New Silk Road: how the logistics industry can benefit
Opportunities for logistics: China wants to create infrastructure and orders with the New Silk Road. What is the current status of this global megaproject and what do European logistics experts have to say about it?
Advantages of the new Silk Road
With the New Silk Road project, also known as the Belt and Road Initiative (BRI), China is breathing new life into old trade routes. The transportation of goods by road, rail and water between Asia, Africa and Europe is to become easier and safer. This will create economic opportunities, particularly for the logistics and transportation sector. But the initial euphoria has faded. How can logistics still benefit?
What advantages does the Chinese initiative offer logistics in Europe?
Geopolitical developments, above all the Russian war against Ukraine, have changed a lot in recent years. Despite the current conditions, more rather than less goods will pass through the transport routes originally initiated by China in the future. According to Statista, the number of trains has more than doubled from 8225 to 17,000 since 2019. In addition to the Iron Silk Road as part of the BRI, investments as part of the EU-Asia connectivity strategy and along the Europe-Caucasus-Asia transport corridor (TRACECA) are now also contributing to this.
China continues to invest
The BRI is celebrating a milestone birthday. China has been driving the project forward for ten years. 149 countries, around 70 percent of all countries in the world, are committed to the initiative, which is far more than just an infrastructure project with countless political, scientific and cultural collaborations. With the right strategy, logistics companies can continue to benefit from the idea of “One Belt, One Road” —OBOR for short—in the future. With the new Silk Road, China wants to make the growing freight traffic even more attractive ten years on.
The project includes:
- Free trade agreements
- special economic zones
- Customs clearance processes
“In the first half of 2023, China exported more to the BRI countries than to the USA, Japan and the EU combined for the first time,” says Andreas Breinbauer, Rector and Head of the Logistics and Transport Management degree programs at the BFI Vienna University of Applied Sciences. “The promising e-commerce trade with the BRI countries has grown even faster. From 2019 to 2021, it increased elevenfold and reached a total volume of 228 billion US dollars.”
What is the right strategy for transportation between Europe and China?
Logistics companies are reacting to take advantage of their opportunities. Logistics service provider Rhenus, for example, has expanded its international network. More and more transports along the new Silk Road are connecting Europe with China, the CIS states and Russia from door to door. “We expect the demand for transporting containerized goods and goods that we connect with the transport networks in Europe along the Middle Corridor of the classic Silk Road to increase in the coming years,” explains Tobias Bartz, CEO of the Rhenus Group, in a press release about the expansion of a terminal in Uzbekistan. The company is not only active in this country, but also in the neighboring states of Kazakhstan, the southern Caucasus and the Asia-Pacific region with its own companies.
Silk Road challenges logistics providers
The New Silk Road offers potential, but it does not make things easy for logistics companies. “More than ever, it presents companies with major challenges. If only because of the geographical, cultural and economic differences. As the world's leading trade fair, transport logistic in Munich will be a platform where many participants can network and exchange ideas over short distances,” explains Stefan Rummel, Managing Director of Messe München. Companies can make suitable business contacts in China and third markets in Munich.
Landing logistics contracts from the New Silk Road project is still difficult, especially for foreign companies. According to China's described goals for the New Silk Road, the construction is intended to increase financial integrity and cohesion, while at the same time China wants to strengthen its political influence and open up new sales markets. The euphoria surrounding the expansion of the Silk Road has waned considerably.
In “Wirtschaft und Management”, Silk Road expert Breinbauer underpins this impression in May 2024: “The win-win situation repeatedly put forward by the official side has not materialized. Instead, Chinese money is being used to support Chinese projects and, in particular, Chinese state-owned companies. And in fact, it is mainly, but not only, Chinese companies that benefit from the investments.”
Pakistan is a prime example of the new Silk Road
China has invested in the CPEC corridor (China-Pakistan Economic Corridor) for access to the Indian Ocean via Pakistan. Over 2,000 kilometers of road and rail run from Xinjiang in western China to Balochistan. Ali Murad, Head of the Department of Political Science at the University of Malakand, Pakistan at the German Institute of Development and Sustainability (IDOS), summarizes the last ten years: “A total of 26 projects with an investment volume of USD 17 billion have already been completed. Currently, 30 projects worth USD 8.5 billion are underway and a further 36 projects worth USD 28.4 billion are planned. So far, CPEC projects in Pakistan have directly or indirectly created 200,000 jobs, added more than 6,000 MW to the national grid, built around 809 km of road infrastructure and installed 886 km of power lines.”
What influence does the BRI have on per capita income?
For a long time, from 2013-2018, Europe was able to attract the most foreign direct investments and construction contracts, Breinbauer looks back on ten years of the New Silk Road Initiative. According to his research, the transportation sector accounts for around 16 percent worldwide. Overall, the focus of investment today is on other continents.
According to Breinbauer's research, around one in two of the approximately 150 countries involved in the BRI have low or very low incomes. In order to drive these countries forward economically, a functioning infrastructure must first be created. There is a great need for investment between China and Europe, which cannot be met without Chinese support.
In Europe, 27 out of 47 countries are committed to the BRI by the end of 2023, 17 of which are EU members. Even if China is pursuing its own interests with the Silk Road project, there are benefits for them and their logistics:
- Establishing regional value chains
- Advancing industrialization
- Investments in crisis countries to stabilize individual regions
The new Silk Road is not dead, just different
In the last ten years, China has invested around 900 billion dollars as part of the Belt and Road Initiative. Matthias Kamp, editor of the Neue Züricher Zeitung, draws a conclusion in an article on the 10th anniversary of the Silk Road in October 20123: “After initial failures with sometimes gigantic and economically unsustainable infrastructure projects that caused national debt to explode in many countries, some Western observers had already written off the BRI. But Beijing's new Silk Road is not dead, it has merely changed its shape.”