- Name and explain three tricks that management can play to manage earnings. Explain how using financial ratios can help spot these tricks.
- Why is it important to analyze profitability, specifically focusing on return on investment? Invoke the breakdown of ROI in thinking about your response.
China’s New Silk Road initiative is a logical extension of China’s economic expansion and modernization efforts. This initiative is an allusion to its namesake trade network stretching from China to Central Asia and the Middle East, which was established over 2,000 years ago. In 2013, China proposed establishing a modern analog to the ancient Silk Road; however, instead of transporting silk and spices, this would build a network of railways, pipelines and utility grids to link China to the Middle East and Eastern Europe via Central Asia. Also known as the One Belt One Road Initiative (OBOR), this massive infrastructure project aims to create the world’s largest network for economic cooperation. This development would make it much more efficient for China to trade with 65 countries, representing 60 percent of the global population. China markets the initiative as a net win for all parties involved, and host governments see the New Silk Road as an opportunity for job creation, economic development, and participation in the global supply chain. The New Silk Road initiative would allow China to more efficiently project soft power within Asia, Africa and Europe, which could have significant trade and national security implications for the United States. Chinese firms have increased their foreign investment within partner countries in order to pave the way for the New Silk Road. According to the Economist, several economic research organizations predict that the total Chinese investment abroad could rise to $2 trillion USD by 2020. For comparison, this figure was less than $800 billion USD at the end of 2014. As stated previously, Chinese firms are strongly incentivized to maintain connections with Chinese state-owned entities (or to be state-owned entities themselves), thus it stands to reason that much of the value earned through this investment will directly benefit the Chinese government. The Chinese regime’s entanglement within the region will likely introduce significant hurdles to U.S. activities, and may diminish U.S. influence in Central Asia, the Middle East, and possibly Europe. It is worth noting that Beijing established $100 billion USD Asian Infrastructure Investment Bank (AIID), a multinational funding body, to support New Silk Road investments.  The AIID currently has 57 members, including Germany, the United Kingdom, France and Russia. Notably absent is the United States. Made in China 2025 Not only is China expanding its economic reach and soft power influence within Eurasia via the New Silk Road, but it is also working to shift its overall production upmarket from low level manufacturing to advanced technology development. Made in China 2025 is an effort to completely upgrade Chinese industry. The Chinese government has outlined clear principles establishing the goals of the initiative, including a desire to comprehensively upgrade Chinese industry by making it more efficient so that it can participate in the highest-level global production chains. It also strives to create more innovation-driven manufacturing that emphasizes quality over quantity, environmentally sustainable development, and human capital management. While these are worthy goals for any country, China’s upmarket shift from manufacturing large quantities of inexpensive, low-quality goods to high-tech, high-quality products could disrupt the global market for high-tech goods because of China’s large production capacity. In the same way that inexpensive Chinese manufacturing has shifted labor from the United States to China, an upmarket shift in China’s manufac>GET ANSWER