The Silk Road Economic Belt

By Danny

Since 2010, Chinese cities including Chengdu, Chongqing, Xi’an, Zhengzhou, Wuhan and Yiwu have introduced freight train services to European and Central Asian destinations – particularly as manufacturing moves westward into China. As such, 3PL providers such as DHL, DB Schenker, TNT, Geodis, Hellmann and UPS have launched logistics services to take advantage of this alternate freight transport mode.

As a means to stimulate economic growth, the Chinese President Xi Jinping wants to take this apparent success story of linking China and Europe by rail a step further by revisiting the ancient Silk Road. In late 2013, the Chinese President proposed the idea of a “Silk Road Economic Belt” and has since received agreements from over 20 countries along the proposed route to study and collaborate on such an entity.

According to a map from Chinese publication, Xinhua, the land-based Silk Road Economic Belt will begin in China’s Xi’an, stretching west through Chinese cities Lanzhou, Urumqi, and Khorgas before running southwest across Central Asia, the Middle East and Europe where it will meet up with the maritime Silk Road in Venice, Italy.

The sea-based Maritime Silk Road will run through the Chinese cities of Quanzhou, Guangzhou, Beihai, and Haikou to the Malacca Strait and Indian Ocean and along the Horn of Africa before entering the Red Sea and Mediterranean.

Chinese President Xi Jinping has been promoting the Silk Road Economic Belt concept throughout Asia, the Middle East/Africa and Europe. If the concept is embraced by all potentially affected countries, it could mean an interesting change in global and regional trade as well as logistics dynamics.

At a recently held forum in China to discuss this topic, Tong Daochi, assistant minister of commerce said, “We will focus on expanding open markets and deepening services in customs, quality assurance, e-commerce and transit transportation.” He also noted China would import more energy resources and agricultural products from countries along the route.

Kazakhstan has embraced the concept and has spent heavily on creating its “Western Europe-Western China” road network which is scheduled to be operational in 2015. Logistics providers such as DHL Freight and Agility have established offices in this Central Asian country as growth expectations remain strong thanks to the region’s natural resources and as an emerging market with much potential.

There is great opportunity for this potential trade route. However, not surprisingly parts of the route are politically volatile as well as prone to natural disasters such as earthquakes. Thus, companies will need to be cautioned and be well prepared for such supply chain risks. Finally, if it does indeed become a reality, global trade lane shifts could likely be focussed away from the Americas.