Tech flocks to Shanghai

Lured by the vast size of China’s domestic market and its lower labor costs, plus a raft of corporate tax breaks, foreign technology companies are setting up shop in Shanghai in droves.

According to a report from Russell Reynolds Associates based on Shanghai government statistics, 144 foreign companies now have their Asia-Pacific headquarters in Shanghai, 48 of which established operations there only in the last year.

Alcatel was the first major multinational to make the move in 2001; now there are 11 in Shanghai.

This list includes AlliedSignal, Delphi, FedEx, General Electric, General Motors, Goodyear Tire, IBM, Johnson & Johnson, Kodak, Rhodia, Roche and Sharpe.

Russell Reynolds said 15% of the top 50 U.S. tech companies now have their Asia-Pacific headquarters in Shanghai, compared to 40% in Singapore, the city dubbed “Asia for beginners,” and 20% in Hong Kong.

Of the top 50 European technology companies, the executive search firm said 14% have their regional headquarters in Shanghai, 50% are in Singapore and 4% are in Hong Kong.

Beyond the tax breaks, low manufacturing costs and the desire to have executives on the ground in what many believe will soon be one of the most lucrative markets in the world, the report said one of the top reasons companies set up regional HQs in Shanghai is to make a political statement to the Chinese government.

The negatives of operating out of Shanghai include a lack of experienced talent at the executive level and the high cost of expatriate housing and schooling, often higher than comparable cost in Singapore.

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