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How DBS Group Holdings Ltd Can Gain from China’s Massive One Belt One Road Project

You can’t say that China is short on ambition.

The country’s One Belt One Road (OBOR) project is a massive infrastructure program that will stretch into 60 countries in Africa, Asia, and Europe. It will cover 60% of the world’s population and represent one-third of the world’s gross domestic product.

Banking on growth

Companies in Singapore, such as DBS Group Holdings Ltd (SGX: D05), could stand to benefit from the programme. The Asian bank’s chief executive officer, Piyush Gupta, responded to a question on OBOR in its latest earnings briefing:

“We do project financing, M&A financing, all kinds of financing. When a company goes overseas, they need money for both buying the asset or doing greenfield projects. We do both.”

According to a report from the TODAY newspaper, China Development Bank has put aside US$890 billion to finance some 900 projects. At the moment, it is hard to quantify the opportunity for DBS Group. Gupta said:

“Five-year [loan growth] is hard to [project]. In general, I’d say that total demand for infrastructure investment in Asia is huge.”

But Gupta believes that there will be plenty to go around:

“[The Asian Development Bank] ADB [has] now doubled the estimate [for infrastructure investments]. Earlier it said US$7 trillion, now it’s saying more like US$15 trillion. So there is tremendous demand for capital investment in the region.

While a lot of it will be taken up by FDI [foreign direct investment] and by the debt capital markets, I don’t think the markets will be adequate to fulfil the demand. So there will continue to be significant demand for bank financing.”

OBOR involves a great number of countries, so there is likely to be political and economic challenges to overcome when it is implemented. It is too early to say how much Singapore companies can benefit from it.

But as Gupta notes, if it happens on the scale China is proposing, there could be plenty of business to go around.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.