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China’s Digital Silk Road (DSR), which aims to create digital integration by means of a single platform for all digital communication along the Belt Road Initiative (BRI), will have the knock-on effect of creating dual digital ecosystems beyond the current focus within the maritime sector on smart ports and shipping.
The DSR platform aims to facilitate integration of all service providers that want to conduct trade along the BRI and with China. In simple terms, it takes the discussion away from the idea of smart ports and/or cities and looks instead towards a digital regional trade ecosystem, which sits within a global trade ecosystem.
This development has consequences for logistics and supply chain providers. It will disrupt the current digital developments being undertaken by the maritime sector, particularly the current trend that has created data silos within a port ecosystem. This is especially important when one considers that the merge points of the Silk Road Economic Belt and the 21st Century Maritime Silk Road are largely ports, both maritime and inland dry ports.
The core component of the strategy for the merge points is not just the development of a physical infrastructure, it also includes a digital framework. This IT infrastructure will allow China to digitally connect with countries with whom they trade, but with a requirement that this should result in seamless and integrated trade through improved information and communications.
The centrality of cyber space and digitalisation to the country’s overall development goals was highlighted by Xi Jinping’s announcement at the first BRI summit in 2017, where he stated that Big Data would be integrated into the BRI through the development of a ‘21st century Digital Silk Road’.
The DSR will not only bring advanced IT infrastructure to BRI countries, such as broadband, e-commerce hubs and smart cities, but will also highlight the need for a communication interface to be established between maritime and land-based digital platforms along the BRI to create digital integration.
Strategically, China’s external geo-political arrangements will re-align as it continues its own growth, but in a manner that enforces participants to comply with China’s IT standards. The DSR is increasingly playing a central role in the development of a comprehensive package that includes policy dialogue, financial support, unimpeded trade, and people-to-people exchange. This ‘team China’ approach is to have all end user devices/services interfacing along a central/common digital infrastructure corridor that includes cloud-based platforms.
The initiative is facing increasing barriers, not just the lack of a central coordination mechanism but also rising geo-political tensions as to the commercial intent of cross-border projects and trade.
Increased trade and container traffic between Europe and Asia over the last few years has led to increased planning requirements for maritime logistics. With this came the need for processes to manage freight movements using ocean carriage. Digitalisation is seen as an answer to the challenges associated with the growing requirements for transparency and visibility in cargo movement.
However, the development of the DSR puts additional pressure on the maritime industry to design, develop, and implement a sustainable digital system that not only increases port/shipping operational efficiency, but one that is integrated into Country-to-Country trade. Whilst logistics and supply chain management has shifted towards the digital ‘fourth revolution’ by enabling greater cargo visibility and transparency, it comes up short when considering last and first mile logistics through multi-modal transport systems.
This is increasingly evident when you consider that China has moved its maritime digital systems away from dealing with trans-shipment ports to focus more on gateway ports. The merge points of the Belt and Road are essentially gateway ports connecting with multi-modal transport options that moves smart port development beyond the traditional port to more of a port delivery optimisation approach.
The size of e-commerce within China has seen a shift from FCL (Full Container Load) to LCL (Less than Container Load) freight movements, which requires a greater level of cargo visibility, traceability and monitoring than before. In the main, smart maritime digitisation and digitalisation does not fully provide the solution to current information and data gaps between participants along the supply and logistics chain.
Unfortunately, the geo-political tension between China and much of Europe has crystalised debate around how digital integration is to take place within the trading ecosystem with China.
Strategic questions include the choice between operation of a single digital platform, or a multitude of platforms that have Application Programming Interface (API) and Electronic Data Interchange (EDI) standards that would allow differing operating data systems to communicate with each other. That also raises the issue of how a cyber network that connects data points and allows seamless interoperability within a network’s ecosystem would be designed.
These issues require a greater level of trust in dealing with large-scale data processing and fusion, data storage and operability across sovereign borders. However, the answer to these questions feed into a wider discussion around cyber security, IP protection, software ownership and trust.
Until countries and trade participants cooperate on API and EDI standards and have a common approach to such systems, the biggest issue confronting digital maritime development will continue to be the existence of this communication gap. Unless this is resolved, we are on a path to two separate trade digital ecosystems, with the associated problem of how best to exchange data between China’s DSR and Western-aligned digital trade platforms.
This article has been adapted from a chapter written by Andre Wheeler in the recently released book ‘The Digital Transformation of Logistics: Demystifying Impacts of the Fourth Industrial Revolution’ (Kern & Sullivan, 2021), which offers a critical look at China’s Digital Silk Road initiative and the wider impact of digitalisation on logistics and supply chains.