor of a downtown office building.
Companies are finding it easier to persuade talented managers to move to Singapore, with its fairly clean air, than to Shanghai.
Zhang Xin (張欣), the chief executive of SOHO China, the leading developer of top-end office buildings in Beijing and Shanghai, said she was stunned when three-fifths of the mostly European teenagers and the coach at her son’s soccer club in Beijing moved out of China this summer, a shift she attributed to air pollution.
The EU Chamber of Commerce in China said in its wide-ranging annual position paper, released in Beijing on Tuesday, that eight of its member companies had reported rising difficulties in persuading talented staff to move to China, particularly because of air pollution.
While few headquarters, and even fewer factories, are moving, multinationals do appear more cautious in adding further to their already numerous research centers in China.
Companies like Procter & Gamble Co, and Baxter Pharmaceuticals have been opening or expanding research and development centers and high-tech factories in Singapore, although they also retain large operations in China.
Kishore Mahbubani, the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, said the growth of Chinese technology companies like Baidu (百度) and Huawei (華為) meant that a constituency was growing in China for eventual improvements in intellectual property protection.
The chief executive for Asia at another Western multinational, who insisted on anonymity because of the legal dangers in criticizing China openly, said that at many companies now “they’re just convinced if they open that R&D center in China, every technical secret they’ve got will be copied, every patent will be exploited.”
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