China and Singapore established diplomatic relationship in October 1990. Since then there happened some major high level visits, including one by Premier Wen Jiabao and one by then Vice president Wu Yi to Singapore in 2007.

In 2007, Senior Minister Goh Chok Tong and Minister Mentor Lee Kuan Yew also visited China. This year, there have been visits to China by four of Singapore’s top leaders, including President S R Nathan and Prime Minister Lee Hsien Loong.

In a visit to Beijing by Prime Minister Lee Hsien Loong, Singapore and China will sign a free trade agreement.

With China’s rapid development, the two countries have promoted cooperation in many fields like trade, education, culture, security and politics, observing the fundamental interests of the two countries and peoples and stimulate peace and prosperity in the region.

Last year, China and Singapore realized a flagship eco-city project in Tianjin to strengthen bilateral ties. Both sides will cooperate to share their expertise and experience to develop a socially harmonious, environmentally friendly and resource-conserving city in Tianjin.

The 30 sq km eco-city project is 40 km from downtown Tianjin and 150 km from Beijing. The goal is to convert non-arable land into a prosperous and active city, where ecological environment is sensitively balanced with urban development.

The first China-Singapore flagship project was the Suzhou Industrial Park, started in 1994, which turned out to be a brilliant success. It helped transfer Singapore’s industrial expertise to China, and became a model for other industrial parks in the country.

In economic field, Singapore and China have continuing strong and extending economic ties.

Shown by the statistics released by the Chinese customs, the year 2007 witnessed a $47.15 billion bilateral trade, making Singapore China’s eighth largest trading partner.

As for the realized investments in China from Singapore, it amounted up to $33.2 billion at the end of December 2007, making Singapore China’s seventh largest foreign investor and the largest investor among the Association of Southern Asian Nations (ASEAN).

The close relationships between China and Singapore are not limited to the economic area, but also in terms of the strong bond of friendship between the two peoples.

The news of Sichuan earthquake triggered enormous sympathy among Singaporeans. The government immediately offered $200,000 in relief assistance, tents and the services of one of four crack rescue teams.

In Singapore, many charity drives raised spontaneously. All of them received tremendous support.

The Singapore-Sichuan Trade and Investment Committee donated almost $1 million. A TV charity event in Singapore on May 25 raised $10 million, pledged to be used to build schools and orphanages in Sichuan. A charity concert was initialed in Chengdu on June 28, involving artist from China and Singapore.

According to China’s Foreign Ministry’s statistics, Singapore’s donations through ministry-related agencies, ranked the third highest in the whole world, after the United Arab Emirates and Saudi Arabia.

The two countries have also accelerated the pace of people-to-people exchanges, in the form of mutual tourism and education. In 2006, about 828,000 Singaporeans visited China, a year-on-year increase of 9.5 percent. Meanwhile more than 1 million Chinese residents traveled to Singapore, a year-on-year increase of 20.9 percent.

With the rapid growth of educational collaborations between China and Singapore, the Ministry of Education of China (MOE) has established the inspectorate of overseas education to monitor recruitment agencies, in 2004.

According to figures released on the website of the ministry, 20 educational cooperation programs by 15 universities with about 32,000 Chinese students studying in Singapore and 1,500 Singaporeans in China.

In 2006, the two countries signed the Agreement on Culture Cooperation between China and Singapore, which lead to about 200 cultural exchange programs every year.

On January 7, 2008, Singapore and China signed the first bilateral agreement for defense exchange and security cooperation between the countries at the close of the inaugural China-Singapore Defense Policy Dialog.

The agreement formalizes exiting defense activities in the form of exchanges, attendance at course, seminars and reciprocal port calls between the two countries.

All these are projected to strengthen cooperation and promote bilateral understanding.

The official visit of Singapore Prime Minister Lee Hesien Loong to China from Oct 22 to 27, associated with his attendance at the Asia-Europe Meeting in Beijing, will further consolidate relations between the two countries.

