Logistics and the Belt and Road Initiative – a market study by Militzer & Münch | Global Trade Magazine
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  October 26th, 2018 | Written by

Logistics and the Belt and Road Initiative – a market study by Militzer & Münch

The project team analyzed six corridors that are essential to the New Silk Road

Sharelines

  • "Big Chinese enterprises are gradually conquering the world market and developing their own supply chains.”
  • For trade along the New Silk Road, this means mainly one thing: growth.

In a market analysis, the Militzer & Münch Group took a close look at the logistics market along the New Silk Road with the objective to get a deeper insight into the decision processes of logistics projects in China, and to determine the share logistics services have in the Belt and Road Initiative (BRI). One central result: in China, for 80 percent of logistics services within BRI, Chinese enterprises are contracted.

 With the BRI project, also referred to as the New Silk Road, China is investing massively in the development and extension of intercontinental trade and infrastructure networks between Europe, Asia and Africa. The total sum invested is estimated to have reached about 1.1 trillion US dollars at this time. For trade along the New Silk Road, this means mainly one thing: growth. Growth that the logistics sector can have its share of, too. For one, logisticians can be involved in infrastructure projects by transporting machinery or construction; and then, once infrastructure has been modernized, they profit from an increase in transport volumes.

Commissioned by Militzer & Münch, a project team of students from the St. Gallen University of Applied Sciences and the Shanghai University conducted numerous personal interviews in Shanghai as well as phone interviews with decision makers from the logistics sector. “The cooperation with St. Gallen University and the Shanghai University offered the ideal local approach for intensive research in China”, says Christoph Hollenstein, Head of Group Controlling at M&M Militzer & Münch International Holding AG and in charge of the project. “Thinking outside one’s own structures and networks helps – which is why the results of this study are very interesting for us but also for all other logistics companies operating on the Europe-China trade lane.”

Militzer & Münch observes that there is currently a shift of decision makers in the global logistics market. “Today, logistics is mostly decided upon in Europe and the USA”, says Dr. Lothar Thoma, CEO M&M Militzer & Münch International Holding AG. “In the future, these decisions will come increasingly from China, as big Chinese enterprises are gradually conquering the world market and developing their own supply chains.”

 

Contracts go to logistics companies in China

In China, 80 percent of logistics contracts within the framework of BRI are awarded to

Chinese enterprises. “There is little chance for European logistics companies in China directly – opportunities present themselves especially in those countries where China is not yet or only scarcely active”, Dr. Lothar Thoma says. “We profit from these opportunities in Kazakhstan and in Central Asia, for instance.”

To be awarded a contract in China, some peculiarities apply: among others, a ten percent down-payment on the contract sum has to be made, the share capital of the logistician is reviewed, as are his business reports and his credit rating. The size of the company and the cost of the service are taken into account, too.

Another important factor in China is trust in the logistics services provider, which grows from long years of relationship and partnership. Among others, developing partnerships with state-owned enterprises in China or with Chinese enterprises that are networked with state-owned entities is crucial here. Also helpful when developing business relations is when third parties are involved, for instance when Chinese enterprises outsource their logistics.

Investments in projects along six BRI corridors 

The project team compiled significant data on the most promising investment regions along six BRI corridors and on the share of BRI projects. As a basis, the team assumed investments in the amount of 1.067 trillion USD and 420 BRI projects.

 

The project team analyzed six corridors that are essential to the New Silk Road:

-The New Eurasian Land Bridge economic corridor is regarded as the most important corridor. It connects China to European countries with high GNP and high market potential. Along this corridor, general cargo is transported mainly between China and Europe as well as between China and Kazakhstan, but there are also project transports between China and Kazakhstan.

-The China – Central Asia – West Asia economic corridor

-The China – Mongolia – Russia economic corridor

-The China – Pakistan economic corridor

-The Bangladesh – China – Myanmar economic corridor

-The China – Indochina Peninsula economic corridor

A central result: The Middle East is the region with the highest investments – 43 percent of the BRI investments flow, among others, into the development of infrastructure. 23 percent of the BRI funds are invested in South East Asia, and 12 percent in Russia. Thus, the finding that most BRI-related projects are carried out in these regions is conclusive, too. First rank is held by South East Asia, accounting for 27 percent, followed, at 21 percent, by South Asia, then come the Middle East (18 percent) and Russia (7 percent).

Most projects – 59 percent – are geared towards the development of traffic infrastructure. Energy infrastructure as second most important sector amounts to 17 percent. These two sectors also account for the highest investment volumes.

 

 M&M Militzer & Münch at a glance 

The Militzer & Münch Group employs a staff of about 2,000 at 100 locations in around 30 countries. Strategic partnerships in numerous other countries complete the dense network. Militzer & Münch offers worldwide air and sea freight services as well as road and rail transportsand project logistics along the East-West axis in Eurasia and North Africa. The Group operates with a dense network of branch offices in Eastern Europe, the CIS, the Middle East and the Far East as well as in the Maghreb countries. The head office of the company that goes back to 1880 is in Sankt Gallen, Switzerland.

Source: https://www.mumnet.com/en/mediacenter/article/logistics-and-the-belt-and-road-initiative/

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