Analysis On The Comparative Advantages And Complementarities In The Case Of Sino-Singapore Trade

Singapore is China's largest trading partner and the only developed country in the ASEAN. Since the establishment of diplomatic ties between the two countries in 1990, China and Singapore's bilateral economic and trade relation has gained and maintained a steady and rapid rise. China- Singapore's bilateral trade has become an important part of the two countries'relationship. The development of bilateral trade between the two countries is of special significance to China's economic development and industrial evolution. In this paper, by using theoretical analysis and empirical analysis methods, we study the comparative advantage and complementarities in the case of Sino-Singapore trade.This paper is divided into five chapters. The first chapter outlines the background of choosing the article topic, related literature review, the structure, the possible innovation and defects of the paper.Chapter II gives a detailed description of the Chinese-Singapore trade's history and current situation. First, it briefly outlines China-Singapore trade conditions. Then, it studies the Trade Specialization Coefficient movement of the trade relations between the two countries. Generally speaking, the bilateral trade between the two countries is on a low degree, but the Trade Specialization Coefficient index is presenting a steady upward trend. In the foreseeable future, trade volume between China and Singapore will expand faster.Chapter III analyses China and Singapore's trade comparative advantages. China is the world's largest developing country, while Singapore, which is considered one of the"four little dragons in Asia", is a newly industrialized country. They differ a lot in natural resources, technology, and economy scale. Thus, there must exist big differences of the comparative advantages in different products. In this paper, it introduces the United States as a third country. It uses the adjusted Revealed Comparative Advantage index, which is to select a particular product of China and Singapore, then compare their exports accounted for the proportion of the country's total exports with the United States'situation in this products'export. It is an indirect measurement to measure whether or not China or Singapore has comparative advantage in a particular industry. By analyzing the two countries'Revealed Comparative Advantage indexes in primary products, capital and technology-intensive products, as well as labor-intensive products, it shows the two countries'different comparative advantages in different industries. Analysis of that the two countries'dynamic changes in comparative advantage index help us find the decisive factor of the changes, which is Foreign Direct Investment. Since the 1990s, multinational companies investing in China moved their targets from the labor-intensive projects to capital and technology-intensive industries, making China's capital-and technology-intensive products'comparative advantages improved gradually. Singapore has remained relatively high comparative advantage in the capital-and technology-intensive products, it is also due to that a large number of foreign implantation, when at its economic take-off stage. With China's economic development, China's comparative advantage in capital-intensive industries will gain further increases.Chapter IV analyses the bilateral trade complementarities between China and Singapore. First, it uses the Special Trade Coefficient index between the two countries, and shows that the bilateral trade between China and Singapore is mainly focused in intra-industry trade. Then it uses Intra-industry Trade index to analyses the complementarities in the intra-industry of the two countries. It concludes that the Intra-industry Trade indexes of manufactured goods are higher than those of primary products. Then, it studies the intra-industry trade in manufactured good of the two countries, analyses the dynamic changes of Intra-industry Trade index of the two countries in the capital-and technology-intensive products and labor-intensive products, and points out the determinant factor of the two countries'intra-industry trade-Foreign Direct Investment. China and Singapore are two of the hot-spot areas to attract foreign direct investment. Foreign Direct Investment in the two countries are mainly on processing trade, which is to use foreign raw materials and products components to process finished products internally, and then sold abroad . The processing trade increases exports and imports at the same time, thus foreign direct investment which will greatly promote the development of intra-industry trade. Transnational corporations distribute different segments of production in China and Singapore, resulting in the intra-industry trade between the two countries.Chapter V makes conclusions of the previous three chapters. First, China and Singapore, accompanied by economic growth, will result in greater growth in bilateral trade. The combination of trade index is of steady upward trend, and trade between the two nations has great potential. Second, China and Singapore have their own respective advantages, from the overall point of view, China's labor-intensive products maintain comparative advantages, and in capital and technology-intensive industries, Singapore has a comparative advantage. However, China's comparative advantage in capital-and technology-intensive industries were also presenting a rising trend. Third, the bilateral trade of the two nations is mainly based on intra-industry trade in terms of volume, but in terms the number of products, it is the mainly in inter-industry trade. The determinant factor of China - Singapore's intra-industry trade is Foreign Direct Investment (including Singapore's investment in China), the multinational corporations in the production will be distributed to the different segments with different elements of production and the proportion of the elements of production efficiency between China and Singapore result in intra-industry trade between the two countries. Based on the above findings, this paper presents the corresponding policy recommendations. First, the two countries should give full play to their own comparative advantages and expand trade volume between them. Second, China should focus on the use of foreign direct investment and the interaction of intra-industry complementarities to stimulate domestic industrial structure adjustment, and optimize the allocation of resources. Third, attach importance to and strengthen the inter-investment between the two countries, to promote industry division. Finally, China should make efforts to develop intra-industry trade with more nations. In the long run, this will help improve China's external trade environment and ensure the sustainability of commodity exports.