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Doing Business - Singapore vs China

Choosing the optimal jurisdiction for a business is an important decision as it determines the future and success of that business. Factors such as political and economic stability, financial and physical infrastructure, company and labor laws, taxation system, legal environment, intellectual property protection, availability of human resources, cultural fabric, and language play a vital role in choosing a country for business incorporation.

Comparing jurisdictions on the basis of the above mentioned factors is an effective means of assessing the compatibility of a country to your business goals. In this regard, a comprehensive comparative analysis of Singapore’s and China’s performance in various economic and business surveys shows that Singapore is highly ranked as a business jurisdiction as compared to the mainland. The analysis reveals the following differences between the two jurisdictions.

Business Environment

  • Singapore is ranked as the #1 place in the world for ease of doing business in the World Bank’s ‘Doing Business 2011‘ report. In comparison, China’s 79th position indicates that its regulatory environment is less favorable to business. There was remarkable difference in the areas of starting a business (rank #151 vs #4), paying taxes (rank #114 vs #4), protecting investors (rank #93 vs #2), getting credit (rank #65 vs #6), and trading across borders (rank #50 vs #1). An analysis of company setup in Singapore vs China shows that Singapore company registration takes only two procedures and one-day’s time while China incorporation can take up to 2-3 months due to the complex procedures involved.
  • Singapore’s #8 ranking in Forbes magazine’s ‘2014 Best Countries for Business‘ as compared to China’s #97 ranking is another indicator of Singapore’s superiority as a business jurisdiction over China. Singapore’s trade freedom is #1 in the world while its investor protection ranking is #3 whereas China ranked #107 and #113 on the same parameters. Red tape and corruption are rampant in China as indicated by its #107 and #92 ranking. In Singapore, businesses face no red-tape and corruption is almost non-existent as indicated by its #6 and #7 rank on these parameters.

Taxes

  • Singapore’s tax system is known for its low tax rates, generous tax incentives, and extensive tax treaty network. China’s taxation system places it at a competitive disadvantage as revealed by the following surveys.
  • The PWC, IFC, World Bank’s ‘2011 Paying Taxes‘ survey shows that Singapore is placed fourth in the world for ease of paying taxes while China’s rank was #114.
  • The Forbes ‘2009 Tax Misery & Reform Index‘ ranked Singapore #11 in the world for having low tax misery while China ranked #64 showing that its burden of taxes is much higher.
  • The Forbes ‘2010 Best Countries for Business‘ ranks China’s tax burden as #85 while Singapore’s rank is #4.
  • According to tax firm KPMG Singapore’s corporate tax rate is the third lowest in Asia Pacific while China’s indirect tax rate of 17% is the highest in the region. KPMG’s ‘2010 Individual Income Tax and Social Security Rates Survey‘ shows that Singapore has the second lowest rates of personal income tax in Asia Pacific while China imposes one of the highest rates of personal income tax in the region.

IP Protection

  • Singapore has the second-best IP protection regime in the world according to the World Economic Forum (WEF) ‘2014-2015 Global Competitiveness Report‘ while China ranked #53 for IP protection.
  • Forbes magazine ranked Singapore #8 for property rights in its ‘2010 Best Countries for Business‘ list while China’s rank was #62.

Global Competitiveness

  • WEF’s ‘2014-2015 Global Competitiveness Report‘ confirms that Singapore’s economy is the second most competitive in the world while China ranks #28 out of 144 economies. Access to financing, political instability, corruption, inefficient government bureaucracy, tax regulations, and inadequate supply of infrastructure were some of the factors that disadvantage China as a competitive economy. By contrast, Singapore’s institutions were ranked as the world’s best; it was placed at the top 3 positions for lack of corruption, government efficiency, and goods and labor market efficiency. Financial market sophistication and infrastructure are the second-best in the world.
  • Singapore is second freest economy in the world according to Heritage Foundation’s ‘2010 Index of Economic Freedom‘. An efficient regulatory environment, competitive tax regime, lack of corruption, transparency and efficiency of services, highly flexible labor market, equal treatment of foreign and domestic investors, and a highly effective legal system were factors that boosted Singapore’s economic freedom score. China ranked #140 in the Index due to the lack of business freedom, lack of legal and regulatory transparency, high income tax rates, restrictions on foreign investment, tightly controlled financial system, wide-spread corruption and restrictive labor regulations.
  • IMD’s ‘2010 World Competitiveness Yearbook‘ ranked Singapore as the world’s most competitive economy while China’s economy is the eighteenth most competitive.

