Economic Structures in Singapore and China

This paper analyzes the economic structures of Singapore and China, highlighting the differences and similarities between the two nations. It also examines the role of government intervention in the economy of both countries. The paper concludes that while Singapore has a mixed economic structure, China has a socialist economy. The government exercises a certain degree of control over the economy in both countries. The paper also highlights the importance of taking into account these economic factors and the role of government intervention while expanding businesses from Singapore to China.

Running head: ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
Economic structures in Singapore and China
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1ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
One of the most important factors to be considered while carrying out international
business is choosing the right jurisdiction to operate out of. It must be remembered that
different nations have different policies and regulations pertaining to business; furthermore,
factors like political stability, economic conditions, financial infrastructure, labor laws, legal
environment, business environment and cultural fabric could make or break businesses in
foreign lands (Cavusgil et al., 2014). This paper would analyze the impact of economic
structures in Singapore and China, and the similarities and differences between the two
nations. Firms in Singapore have a distinct organizational structure and function in an entirely
different economic environment than the ones in China; thus, for a firm in Singapore to
expand globally into the Chinese market, a sound knowledge of the Chinese economy would
be essential. The paper also analyzes the role of government intervention in the economic
structures of the two nations, and draws a comparative study accordingly.
According to the Doing Business Report released by the World Bank in 2011,
Singapore was ranked at number one, while China was lagging behind at seventy nine; this
can be taken as an indicator of the superior economic structure of Singapore
(Doingbusiness.org, 2018). It can safely be assumed that Singapore boasts of a mixed
economic structure; while the nation has a number of free market regulations and policies,
one cannot deny the role of the government in the economy, especially in the case of
macroeconomic development (Chiu, 2018). This paves the way for a unique kind of
economic model, which has since been termed the Singapore Model. The economic policy in
Singapore is based on foreign trade drive, which may often be categorized as unstable or
unsuitable for most developing countries; this is primarily because of the rigidity within the
system and the inability to incorporate social adjustments. This is one of the major points of
difference between the economies of Singapore and China, which has a socialist economy.

2ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
Ever since the early nineteenth centuries, the economy of Singapore has been largely
a free market one, depending mainly on international trade; consequently, the economic
structure of Singapore is characterized by free trade and markets and an economic openness;
however, the government of Singapore was compelled to implement stringent policies that
would protect the Singapore market from global threats. At the same time, government
intervention has also paved the way for newer industries and innovative economic initiatives
– all of which proved to be beneficial for the economy of the country. Because of its
economic infrastructure, Singapore has been immune to the global economic crises of 1997
and 2008 (Rodan, 2016). On the other hand, in China, the government has been entirely
entrusted with the management of the national economy. In 1978, after Deng Xiaoping
implemented a capitalist market plan, the Chinese economy began to show significant
progress, with a constant growth of nearly ten percent GDP every year. However, most of
these economic reforms that were implemented focused on agricultural activities since that
was a key factor in the national economy back then (Su et al., 2013). The recent five year
plan implemented by the government highlighted certain challenges which could curb the
overall economic growth of the nation. They include sustainable employment opportunities
for the growing population, reducing corruption, limiting damage caused to the environment,
elimination of social strife, reducing high domestic savings rates and so on (Wu et al., 2014).
According to the Global Competitiveness Report released by the World Economic
Forum for 2014 – 2015, Singapore ranks as one of the most competitive economies in the
world whereas China ranks at number 28, out of a total of 144 economies ("The Global
Competitiveness Report 2014-2015", 2018). Political instability, restricted access to finances,
corruption, tax regulations, ineffectual government bureaucracy, inadequate infrastructure –
these are some of the factors that have posed as a hindrance in China’s growth as a highly
competitive economy. On the contrary, Singapore ranked high on the global competitiveness

3ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
chart owing to its government efficiency, clear labor laws and regulations, sophisticated
market infrastructure and reduced corruption. According to the 2010 report on economic
freedom, Singapore ranks second internationally as far as free economies are concerned;
Singapore has a robust tax regime, a regulated and efficient business environment, a versatile
labor market, transparent services, equity in terms of domestic and foreign investors and a
well established legal environment all of which help in making Singapore an economically
free nation. On the other hand, China ranks at 140; rigid and strict financial regulations and a
restricted foreign investment policy, coupled with corruption, have curbed the overall growth
of the national economy in China ("2010 Index of Economic Freedom - Institute of Economic
Affairs", 2018).
Reports also suggest that China’s economic structure does not exhibit openness to
trade on account of its faulty transportation infrastructure. An ordinary customs procedure
that would be completed in 5 days in Singapore would take almost a month in China. One of
the reasons for such a prolonged procedure could be the high tariff rates imposed by the
Chinese government and the restrictions on flow of international capital (Zhang, Zhu & Lu,
2015). On the contrary, Singapore has a very well developed border administration and
approach to foreign trade; this is because Singapore, as compared to China, has a transparent
bureaucracy which promotes foreign trade and domestic economy. Unlike China, Singapore
has a strong, productive, cosmopolitan and formidable work or labor force; such harmonious
relations within the work force ensure high productivity and contribute to the growing
economy of the nation (Autor, Dorn & Hanson, 2016).
The chief reason why the Chinese economic structure is lagging behind that of
Singapore is because of government autonomy in most of the industrial sectors; it would be
wrong to say that China’s economic growth has been declining over the years, as can be seen
from the development of trade links and settlements in Singapore and other countries.

4ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
Previously however, China experienced a period of stagnancy when the government feared
the threat of western colonization and shut its economy up to foreign trade; it was this policy,
founded on the basis of sheer paranoia, which suffocated its own economy (Kirby, 2013). It
was then that Xiaoping introduced the reform, which revolutionized Chinese economy.
Whereas the Chinese economy was vastly dependent on agriculture, this particular industry
has practically no relevance in Singapore’s GDP. Ever since the foundations of the economic
structure were laid in Singapore, it endowed importance to the industrial sector; electronics
and digital industry along with that of petrochemicals and petroleum control a major part of
the Singapore market. Similarly, Singapore has a state of the art banking and finance
industry, in contrast to the relatively primitive systems in China.
In conclusion, it can be said that China and Singapore have economic structures that
are very different in nature; for instance, while the Singapore economy is ruled by foreign
trade and open markets, the Chinese economy is more rigid and not receptive to global
expansion. This is assumed to be one of the main reasons why China is still behind Singapore
in the race to the top, as far as economic structures are concerned. In addition, while China
mainly emphasizes on agriculture as part of the economy, Singapore has focused on building
and developing its industrial sector. However, it has been observed that in both countries, the
government exercises a certain degree of control over the economy. These economic factors
along with the role of government intervention will have to be taken into account if firms in
Singapore were planning to expand into China.

5ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
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6ECONOMIC STRUCTURES IN SINGAPORE AND CHINA
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