The Old Silk Road and the New Economic Silk Belt

This is China’s attempt to step up its role in global affairs, and to export China’s production capacity in industries such as construction materials, transportation equipment, roads and rails.

The first blog I wrote for Supply Chain Management Review in April, 2012 was about the first global supply chain, otherwise known as the Silk Road. Starting around 200 BC and extending 4,000 miles, the Silk Road got its name from the lucrative Chinese silk trade and tea trade in exchange for spices, nuts and jewels from Europe and the Middle East.

In addition, various science and technology innovations were traded along with religious ideas and the bubonic plague. The Silk Road was a significant factor in the development of modern civilizations.
A new Silk Road is now being built in China.

The One Belt and One Road Initiative is a development strategy and framework that focuses on connecting countries primarily in Eurasia. There are two main components: the land-based “Silk Road Economic Belt” (SREB) and oceangoing “Maritime Silk Road” (MSR).

The details released so far by China’s official media outlets show the “Belt” as a planned network of overland road and rail routes, oil and natural gas pipelines, and other infrastructure projects that will stretch from Xi’an in central China, through Central Asia, and ultimately reach as far as Moscow, Rotterdam, and Venice. The Maritime Silk Road is a complementary initiative aimed at investing and fostering collaboration in Southeast Asia, Oceania, and North Africa, through several contiguous bodies of water – the South China Sea, the South Pacific, and the Indian Ocean.

The construction of the belt will also relieve China’s industrial overcapacity and ease the entry of Chinese goods into regional markets. This will help China with its projected industrial growth rates and improve unemployment.

This is China’s attempt to step up its role in global affairs, and to export China’s production capacity in industries such as construction materials, transportation equipment, roads and rails. Chinese President Xi Jinping, has made the program a centerpiece of both his foreign policy and domestic economic strategy. The initiatives are expected to be highlighted in China’s 13th Five-Year Plan, which will go through 2020 and guide national investment strategy throughout that period.

So what does this mean for Supply Chain professionals?

There is no doubt that improving transportation infrastructure helps to facilitate trade and in turn, that will help companies to improve getting their products to market. As we see more and more cooperative and physical trade initiatives such as ASEAN, NAFTA, the EC and now the Silk Belt, we can expect to see global trade continue to flourish.  There will be more need for global manufacturing strategies, international transportation companies and professionals as well as trade compliance management.