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October 30, 2015

Voyager News

All roads lead to Shanghai

Until Chinese Premier Xi Jingping’s visit to the UK last week, it was probably fair to say that the ‘One Belt, One Road’ (OBOR) initiative was more an abstract idea than a solid commitment to many in the shipping industry.
Any confusion might have been caused by the project’s name – there are at least three – but the concept is breathtakingly simple.

The plan calls for the development of the Silk Road Economic Belt; principally a land bridge in Central Asia linking China to Continental Europe (the belt) and a maritime ‘Silk Road’, which will further develop shipping infrastructure between China and Southeast Asia, the Indian subcontinent, Middle East, Africa and Europe.

The OBOR route will touch 65 countries with a combined population of 4.4bn, almost two thirds of the global population, taking advantage of rapid forecast growth of a consumer-rich middle class across Asia. China’s government believes it can increase trade with nations involved to more than $2.5trn in 10 years from the 2014 level of $1.1trn.

What is less clear is whether OBOR is a policy goal or an economic strategy. There is consensus that it is a demonstration of an increasingly confident country projecting ‘soft power’ rather than the rather blunt diplomacy it previously exhibited.

Even before Mr Xi had departed the UK, the impact was being felt. Among the publicised deals, communications provider Inmarsat signed a Memorandum of Understanding with China Transport Telecommunication & Information Centre to deliver communications services throughout China as well as on the OBOR route.

Custodian of dry bulk and tanker market data, the Baltic Exchange said it would start to publish a container freight index from a Chinese government-owned enterprise assessing routes between Ningbo, the Middle East, the Mediterranean and Europe under the same initiative.

China will use OBOR to export its knowledge, know-how and influence, both physical and intellectual but its aims appear to be a moving target. Former China government officials say the vision began quite modestly as a means to deal with the overcapacity in the country’s steel and manufacturing sectors by increasing exports.

When first announced, OBOR appeared to be aimed more at cementing relationships with China’s central Asian and Middle Eastern neighbours than forging new ties of friendship with Europe or the UK specifically.  Now it appears the project’s main goal is to help China export excess infrastructure capacity amid slowing domestic economic growth. The full embrace of the end market is a more recent development but the implication is that all are welcome to take a share of Chinese exports.

Largesse is certainly being doled out. Last year, Beijing kicked off the plan by pledging $46bn to an infrastructure fund and in April this year it announced a capital injection of more than $60bn into two policy banks to beef up lending capacity. This makes it the largest programme of economic diplomacy since the US-led Marshall Plan of post-war reconstruction in Europe, covering dozens of countries with a total population of over 3bn people.

Demand is there too. By some estimates, Asia alone needs to add $11trillion worth of urban infrastructure by 2030 and countries including Thailand and Indonesia suffer from a shortfall of domestic capital – the former is already working with China on rail infrastructure. During his visit, the Chinese premier announced a total of £30bn in investment in the UK.
And as the foundations have been laid, so the definition of OBOR has widened. Projects already on the drawing board have been co-opted into the new scheme by bureaucrats and businesspeople are scrambling to peg their plans to the policy.

Mr Xi told the UK-China Business Summit “One Belt, One Road is open. It’s a broad circle of friends through Africa and Eurasia that every interested country can join. It is multi-faceted and covers various areas of co-operation, and there are various ways of co-operation.”

Mr Xi appeared to define OBOR as a concept that could bring prosperity to many economies, rather than merely a conventional trade project. “The Belt and Road Initiative connects the Asia Pacific economic circle in the East, and the European economic circle in the West, and there are more than 60 countries along that traditional route,” he told a Downing Street press conference.
The programme has critics too, who chiefly point out that China is asserting economic, diplomatic and military leadership in Asia just as its own economy is faltering, establishing a new sphere of influence with some unthreatening brand promotion.

However much of OBOR gets built, the UK’s maritime leaders clearly felt that the time was right to get onboard wherever the road was leading. And they are not restricting their interest to the UK. In a few weeks the global shipping roadshow arrives in Shanghai for the Marintec 2015 exhibition.

Among the hundreds of exhibitors will be GNS, which will be showcasing Hang Xing Zhe, its chart updating service with software written in Simplified Chinese, specifically designed for the China market.
This new service will help vessels with Chinese-speaking crews to reduce navigation-related deficiencies and fines, which were yet again the top category for shortcomings in the 2014 Annual Report from the Paris Memorandum of Understanding on Port State Control.

GNS expects Hang Xing Zhe to become the standard for Chinese ships sailing within Asia and internationally, as it includes Chinese Maritime Safety Administration and Naval Guarantee Department Notice to Mariners, as well as NtMs from Hong Kong, British Admiralty as well as updates for many other national chart series.

Poster city for China’s stunning economic growth, there is nonetheless some timely advice for Shanghai as it seeks to become the centrepiece of the new global economic order.
Just prior to the Marintec show, Lloyd’s List reported the findings of a Shanghai International Shipping Institute study which assessed the progress of its ambitious plans to rival Hong Kong, Singapore and London.

In an interesting commentary on the sweeping scale of OBOR, the SISI found that among the key issues facing Shanghai were policy innovation and a lack of reform. Though innovative measures had come into force, they were still at pilot stage and were unable to deliver the expected effect in forcing administrative reforms, the report said, and more work is needed.

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