Environmental Analysis of Nestle

1. Introduction

Officially, relations between China and Singapore began October 3, 1990. Singapore became the last country which formally adopted the People's Republic of China due to the respect to Indonesia. The first economic contacts were established in the 1990s and were aimed at expanding trade with China among the countries of Southeast Asia. Economic relations between Singapore and China have developed rapidly in recent years, Singapore has retained the first place among the ASEAN countries and the 9th place in the world in their trade with China. Currently China and Singapore have maintained friendly political relations and have greater complementarity to the economy of both countries. There are broad prospects for further expansion and improvement of the Sino-Singapore economic cooperation. At the moment, these two countries have free trade zone, it includes the relationship in terms of trade in goods and services, as well as investments. Also it reflects the desire of both sides to deepen and expand economic and trade cooperation. According to statistics, in 1998 the volume of trade amounted to US$8.154 billion in 1998. In 1999, trading value increased to US$8.56 billion. In 2000, the amount increased up to 28% from the previous year to US$10.821 billion and the China’s Customs reports that the volume of Sino-Singaporean trade in 2014 reached 79.7 billion US dollars, it is 28 times more than the volume of trade in 1990. With the development of bilateral trade and economic relations between these two countries have also improved the exchange and cooperation in culture, education and tourism. Cooperation between China and Singapore has great prospects, amid China's initiative to internationalize the Chinese yuan and the investment abroad, which has a positive impact on the economy of Singapore (Min, 2015).

1. The benefits Singapore gained from the China rapid economic growth

Growth of tourist industry

Tourism plays an important role for Singapore, because it helps to Singapore in foreign economic relations. Firstly tourism contributes to enhancing international trade exchange, and secondly provides a constant flow of foreign currency without exports. Tourism sector in Singapore has a positive impact on various industries, such as the development of transport, the hotel industry, restaurants and catering, entertainment. According to statistics, in 2014 in the first half of the year, there were more than 1.2 million tourists from China, which spent more than $1.5 billion. If we compare this period with 2012, the number of tourists from China increased by 25%. However, according to statistics of 2014, the flow of tourists, including Chinese in Singapore fell by 3%. It may be associated with the economic decline of the Chinese economy. As we can see, China's economy is in a recession (graph 1). Accordingly, from the recession affected the flow of tourists, not only Chinese, but also from other countries, because China plays an important role in the world economy and this recession might affect economy of other countries. From these data (graph 1), we can say that as long as China's economy is stable, therefore the tourism sector in Singapore will have profit (TODAYonline, 2015).

Joint government projects

In 2006, Singapore and China established a joint agreement Investment Promotion Committee (IPC). This agreement includes mutual cooperation in investment, trade and improving economic relations. Currently, this agreement includes cooperation in the service, entertainment and energy sectors. This agreement is very important for both countries, as in fact, Singapore's economy is largely dependent on the Chinese economy, and therefore Singapore is interested in joint projects with China. Many Singaporean companies keen to play a more active role in the development because joint projects help them effectively enter the international level, which would greatly increase the importance of the two countries in economic terms. According to the data at the beginning of 2000, before the start of cooperation between the two countries the volumes of joint cooperation was less than $10 billion. However, in 2012 the number of direct investment of Singapore was almost $55 billion and direct investment of China was $7.4 billion. To summarize, can say that China's investment in Singapore are not significant for the economy of Singapore, compared with the importance of stability and growth in the Chinese economy (Mofcom, 2015).

Export and import

Singapore's main income received from foreign trade. In 2013, China was named as the main trading partner of Singapore with 12% of total exports. Annual turnover between the two countries amounted to S$115 billion. With a balanced development of China's economy, it allows Singapore to see in China a reliable partner for the future trade. Currently, highly increase in demand on the export of ICT and industrial machinery which will help China's economy to move in a right direction because it will be more technological country. In this case Singapore sees their interest in developing China’s economy, because bilateral economic relationships directly depends on China’s economy. If China will become more technological country and their economy will growth it will allow to Singapore export more, respectively profits from foreign trade will continue to grow (SBR, 2015).

1. The challenges Singapore faces in this economic relationship

Dependence on China economy growth

The most serious challenge for Singapore is that its economy is dependent on the economic growth of China. It is not an advantage for Singapore, as it can be affected by any economic changes in the Chinese economy. Currently, China’s economy is going recession and Singapore’s economy market affected by this, because Singapore is not able to export as much as before the recession and that makes lose in profit for the country. This phenomenon is common, as on the world stage all countries linked economic relations, and economic changes in one country can cause negative and positive effects in other economies. The country may be less responsive to changes in other countries only if the country is a major exporter to the world, but as in Singapore there are no natural resources and enough territories for production.  Therefore, it is essential for Singapore to maintain economic relations with China in terms of investment, joint projects, logistics and financial sectors, as China is an important player in the global economy (SCMP, 2015).