The aim of the chapter is to propose a methodology to illustrate the cost and time components of door-to-door movement by One Belt and One Road (OBOR) and traditional routes alongside with modes. The study is concentrated on a case study and uses established multimodal transport cost model as a research framework. Interviews with industry practitioners and observation from primary methods of data collection. The use of multimodal transport cost model is common in the containerized cargoes. Hence, this study provides an original analysis for OBOR initiative. The volumes of OBOR shipments are large, with a high value-to-volume ratio. The research initially confirms that multimodal transport alternatives and modal combinations may successfully be applied and assess the performance of OBOR initiative.
TopIntroduction
Globalization and trade liberalization have benefitted China by making it the world’s largest manufacturing center and the country has emerged as an engine of Asian economic growth (McGregor, 2006). This phenomenon made China has grown to the largest manufacturing and trading country in the world. However, in recent years, China has faced a slowdown of its domestic economy that has affected global and inter-regional trade (Timmer et al., 2016).
More than 2,000 years ago, China’s imperial envoy Zhang Qian helped to establish the Silk Road, a network of trade routes that linked China to Central Asia, Middle East and Europe. The name came from one of China’s most important exports silk. And the road itself influenced the development of the entire region for hundreds of years (Jinchen, 2016:1). In 2013, president, Xi Jinping proposed establishing the new regional cooperation model and called Silk Road Economic Belt. This proposal contains new maritime silk roads, new railways network, roads, pipelines and utilities that would connected to China, Central Asia, West Asia, parts of South Asia and Europe. The geographical coverage of which is illustrated in Figure 1. This proposal is officially called as the One Belt, One Road initiative (OBOR) or the Belt and Road initiative.
Figure 1.
New Silk Road, One Belt and One Road (OBOR)
This plan connects China with its neighbors in Asia and beyond, involving more than 60 countries. Among the objectives of OBOR, a key one is to ease the bottlenecks for cross-border trade, especially to investigate how to achieve a well-connected transport infrastructure with effective logistics services (Garca-Herrero and Xu, 2016). One Belt and One Road (OBOR) initiative or New Silk Road consists of two major parts. First part is the Silk Road economic belt which establishes a road stretching from China to Europe and encompassing a host of trade and infrastructure projects and secondly it aims to build maritime Silk Road which is based on sea-based network of shipping lanes and port developments throughout Asia and the Pacific.
In 2014, it has launched the Asian Infrastructure Investment Bank (AIIB) and set up a US$ 40 billion Silk Road Fund. Chinese officials claim that the Belt and Road Initiative (BRI) is also part of the new round of China’s opening up. There is certainly a lot of truth in this claim. Firstly, China is facing challenges of overproduction and overcapacity, particularly in the steel and construction materials sectors. This can be addressed by the BRI which will open up foreign markets to many Chinese companies. Secondly, as labor costs rise, China will move its labor-intensive and low value-added manufacturing facilities overseas (Li, M., and 2015:3). After 2008 financial crisis, large supply chain managers realized the problems of offshore production and selling at consumption areas. As well as production cost in offshore is not so low nowadays, mass production does not meet with customer demand. Due to the lack of mass production elasticy and with introduction of new models such as “additive production”, the supply chain managers tend to moves the production facilities at near shores in supply chains. Therefore, BRI has to be improved by China because of fear in loss of market. On a macro scale, OBOR countries have accelerate the construction of transport infrastructures to promote cargo freight. Railway Express, for example is able to transport container from China to Europe and other countries along OBOR. In accordance with the goals of the OBOR strategy, cross-border e-commerce is growing rapidly. According to reports from Ali Baba, half of its customers, which are more than 100 million, on the Business-to-Customer (B2C) platform locate within the OBOR region. Therefore, it can be seen that international logistics cooperation is essential to meeting the growing demand (Lui, X. et al. 2018:1).