Global infrastructure The New Silk Road

China’s Belt and Road Initiative is the most ambitious global infrastructure project ever seen. By connecting more than two-thirds of the world’s population, it could transform global trade and logistics.

Chengdu is the starting point of the new silk road. (Photo: Shutterstock)

It’s almost 11,000 kilometres from the Chinese city of Chengdu to Rotterdam, in the Netherlands. By sea, the journey takes 45 days, but by rail, it now takes just 15, at a quarter the cost of air freight. Since 2017, the Chengdu-Tilburg-Rotterdam-Express has been running five times a week, bringing clothes and electronics to Europe and returning to China with German cars, French wine or Italian textiles.

It’s part of a rapidly expanding rail network that stretches from China through Afghanistan, Kazakhstan and into Europe. In turn, this network is part of the most ambitious infrastructure project of all time – China’s Belt and Road Initiative (BRI).

A brighter future together

Announced by the Chinese government in 2013, it’s also been called the ‘New Silk Road’, after the ancient trade route that once brought oriental silks from China to the West – and other goods in the opposite direction. The BRI has been introduced to “enhance regional connectivity and embrace a brighter future together”, according to Beijing.

It aims to connect more than two-thirds of the global population via continuous networks of roads, railways, shipping routes and ports. The ‘belt’ comprises a land route between China, Central and South Asia and Europe, like the one taken by the Chengdu-Tilburg-Rotterdam-Express; the ‘road’ (slightly confusingly) refers to a network of shipping lanes linking China to the nations of South East Asia, the Gulf Countries, North Africa, and on to Europe.

Global projects underway

Around the world, numerous BRI projects have already begun. One of the key elements of the rail route is a huge dry port opened in Kazakhstan on the border with China. At the end of 2017, work began on a railway line between Budapest and Belgrade, which will eventually form an important connection to the port of Piraeus in Greece, which is being refurbished under BRI. Ports on the Caspian Sea are undergoing expansion, while rail projects with Chinese involvement are underway across Southeast Asia. The China-Pakistan Economic Corridor, a $57 billion collection of infrastructure projects linking the two countries, is a major pillar of the BRI.

By the time it’s completed in 2049, the New Silk Road is expected to cost almost $1 trillion. More than 70 countries have signed on so far and more could still join; the Initiative is open to all, regardless of geography. The IMF says “it could fill large and long-standing infrastructure gaps in partner countries, boosting their growth prospects, strengthening supply chains and trade and increasing employment.”

Reduced shipping times and trade costs

The effect on global logistics could also be significant. According to the World Bank, BRI will bring a reduction in shipping times of between 1.2% and 2.5% across all country pairs in the world. Aggregate trade costs will fall by 1.1-2.2% across the globe.

With current infrastructure, rail transport from China to Europe may be twice as fast as shipping, but it’s also twice as expensive. But by improving capacity and network, “the time and cost reduction will have significant consequences for certain goods, impacting the mode choice and total flows of international trade,” says the World Bank.

Such a monumental project also presents significant challenges. With such a diverse range of countries involved, import processes, for example, still vary wildly. In Central Asia, it can take up to 50 days to comply with all procedures to import goods. In G7 countries, it’s less than ten.

Beginning a journey

But as Deloitte says, while BRI is undoubtedly “a much-needed step that is kick-starting a new cycle of infrastructure spending”, it is perhaps more accurate to view BRI as a journey, rather than a series of one-off infrastructure projects. And that journey is very much just beginning.

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