One Belt, One Road Initiative Analysis

This assignment requires a comprehensive analysis of China's 'One Belt, One Road' (OBOR) initiative. Students need to examine its multifaceted impacts on global trade patterns, economic development in participating countries, and the potential challenges associated with the project. The analysis should draw upon various sources including news articles, academic journals, and policy reports.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
University Name
Student Name
Authors’ Note

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Table of Contents
Introduction................................................................................................................................2
Capabilities of Singapore companies to capture this opportunity..............................................2
Possible challenges ahead encountered by Singapore companies.............................................9
Government Support and Assistance.......................................................................................11
Conclusion................................................................................................................................13
References................................................................................................................................14

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Introduction
The current study elucidates in detail about the initiative of “One Belt One Road” (OBOR)
that was declared by the Chinese President, Xi JingPing during the year 2013. Essentially,
this scheme was necessarily a crucial foreign strategy for China as this scheme had the
intention to promote monetary assistance amongst countries together with the belt as well as
road way. The OBOR scheme can hereby be considered as an outline for generation of
superior cooperation and assimilation by means of development of an infrastructure network.
The current study also presents the capabilities of Singapore companies to grab this
opportunity, probable challenges encountered along with the government support and
assistance delivered.
Capabilities of Singapore companies to capture this opportunity
The exclusive position of the nation Singapore under the scheme “One Belt, One Road” can
be evaluated for comprehending the potential of the country to capture this opportunity. As
per the framework and structure of Vision and Actions, particularly South East Asia can be
considered to be a significant area of the scheme and reinforcing the framework of the
nations together with the course is an important priority (The Straits Times 2017).
Connectivity
As far as connectivity is concerned, there are nearly 200 shipping streak that join the nation
Singapore to more than 600 ports in over and above 120 countries right round the globe.
Essentially, Chinese enterprises have necessarily observed about impact of the city and their
influence on businesses and trade in Southeast Asia in recent years and China has enhanced
the entire ante in the deal in Singaporean outline (Winter 2016). The transportation
infrastructure includes highway, roads as well as railways that can be considered as one of the

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obstacles that that these come across in attaining the complete economic prospective. The
scheme makes every effort to endorse capital as well as outlays for technological
advancements by mainly China into particularly linkages such as ports, courses and ways of
transport as well as other infrastructure. This in turn can help in enhancement of the processes
of resource circulation, assimilation of the market and permit improved facilitation of both
business and ventures in Southeast Asia (The Straits Times 2017).
Financial services and trade
Singapore can be considered to be principal financial centre and the best hub or centre for
particularly commodities as well as oil business in primarily Asia that can help in
acquirement and distribution of equity and debt capital. This can help in facilitating
investment on other areas of the region counting the ASEAN nations. There is also a crucial
association centre for the country China, markets of Asia-Pacific and Asia (Yuan et al. 2016).
In essence, consistent with the position, the country Singapore can be considered to be strong
and well-regulated and clear capital markets. This has important concentration of speciality in
the areas of banking as well as financial services, finances along with investment
management along with private equity (Yuan et al. 2016).
Singapore is a focal point for foreign venture that has a well synchronized legal framework
with very lower corruption levels. As such, foreign financiers do not necessarily enter into
definite joint course of action and has more than 70 monetary as well as tax treaties with
other countries, and proved to be a lucrative spot for multi-state business concerns

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Economic Policies selected by the government:
Rationale for selection of economic policy
The initiative can be observed as an attempt to augment trade as well as political associations
amongst nations such as China, Asia together with Europe. Also, this “One Belt One Road”
strategy is anticipated to augment growth by exporting huge capital, innovative and advanced
technology and capacity internationally (Winter 2016). The adoption of this policy can
thereby be said to be effective as the implementation of the development plans together with
the trade route might help in improving overall connectivity in five specific areas. The
identified areas include policy, trade, people as well as infrastructure. Therefore, with the
adoption of the OBOR initiative, the nation can adopt the strategy of augmentation of trade as
well as facilitation dimensions, development of requisite infrastructure (Tsui et al. 2017).
Economic conjecture that can help in explaining the adoption of the OBOR:
The economic initiative of “One Belt One Road (OBOR)” is expected to enhance the
infrastructure and serve as a blueprint or a roadmap for growing worldwide influence. As
rightly indicated by Mankiw (2014), economic potential of the initiative is said to enhance
the investment scenario in Singapore and affect the overall aggregate demand. Mankiw
(2014) mentions that aggregate demand is necessarily the entire demand for particularly
goods as well as services manufactured within a specific economy over a specific time
period.
The equation for aggregate demand (AD) is as presented below:
Aggregate Demand (AD) = Consumer Expenditure (C) + (Gross Capital Investment-
Investment Expenditure on diverse capital goods)+Government Spending+(Exports-Imports
of goods and services)

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The increase in investment can lead to an increase in aggregate demand. The increase in
investment directs the way towards lower rates of interest and makes borrowing for the
purpose of investment cheaper. In addition to this, this can also lead to increase in overall
confidence in the overall economic outlook, enhanced technology, augmented economic
growth in order to satisfy augmented demand of corporations to enhance capability. Mankiw
(2014) asserts that investment implies expenses on capital spending. Therefore, investment
can be regarded as an element of Aggregate Demand (AD).

