China’s Massive One Belt One Road Project: 2 Key Insights from Oversea-Chinese Banking Corporation Limited

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

China’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.

Banks in Singapore, like Oversea-Chinese Banking Corporation Limited (SGX: O39), could stand to benefit from the programme.

The One Belt, One Road concept

OCBC chief Samuel Tsien gave his take on the concept of OBOR during its second-quarter earnings briefing:

“One Belt, One Road is really a concept and an approach where China would like to make capital investments offshore that’s not only going to benefit offshore countries, but in return, also to create more activities such that they can trade and invest and interact with China more.

So that was the concept.”

According to a report from the TODAY newspaper, China Development Bank has put aside US$890 billion to finance some 900 projects, including infrastructure investments. 

A quarter ago, DBS Group Holdings Ltd‘s (SGX: D05) Chief Executive Officer, Piyush 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.”

“[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.”

Based on the sheer scale of the projects, Gupta believes that there will be significant demand for bank financing.

Beyond infrastructure

But that’s not all. Tsien believes that there are opportunities for OCBC that go beyond infrastructure investments. He said:

“Along the way, there are different types of banking opportunities that were created. People mostly talk about infrastructure, but it’s actually more than infrastructure. It could also be project in minerals, project in power plant.

So we have a project finance team already set up, and we have been able to get quite a business — quite a number of businesses there.”

OCBC is getting involved in financing power plant projects, mineral projects and water treatment projects. Tsien said:

“And this included — so far over the past 18 months, we have done 4 power plant projects already. Those are both coal-fired and gas-fired, has got the Chinese component to it and those are very well structured. And those are in Indonesia primarily, but there was also one in Vietnam.

We’ve also done mineral projects, bauxite and alumina projects in Indonesia for sale back into China and it’s got the Chinese component to it.

We are also involved in, with a Singapore company, in Myanmar on another power plant project. And we have done the water treatment — one of the water treatment project a year ago in Singapore.

So it creates new opportunities for us.”

OBOR involves a significant 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 to be sure, there could be plenty of projects 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.