Why It Matters

Singapore's door to western China

Singapore's role as a regional hub can help it capitalise on China's ambitious "One Belt, One Road" initiative.

The "road" aspect - it involves reviving the ancient sea route that links China with South-east Asia, Africa and Europe - offers plenty of opportunities in trade, finance and logistics.

But the "belt" - an overland economic route China wants to build across Central Asia to Europe - seems less relevant as Singapore is well away from the area.

This is where the launch of Singapore's third joint project with China can help fill in the gaps.

It will be based in the south-western city of Chongqing, which is at the Y-shaped junction of the "One Belt", "One Road", as well as the Yangtze River economic belt. This fortunate location allows it to connect with all points of the compass.

The city is already booming, led by the electronics and information technology sectors, which have benefited from preferential economic policies offered by the central government.

Its economy grew by 11 per cent in the first three quarters of this year over the same period last year, easily trumping the national growth rate of 6.9 per cent.

The new collaboration between China and Singapore is labelled a "priority demonstrative project" by the Chinese government, so it is likely to enjoy preferential policy treatment as well.

As part of the project launch, the Chinese government has agreed to apply the new cross-border yuan rules to companies based in Chongqing, allowing them to borrow offshore yuan from Singapore-based banks. Chongqing-based companies can also issue yuan bonds in Singapore and repatriate the funds fully back to China.

Singapore companies, especially those in the financial service, aviation, transport and logistics, and information and communications technology sectors, can look forward to innovative measures that will be piloted in this project.

They can play a role in shaping "strategic connectivity" (as the name of the project suggests) in western China.

A version of this article appeared in the print edition of The Straits Times on November 10, 2015, with the headline 'S'pore's door to western China'. Print Edition | Subscribe