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Nevertheless, in case if the economy is close enough to full capacity, then increase in
aggregate demand can direct the way towards inflation and not an enhancement in real GDP.
Nevertheless, there are other facets that affect the aggregate demand besides investment. For
instance, the in case if there is a decrease in consumer spending or else a decline in the
exports, then this leads to an increase in investment that might not perhaps enhance the
aggregate demand.
In addition to this, the economy of Singapore essentially has scarce capability and an increase
in investment can create multiplier effect. The initial increase in investment enhances
economic growth, however, in case if the firm acquires more number of sales and profit.
Again, they are eager to put into this in further amount of investment (Tsui et al. 2017). In
addition to this, households that again acquire employment from specific investment have
more earnings to spend. For example, an investment worth USD 2 billion can lead to final

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increase in real gross domestic product by around USD 3 billion. In this case, there is said to
be a multiplier effect of approximately 1.5(Borio 2014).
In essence, investment undertaken by the nation particularly for development of advanced
infrastructure as well as capital can enhance the overall productivity together with the
productivity capability (Heijdra 2017).
The above figure hereby reflects that investment can hereby direct the way towards higher
real gross domestic product and without overall increase in price (inflation).
The adoption of the OBOR initiative reflects government investment that in turn can enhance
overall industrial capacity. However, in general there is also misplaced government
expenditure that can ideally be inefficient and fail to attain productivity in the nation. Also,
there are nations that might have various supply limits specifically in case of public goods
such as infrastructure, roadways as well as bridges (Agénor and Montiel 2015).

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Possible challenges ahead encountered by Singapore companies
Politic risks: As rightly put forward by Mankiw (2014), with enhancement of diverse cross
border actions, there might be an increase in the political uncertainty, associating to the trade
embargos, framework, impediment as well as corruption particularly amongst developing
countries. Nations together with the belt and Road would have to deliberately operate
together for preventing this kind of risks and arrange a well structured insurance program.
Financing the projects: National Development Minister, which is Lawrence Wong reported
that Singapore can contribute towards policy of financing projects and deliver proficiency in
infrastructure planning. OBOR proved to be an appropriate platform for national integration
that in turn can deliver a tremendous boost trade, connectivity and infrastructure
development. In essence, financial institutions namely the Asian Infrastructure Investment
Bank as well as BRICS New Development Bank are instituted to enhance the overall extent
of multilateral financial assistance.
Corruption and poor governance: As correctly mentioned by van Vliet (2015), government
failures, starting from corruption to ineffective execution of different reforms also pose a
severe threat as social as well as political tensions does. In essence, the challenges might
possibly be very complex; nevertheless, the formula for navigating the challenges can prove
to be very simple.
Risk of exchange rates: Yuan appreciation can essentially systematically reduce the overall
acquisition cost of certain foreign assets and enhance the profitability of corporation’s foreign
branches as well as subsidiaries. Again, exchange rate volatility in OBOR nations is not very
much sensitive to volatility in the rate of exchange. In essence, this specific risk group
enumerates the devaluation risk against the reference currency (Mankiw 2014). Particularly,

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currency risk rating is mainly informed by specific scores for a blend of cyclical, political,
strategy as well as structural variables.
Influence of the maritime lanes: The involvement of Singapore in particularly Chongqing
Connectivity Initiative (CCI) can permit the republic to acquire advantage from the Belt and
Road programme. The Maritime Silk Road can necessarily complement the entire Silk Road
Economic Belt, concentrating on using sea routes as well as Chinese coastal ports to
necessarily link China with necessarily Europe through South China Sea, Indian Ocean, and
South Pacific Ocean via the South China Sea.
Government Support and Assistance
The government intends to utilize OBOR as a specific platform that can help in addressing
the nation’s surplus capacity (Aoyama 2016). The government have the need to regulate as
well as coordinate effectively, whilst operating to make certain that competition is fair as well
as constructive.
Monitoring financing condition (public or private sector)
The government of the nation monitor both the domestic as well as worldwide trends and
thereby undertake different research studies that have a bearing on different economic
policies and management. Thus, the governing bodies monitor the entire project financing
structure for building, operating as well as transferring a project. Also, the governing body
can examine the financing mechanisms that include process of government financing,
financing by private operators and project finance (YANG et al. 2015)
Affordable loan financing
The loan financing refers to a specific mechanism of financing in which a corporation can
accept a loan and provide the same to make repayments of the loan.

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Implementing skills training/retraining program
Gaps can be noticed in areas of knowledge as well as skills that can be related to the
implementation of OBOR. The One Belt One Road initiative necessarily has worldwide
strategic significance and involves economic growth, trade alteration, transportation and
generation of political flexibility (Yeixa and Liang 2017). Thus, it can be hereby mentioned
that the government can focus on making investments on training of different workers and
providing adequate education. Therefore, training the labour force, provide education as well
as other associated skills will essentially enhance the quality of the corridor.
Strengthening RMB business hub
Strengthening RMB indicates towards the fact that the currency comparatively has higher
power in comparison to different other assets/reserves (Huang 2016). In essence, a strong
RMB can provide China the advantages related to the international currency such as dollar
else wise Euro. As such, the positive trend of strengthening RMB can lead to emergence of a
huge market of Chinese consumers as the purchasing power of the nation increases.
Development of this market can call for the need of broad reforms and better governance.
Both Singapore and China can strengthen cross-border flows of Renminbi (RMB) and
collaborate on capital market connectivity that in turn can create huge opportunity for
businesses interested in investing.
Conclusion
The above study has helped in gaining comprehensive understanding regarding initiative of
“One Belt One Road” (OBOR) and the economic concepts and theories associated to the
same. In essence, this study has provided an insight regarding the capabilities that the
Singapore companies have to realize the advantages of this initiative along with the

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challenges that are encountered by them. Moving further, the study also presents
recommendations regarding the government support that can boost the initiative.

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