Openness to Trade

Singapore’s economy is the most open to trade in the world reaffirms WEF’s ‘2010 Global Enabling Trade Index‘ while China’s rank was #48. According to the report, China’s transport infrastructure presents major shortcomings. The time required to complete customs procedures ranges from 21 to 24 days, far longer than Singapore’s 3 to 5 days. Border administration remains subject to irregular payments and corruption in China. Moreover, China imposes high import tariffs and restrictions on international capital flows. By contrast, Singapore’s border administration was described as “top-notch” in every respect. It aced the customs services index. Border clearance of goods is fast and efficient. Finally, the quality and availability of its transport infrastructure is excellent.

Bureaucracy

  •  According to a survey conducted by the Political and Economic Risk Consultancy in 2010, Singapore ranked #1 for having the most efficient bureaucracy in Asia while China came in the seventh spot among the 10 economies included in the survey.
  • The WEF ranks Singapore as #1 for having the Highest Public Trust of Politicians, #2 in Burden of Government Regulation, and the Highest Transparency of Government Policy Making. China on the other hand ranked #26, #19, and #33 on the same parameters.
  • Singapore was ranked #7 on Transparency International’s ‘2014 Corruptions Perception Index‘ while China ranked #100 indicating the widespread existence of corruption.

Labor Force

  • Singapore boasts of a formidable workforce that is best described as productive, hard-working, cosmopolitan, and English-speaking.
  • Singapore has topped BERI’s ‘Labor Force Evaluation Measure‘ for 30 consecutive years.
  • Aon Consulting’s ‘2010 People Risk Index‘ ranks Singapore as #3 in the world for low risk of recruiting, employing, and relocating employees while China ranked #52.
  • According to the World Economic Forum, Singapore has best labor-employer relations and the most productive workforce in the world whereas China ranked #58 and #15 in both the areas.

Living Environment

  • Singapore is the world’s third best country for life experience according to HSBC’s ‘2014 Expat Experience Report‘ while China ranks at #26.
  • According to ECA International Singapore has been ranked as the #1 place for Asians to live for 11 consecutive years while China was accorded the twelfth position.
  • Mercer ranks Singapore as offering the best quality of Asia in its ‘2010 Quality of Living Survey‘.
  • Singapore is the most desirable immigration hot-spot according to Gallup’s ‘2010 Potential Net Migration Index‘.
  • According to the IMD ‘2010 World Competitiveness Yearbook‘, foreign talent rank Singapore as Asia’s best country to work in.
  • HSBC’s ‘2010 Exapt Economics Report‘ ranks Singapore #4 in the world for expats’ financial quality of life while China was ranked as #10.

At-a-glance Country Rankings: Singapore vs. China

Year Category Singapore’s Rank China’s Rank Source
2015 Ease of Doing Business 1 90 World Bank, 2015 Ease of Doing Business Report
2015 Ease of Paying Taxes 5 120 PWC, IFC, World Bank’s 2015 Paying Taxes Survey
2015 World’s Freest Economy 2 139 Heritage Foundation’s Index of Economic Freedom
2014-2015 World’s Most Competitive Economy 2 28 World Economic Forum, Global Competitiveness Report
2014 World’s Best Country for Life Experience 3 26 HSBC’s 2014 Expat Experience Report
2014 Country with Least Corruption Perception 7 100 Transparency International’s Corruption Perceptions Index
2014 World’s Best Country for Business 8 97 Forbes’ Best Countries for Business Index
2010 World’s Best Labor Force 1 BERI’s Labor Force Evaluation Measure
2010 Country Most Open to Trade 1 48 World Economic Forum, Global Enabling Trade Report
2010 World’s Most Competitive Economy 3 18 IMD, World Competitiveness Yearbook
2010 Most Efficient Bureaucracy in Asia 1 7 Political and Economic Risk Consultancy Survey 2010
2010 Best Place for Asians to Live 1 12 ECA International’s 2010 Location Ratings System
2010 World’s Lowest Risk City for Employers 3 52 Aon Consulting’s People Risk Index
2009 Country with Lowest Tax Misery 11 64 Forbes Tax Misery and Reform Index

On a Final Note

It is evident from the above comparative analysis that Singapore is Asia’s preferred destination for business setup and expansion. By setting up a Singapore company, businesses can not only gain access to the mainland China market but can also overcome the bureaucratic hurdles of operating a business from the mainland.

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