General Motors Company (NYSE:GM) said it will shift its international operations headquarters from Shanghai to Singapore during the second quarter of 2014.

General Motors

The announcement comes after General Motors Company (NYSE:GM) split its China operations from its international unit in August this year.

General Motors key move towards CIO transformation

General Motors’ executive vice president, CIO, Stefan Jacoby indicated that having a team in Singapore is a key step in Consolidated International Operations (CIO) division’s transformation.

General Motors Company (NYSE:GM) will have about 120 CIO employees located at its headquarters in Singapore at a location yet to be determined. In a statement, GM indicated around 250 employees will stay in Shanghai and about 245 in Seoul.

Lure for Singapore

Several multinational companies have been lured to Singapore’s shores, as it offers various benefits such as competitive tax rates, use of the English language, and skilled workforce as well as high standards of living.

Singapore is one of the most expensive countries in the world and is not known as a major base for automakers. However,  Singapore’s headline corporate tax rate is 17%, though companies that base their regional headquarters in Singapore can benefit from a lower rate if they meet certain criteria such as providing jobs and spending a certain level of money in the city-state.

GM’s International Operations indicated Singapore offers several advantages, including greater proximity to key CIO markets such as ASEAN and India, the Middle East and Africa.

General Motors Company (NYSE:GM) indicated it had considered other locations for the relocation and looked into keeping the headquarters in Shanghai, but ultimately decided in favor of Singapore.

General Motors’ proposal is likely to come as a blow to Shanghai, as it has to face competition from Singapore and Hong Kong to host multinational companies’ Asia headquarters.

Interestingly, in 2004, General Motors Company (NYSE:GM) decided to move its Asia-Pacific regional headquarters from Singapore to Shanghai, signifying rising importance of China to the U.S. automaker. However, China’s appeal for foreign professionals has been diminished thanks to pollution in cities such as Shanghai and Beijing though General Motors Company (NYSE:GM) did not cite that as a reason for its shift to Singapore.

China – world’s largest auto market

China is currently the world’s largest auto market as defined by vehicles sold but it has endured a decline in sales growth from 2010’s 35% all the way down to 2% in the first quarter of this year. Between government credit and investment controls to slow down the economy, China’s demand for cars has been curtailed.

Interestingly, in April, General Motors Company (NYSE:GM) announced that it will expand its China dealership network by about 600 this year and almost double its production capacity amid slowing sales growth.