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Is China’s Belt Road Initiative the start of a new Cold War?

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Whilst there has been much commentary around the Belt Road Initiative (BRI) and its geopolitical intentions, not much has been said about the way the Digital Silk Road is seen as being essential to deliver the BRI outcomes. To date, much commentary has focused on the development of smart port technology and the new era of the digital supply chain. Enabling port activities via progress in digitisation has progressed the development of automation, greater supply chain visibility and efficiency through the digitalisation of manual work systems. Whilst ports such as Singapore and Rotterdam espouse their leadership in this arena, there are several other great initiatives pursuing this dream of connecting ports to the global supply chain. These smart port initiatives aim to optimise operations through enabling just in time operations as well as acting as information centres that enables optimised transport mode choices that connect with the port.

The digital revolution has improved supply chain visibility and transparency, enabled through IoT and data generation. Running parallel to these smart port developments has been a progression to smart shipping and smart cities. These developments soon came to highlight that independent data silos were being created when the need was for these platforms to communicate with each other. As a result, bodies such as the Smart Maritime Council were born. It is now shaping the discussion around interoperability, standardisation and harmonisation of the digital space within the maritime sector.

With the realisation that the new world supply chain is not based on knowledge but on data and information, the discussion is once again shifting. As the port and supply chain moves to AI operations solutions, understanding grows that the more data one receives enables development of efficient algorithms that leads to more efficient automation. For this to happen, business needs real-time data access that the algorithm ensures interoperability in terms of interoperability and integration of data points. The pursuit of data points has seen the emergence of shipping digital consortia, such as Global Shipping Business Network (GSBN) and TradeLens. As these consortia strive for the holy grail of an integrated digital shipping platform, tensions between the main players has grown as well.

Discussion has recognised that all this activity takes place within an ecosystem. (I remember using thus phrase a couple of years back, only to be told that it was a “nonsense term”). As with all ecosystems, there needs to be a level cooperation and collaboration for all entities to survive. In the case of smart ports / cities / shipping, this level of collaboration is required around digitalisation.

What has this got to do with China’s BRI?

As a reminder, the BRI represents a significant shift in supply chain and logistics management. Many failed to see that it is not just an infrastructure connectivity strategy. It is a means by which China is restoring the old Silk Road that includes integrating maritime and land-based transportation and logistics routes. The inland Belt and the maritime Road converge on key port infrastructure through a co-ordinated pairing of maritime/port/land transport routes.

China recognised that this convergence of transport modes highlighted the major weakness in digital initiatives towards smart port technology as early as 2015. Much of port automation / maritime digital development was taking place within the context of transhipment facilities, but BRI called for a new port ecosystem as its focus shifted to gateway ports. This ecosystem moved from just maritime shipping and port but to services and facilities that connects to inland transport hubs / dry ports and end markets. These are industries and supply chain nodes that are seamlessly connected by physical and digital elements. These gateway ports help move supply chain and logistics towards first and last mile considerations where other costs have a profound effect on final product cost.

This realisation that there is a lack of seamless connectivity coupled with poor infrastructure that will challenge smart port and associated trade and logistics development led to the first iteration of the Digital Silk Road (DSR) in 2015. The DSR includes a broad set of Chinese public policies, ICT infrastructure investments that supports the BRI strategy. Since its inception, the DSR has extended beyond simply rolling out fibre optic cable and now includes network equipment, technology and facilitating software in the form of 5G networks. The DSR plan was reformulated in November 2019, with the focus on building smart ports that incorporate integrated smart management and operations technologies. This period saw China establish its own technological standards and principles of cyber-sovereignty.

The new Cold War?

The West seems to have paid little attention to these developments, until 2019, when issues of cyber security were being raised by the US to stall China’s progress. The debate revolves around 5G and Chinese network equipment suppliers. With the USA pushing for a ban on Huawei, the new world economic order appears to be splitting into two competing market systems. The US led market and digital supply chain is based on the philosophy of an open and transparent network that enables trade. Central to this is the use of the GPS navigation system to track and trace. On the other hand, China has opted for a closed ICT network that uses its own BeiDou satellite tracking systems. Some argue, it is this difference in approach that has given China leadership in 5G development, so much so, that they are now looking at 6G. Rather than going into the political defence of either one of these approaches, it is prudent to say that all systems present ethical and human rights issues. What is true to say, is that the two emerging platforms appear to be creating two trade worlds, and the lack of digital integration / interoperability will create a new set of problems for trade.

So, what does this mean for supply chain and logistics service providers?

The smart port of tomorrow that wants to engage with global trade and supply chains, may have to invest in two parallel ICT universes, which can be expensive and cumbersome. This is contrary to the calls for an integrated and seamless technology base that will allow movement of product and containers from vessels to port to land based transport. The holy grail of digitalisation is to reduce total cost of the supply chain through optimal asset utilisation, lower inventory costs through efficient cargo management and visibility of the entire value chain from manufacture to end user.

Will this technology cold war persist is a matter for conjecture. Unless the geo-political issues can be resolved and a way found that will allow a secure level of interoperability between the two main players, those in supply chain and logistics need to develop methods to work with two ICT platforms or decide on what markets they want to service.

     
Andre Wheeler

CEO of Asia Pacific Connex with more than 20 years’ experience in international business, with a diverse network throughout the USA, Asia, SE Asia , Africa and the United Kingdom. Holding a B. Science (Hons) degree and an MBA, he is currently working towards his Doctorate on the Impact of the China One Belt One Road initiative. Andre has expertise in oil/gas, construction, marine services and mining

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