China’s 2018 Global Shipping Ambitions Could Impact Supply Chains

556

Chinese president Xi Jinping, who was elected in November of 2012, entered his role with an ambitious view for China. While the Chinese economy went from marginal to the global leader in trade in just 40 years, its political position was primarily quiet. Now China’s participation is paramount to global peace and development.

World trade climate

The nationalist economic situation saw a major shift in their agenda in 2016 following the election of Donald Trump to Brexit. While global trade is certainly not a tide that lifts all boats, on aggregate, it benefits the global economy from business development to increasing living standards and buying power.

As trade deals such as NAFTA fall under threat in the western hemisphere, the sentiment in the east is going in the other direction.

One Belt One Road Initiative

Xi Jinping’s ambition to advance China’s economy even further manifests itself in the massive investments the country is making in shipping infrastructure through the One Belt One Road Initiative. It seeks to modernize the ancient trade routes of the Silk Road that once facilitated trading in the east centuries ago. These investments range from port complexes, roadways and rail systems.

However, Carrie Gracie of the BBC, says that critics from India, Japan and Central Asia see the One Belt One Road Initiative as more than just economic development, but also geo-political posturing to further strengthen military capabilities and influence in the region.

Chinese global participation

In 2017, China poured over $20 billion into ship financing alone. The country seeks to assume the position of the world maritime leader. At present it controls 40% of the world’s shipbuilding capacity.

The Wall Street Journal says that China is urging on its bullish efforts to become a mainstream financier of the world’s vessel supply (both new and used).

Banker’s view

European banks such as BNP Paribas still hold the majority of shipping portfolios. However, some of the heavy hitting European banks have withdrawn from the industry. This was primarily due to significant downturns in the industry from overcapacity post- recession. Shipping is a cyclical industry and experts predict China will inevitably have some defaults.

Investment trend

The present trend in trade economics is imminently reflected through investment in infrastructure and industry financing. While certain economic powers are pulling away from trade and closing their doors, others are working tirelessly to pry them open.

This year will be an interesting one for trade economics and supply chain strategists, as changes in trade policy and infrastructure development will have mixed advantages for sourcing and logistics operations.

Did you subscribe for our daily newsletter?

It’s Free! Click here to Subscribe!

Source: Freight Waves

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.