chinese maritime silk road

The True Value of China’s Maritime Silk Road

China, with its deep pockets, has made important announcements on a series of major initiatives, that are designed “to place China at the center of Asia’s economic future.” These included the creation of a $100 billion fund for major projects and a 21st Century Silk Road initiatives generally known as the Silk Road Economic Belt. During APEC summit China’s President Xi Jinping announced a $40 billion fund for improving ports and infrastructure along the Silk Road. Earlier 21 Asian countries including China and India had launched a multilateral Asian Infrastructure Investment Bank (AIIB) to facilitate further cooperation on the plan.

China has invested millions of dollar in developing the Gwadar port facility in Pakistan in the Arabian Sea, to secured itself a sea-lane to the Indian Ocean. The Gwadar port’s strategic location connects China to the Arabian Sea and the Strait of Hormuz – a gateway for one third of the world’s traded oil. This approach can be used to provide a steady supply of oil to China overland, through an expanded Karakoram Highway, and serve a significant supply of cargo and oil, to both China and Pakistan.

China has also developed a project to finance a shipping canal across the Isthumas of Kra in Thailand, that would provide an alternate link between the Indian and Pacific Oceans. The project is expected to cost approximately $20 billion and will shorten the sea passage to nearly 2400 kilometers.

If a crisis were to erupt in China’s relations with Japan, India, or the United States, China may face the greatest strategic vulnerability in the Malacca Strait, a major outlet for Chinese cargo headed to the high seas. To address this vulnerability, China needs sea routes where it can operate freely and independently of this weakness. A maritime silk road – joining China with the Indian Ocean and the Mediterranean Sea with a safe passage, is regarded as a major national priority for Chinese officials.

shipping container contributed to globalization

Rising Global GDP Leads to Increase in Demand for Containers

With most exports of manufactured consumer goods, such as electronics, furniture and garments, being transported around the world in cargo containers; leading companies like Alibaba and Amazon are breaking-down barriers to international trade and commerce. In doing so, the need for worldwide maritime logistics has become increasingly important to them, and the global economy.

The rising demand for shipping services has companies focused on efficient capacity for maritime logistics. It goes without saying that if world economic growth increases in 2015, then it can be expected that containerized trade growth should increase next year (2016), as well.

At the moment, more than 95 percent of the United States’ import-export shipboard cargo is transported in shipping containers. According to the U.S. Department of Homeland Security, there are more than 108 million containers worldwide and it is estimated that there are approximately 200 million “shipboard trips” to international seaports; annually.

On the global scale, the Wall Street Journal report that China’s container ports have registered their biggest gains in port-handling volumes, as a result of America’s economic growth and European economic recovery; in 2014. After analyzing the last month of Q3 2014, the Wall Street Journal discovered and reported that:

The traffic at Chinese coastal container ports, which number more than a dozen, grew 6% in September. The figures showed exports rising 15.3 percent in September from a year earlier, exceeding August’s 9.4 percent growth. These results were also higher than the median forecast of 12.5 percent by The Wall Street Journal’s poll of 15 economists. China’s imports in September rose 7 percent from a year earlier, rebounding from a 2.4 percent decline in August, according to data from the General Administration of Customs.

While global shipping has started to rebound, this should do well for container investing, manufacturing and the global economy. According to Alphaliner, the global supply for containers is projected to increase to nearly 225 million TEU by the end of 2016.

Combining all individual economies worldwide, global gross domestic product (GDP) is a key indicator for the global economy. And, according to industry analysts, an increase in global GDP will lead to a rise in container demand and make shipping containers an even more appealing investment.

An increase in global GDP leads to container demand growth by two or three times.- Helane Becker, Analyst

When looking at the gross domestic product of selected global regions, it is obvious that GDP is highest in industrialized countries.