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To estimate the development of German SMEs in China, German Industry and Commerce Taicang Ltd conducted a survey of more than 270 German operations including wholly owned foreign enterprises (WFOEs), joint ventures (JVs) and representative offices (ROs). The findings of the survey provide a unique opportunity to have a deep look into how German companies do business in the world’s first emerging market.

Success in China

German SMEs achieve success in China. Of all respondents, 80 percent say they have made their goals. Production companies break even within an average of 4 years, while trade and services break even within an average of 2 years after entering the market.

China continuously ranks first in the global business’s list of future prospects. All through ten years, SMEs comprised 20 percent of German companies in China. Four years ago their share rose to 53 percent.

The promotion for this trend is that the key customers moved to China and provoke a domino effect. SMEs suppliers establish operations close to their customers’ Chinese subsidiaries. The advantage of being prepared to solve potential problems sometimes plays a decisive role in sourcing decisions in China. A percent example of this effect is the scaled economies developed in cities and regions such as Taicang in Jiangsu province, which boost, promoting over 80 German companies.

Both the number and nature of German companies is changing. Traditionally dedicated to heavy manufacturing for export, German companies are shifting to the service sector. SMEs dominate these trading, logistics and consulting companies sectors.

RO, JV or WFOE?

With China’s market growth, more and more companies have expanded from a RO to a WFEO or JV, with WFOE being the most popular trend. The proportion of ROs has decreased from 50 percent in 2002 to 27 percent in the latest survey. The WFOEs has taken 80 percent of the companies with two years or less market presence. The push behind the transition are the growth of the domestic market calling for a stronger presence, and the modifications to China’s foreign investment regulations, which used to limit a JV to operate in China, now allow companies more freedom.

WFORs more often report their satisfaction with their legal framework than JVs. Eighty-six percent of WFOEs respondents said that they would stick to their strategy while only twenty-four percent of JVs take their strategy as the best choice. As a result, the trend of increasing number of business entering China as a WFOE will continue and climb.

Contrary to the common perception in the West that companies shift to only to exploit lower cost structures and export back to Europe and North America, most companies produce in China for the Chinese market. According to the survey, only 28 percent of German SME production in China is oriented for export, with many of them going to other countries in Asia.

Localized production

China’s domestic market is the current growth sector for most German SMEs, especially the young generations, sometimes names as “Little Emperors”, aged 35 and younger. This generation, many of which are only-children, is well qualified to consumerism and more open to new products unlike their comparatively conventional grandparents. Smaller families mean more women with more working time and lower costs, resulting larger household incomes.

The convenience of the on-site production enables German SMEs to compete with their Chinese rivals more effectively. In the survey, 75 percent produce goods on site, and 71 percent make domestic sourcing in China. Local content share ranges from 25 percent to 100 percent, with 56 percent marking the average. Generally, companies with longer years in China possess more local content. This strategy allows SMEs to keep prices closer to domestic levels.

Like all consumers, the Chinese want the goods providers to gear to their taste and needs. German SMEs are applying this more than ever, with 38 percent adapting their products to a great extent to meet Chinese customers’ expectations. Nearly 18 percent of respondents claimed that they do even more to adapt in low-price segments.

As German SMEs are growing more experienced in the Chinese market, they gradually transfer operations to their Chinese subsidiaries. However, they still put great importance on remaining corporate culture and contacting with the headquarters. Moreover, sensitive items such as strategic decision-making and R&D are closely overseen by the German headquarters. For example, only 32 percent of SMEs undertake a part of their R&D in China.

Are you interested in the business opportunities in China?

China is one of the world’s great growth markets and is likely to be for many years to come. Foreign companies often face difficulties in assessing Chinese market demand and enacting effective strategies because of the language barriers, culture differences, and high expense.

BPOVIA is the leading virtual assistant and Knowledge process outsourcing (KPO) service provider in China. BPOVIA is the only virtual assistant company ever been nominated for the prestigious “Red Herring 100 Asia” Awards 2008. Combines international perspective with local know-how, BPOVIA can provide our clients China business development service and help our clients doing successful business in China.

Please visit http://www.BPOVIA.com/ for details about our service.