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ONE BELT, ONE ROAD: CONNECTING CHINA TO THE WORLD

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08 Jul 2024

In an ambitious step toward enhancing global trade, the first-ever freight train, loaded with Dutch-made machinery, mineral fuels, pharmaceuticals, optical and medical apparatus, and organic chemicals, was scheduled to depart for China in March 2018. This shipment, part of China's monumental "New Silk Road" initiative, is expected to reach Yiwu, an eastern Chinese city, within 18 days.

The New Silk Road, an expansive trade network project, is a cornerstone of the Chinese government's "One Belt, One Road" initiative announced in 2013. This initiative aims to foster economic collaboration between China, Europe, the Middle East, and Central Asia. With a substantial $40 billion Silk Road Fund, China plans to invest in a comprehensive infrastructure network that includes rail links, highways, shipping routes, and oil and gas pipelines across Eurasia.

The project also offers modern solutions for transporting cargo from Europe to China and vice versa, via strategic locations like Astana, Kazakhstan's capital. Once perceived as one of the most isolated capitals, Astana is now a crucial node in this trade network, with numerous trains transporting a variety of goods primarily from China to Europe.

Historical Context

The concept of the Silk Road dates back centuries to the Han dynasty (207 BCE – 220 CE). The original overland routes were vital trade channels between China and Europe until they diminished in significance when European maritime routes around the Cape of Good Hope emerged. Historically, the Silk Road linked China to Rome, facilitating the exchange of gold, silk, spices, tea, and wool for over two millennia. Marco Polo famously journeyed to China along this route. The contemporary Silk Road initiative seeks to revive and modernize these ancient trading paths.

NUNNER's Role in the New Silk Road

Since autumn 2015, NUNNER has been operating block trains from China to Moscow and Duisburg, offering Full Container Load (FCL) and Less than Container Load (LCL) services with several weekly departures. This dedicated and cost-effective service significantly reduces the time required for ocean freight while being a fraction of the cost of airfreight. The "NUNNER Silk Road" service ensures the fast and economical delivery of valuable freight from China to Western Europe.

As part of China's strategy to strengthen trade and investment links with Europe, China Railway operates services connecting Chinese cities with European destinations such as Madrid and Hamburg. Although the 12,000-mile journey takes approximately two weeks, it is more economical than airfreight and quicker than sea freight. The establishment of routes between China and Amsterdam is part of an overarching strategy to bolster infrastructure ties among China, the Netherlands, and other participating countries, particularly as China seeks to invigorate its economy amidst declining exports and slowing economic growth.

Advantages of the Silk Road Initiative

The "Silk Road" service, run in conjunction with China’s state-run railways, offers multiple advantages:

  • More cost-effective than airfreight and faster than ocean freight.
  • Reliable terminal-to-terminal lead times: 12 days to Moscow and 16 days to Duisburg.
  • Reduced lead time, positively impacting inventory costs and market responsiveness.
  • Flexibility in last-mile delivery.
  • Use of standard 40-foot high cube containers.
  • Daily position updates.
  • Sustainable and environmentally friendly transportation option.
  • Multiple departures per week.

Businesses that deal in heavy goods relative to volume, where airfreight can be prohibitively expensive, stand to benefit substantially from this initiative. Established cargo firms also have growth opportunities via rail transport.

In summary, the global landscape of the "One Belt, One Road" initiative offers significant benefits, positioning it as a transformative force in international trade.

A HIGH-DEMAND SERVICE

Driven by market needs, the “Silk Road” projects aim to deliver optimal value for money, especially in regions where swift product movement to and from European markets is essential. This initiative is largely influenced by customer demand for specific products. The accompanying map illustrating the train route highlights how market demand and the effects of globalization are fueling the resurgence of the historic Silk Road.

EXPANDING TRADE ROUTES

Historically, the renowned trade route from Xian, the ancient capital, connected bustling European markets. In today’s world, China stands as the leading global exporter, with the modern “Silk Road” reestablishing links to these markets. For China, this provides alternative avenues to sustain its economic growth. With its position as the second largest economy globally, it also opens a significant route to import high-value goods from Europe.

PRAISING GLOBALIZATION'S ADVANTAGES

For countries like Kazakhstan, the significance of this project is both political and economic. It allows China to extend its soft power and demonstrate its influence, linking nations from Russia to Spain. There's also a solid business rationale for expanding this trade route, particularly for European companies eager to export to China. Notably, China is the European Union’s second-largest export market.

CREATING EMPLOYMENT

In March 2017, China’s Commerce Minister Zhong Shan announced that the “Silk Road” initiative had generated 180,000 jobs and nearly $1.1 billion in tax revenue along the Belt and Road. Increasingly, Chinese professionals like engineers, crane operators, and steel workers are poised to benefit from the progress of these projects. Likewise, job creation is anticipated in Europe, especially within the Train Management and Logistics sectors.

REDUCING EMISSIONS

As an eco-conscious logistics provider, we continually seek ways to minimize emissions. Addressing China’s pollution challenges is one aspect of this endeavor. While rail cargo is not as environmentally friendly as sea transport, it emits significantly less carbon dioxide (CO2) compared to air transport. Air transportation, responsible for around 7% of total greenhouse gas emissions, faces challenges in equating emissions across different modes of transport due to factors like energy efficiency, load factors, and power sources.

POTENTIAL CHALLENGES WITH THE SILK ROAD

As with any business venture, this initiative comes with its own set of challenges and concerns. Some of the key areas to be mindful of include:

TRADE COMPLIANCE RULES

Encompassing more than sixty countries and several international organizations, the “Silk Road” project presents unparalleled opportunities alongside significant challenges. Non-EU countries have their own trade compliance rules, regulations, and duties that must be navigated.

GEOPOLITICAL AGENDAS

Each Belt and Road partner aims for its industries to thrive, which may pose challenges for China and its partners. Skepticism and distrust have been noted during Beijing’s New “Silk Road” endeavors. For instance, Australia declined China’s invitation to join this globalization strategy during Premier Li Keqiang’s visit.

SECURITY CONCERNS

Numerous supply chain risks need to be considered. Zhu Feng, dean of the Institute of International Affairs at Nanjing University, has stated, “Security is the most important challenge facing Belt and Road.” This issue is not about theft or damage but rather the unique combination of challenges and risks each nation along the “Silk Road” faces. These include macroeconomic challenges, exchange-rate volatility, high debt burdens, and non-diversified, unsustainable economic structures. Additionally, the complex and varied laws, regulations, and rules affecting the business environment in each country add to the complexity. It is almost impossible for Chinese and European enterprises to fully understand each issue before engaging. While the challenges are multifaceted, the strategy for overcoming them is straightforward if all parties collaborate effectively.

CONCLUSION

As the primary driver of the “One Belt, One Road” initiative, China must ensure that all commercial activities are conducted reliably. Host nations' governments must efficiently manage and coordinate sub-national efforts while ensuring fair and productive competition. Realizing the “Silk Road” initiative will not be easy. However, China possesses all the resources necessary for success. If these resources are utilized in a manner that is transparent, eco-friendly, and honest, China and the other participating nations stand to gain substantial benefits.

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