Shipping and the Digital Integration Required by China’s Belt Road Initiative

Supply Chain and Logistics

By Andre Wheeler

Beijing’s Digital Silk Road initiative runs contrary to many data sharing platform projects around the world, something shipping will have to grapple with in the coming years. Andre Wheeler investigates.

There has been tremendous progress with regards smart port / shipping developments in recent times. What is heartening has been the progress with development of common data standards and the number of port ecosystems that have progressed data sharing platform and associated APIs that allow secure data transfer.

The architecture is increasingly in place, setting the standard for exchanging data. Further progress in this digital space comes out of the Port of Jeddah in Saudi Arabia. It has taken a significant step forward in data integration operating systems. Based on DP World’s terminal operating system and its operations and planning systems it has integrated these with the backend Navis N4 software platform. This optimisation of the operating systems will help DP World progress automation activities and real time location systems.

Whilst these developments are welcome, the issue that is not being directly addressed is how will this interface with China’s Belt Road (BRI) and Digital Silk Road (DSR). Have these developments taken account of the current megatrend coming out of China, namely the growing influence of China’s Digital Silk Road (DSR) on supply chain and trade. This important trend sees China creating a single digital platform that seamlessly integrates all trade along the BRI.

At first glance the DSR looks relatively benign as all global supply chain and logistics providers are working towards this seamless digital integration goal. There are significant and obvious benefits to this level of digital integration, particularly seamless data and information transfer between trading entities that would speed up trade across regional borders. Access to a central database reduces time and backlog constraints commonly found in the current manually driven documentation exchange such as Bill of Lading, Letters of Credit, and custom clearance. This trade Nirvana has still a long way to go.

The open system approach by the West to the digitisation and creation of smart trade and supply chains through data / systems integration, has progressed. Despite the building of data exchange networks, the slow implementation and agreement around data standards has been made problematic by the independent data silos found in this open digital network. Whilst the move from EDI data exchange to API exchanges focus on cyber security concerns through the incorporation of effective cyber security protocols, China is well ahead in its ambition to create a closed integrated and seamless ‘smart’ trade ecosystem that it controls from Beijing. Its closed data aggregation platform is the envy of others, but poses significant trade, transport and supply chain security questions for those seeking to diversify trade outside of China and its BRI.

This is fundamentally changing the way trade is conducted with China. The DSR platform is charged with co-ordinating and facilitating digital integration of all providers that conduct trade along the BRI regional ecosystem. In simple terms, it takes the discussion away from the idea of smart ports and/or cities and looks instead to creating a digital regional trade ecosystem. The DSR is a platform constructed along a single digital spine and skeleton, essentially owned, and controlled by the Chinese Communist Party. Key data is centrally stored, disseminated, and controlled by a state instrument in Beijing rather than in neutrally accessible data warehouses or cloud-based data storage.

This is disrupting current digital developments being undertaken by the maritime sector. 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. The core component of the strategy around these merge points is the development of physical infrastructure within a digital framework. Increasingly we see China’s applying pressure on all international trade to comply with and connect with its digital framework to trade with China.

Strategically, China is re-aligning trade such that it increasingly 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.

There are several indicators that China is becoming more robust in encouraging global shipping to dock into their platform. An example of this has been the introduction of the Data Security Law and Personal Information Protection Law that effectively shut western users access to AIS data based on national security. In some cases, shipping lost up to 90% AIS data access impacting on the visibility of vessels within China’s waters.

A further concern is China’s recent steps to replace US / Western technology with homegrown suppliers. Known as the Xinchuang whitelist it gives Beijing leverage to replace foreign tech firms in sensitive sectors. They have already forced Amazon Web Service and Microsoft to set up joint ventures to operate with China’s mainland. The Xinchuang committee is overseen by the Ministry of Industry and Information Technology and the China Electronics Standardization Association. This should raise red flags for the likes of the Port of Jeddah which relies on the US-based Navis OS.

Another concern is the Cybersecurity Administration of China draft rules for data transfer on October 29, 2021. Under the heading of ‘Outbound Data Transfer Security Assessment Measures’ it lists 18 articles of assessment. Article 4 of the measures would require all outward data transmission to undergo transfer security assessments. Article 16 goes further by allowing the state cybersecurity department to unilaterally “cancel” outward data transfer and sharing activities. Sadly, it does not specify what data constitutes a “risk to national security” and as such we could possibly find greater disruption that recently experienced when international shipping was denied access to China AIS data.

What is no longer in question is no longer if technology will be used in Chinese backed ports, but when will it be no longer possible for global maritime trade to operate outside of China’s DSR, this ceding control and ownership of data to Beijing. Huawei’s Smart Port solution focuses on four key areas: custom clearance, visualised collaborative command, convenient clearance systems and port management. Locked into the Logink data aggregation platform, it uses Big Data, AI, and cloud computing to offer an attractive proposition for busy ports.

This raises strategic questions, particularly as to how European shipping and technology companies can compete.

Is it possible for Application Programming Interface (API) and Electronic Data Interchange (EDI) standards that would allow differing operating data systems to securely communicate with China’s DSR? Can the recent Build Back Better infrastructure initiative recently introduced by the G7 offer a viable infrastructure / digital alternative to China’s BRI – how can this be leveraged?

What is becoming clear is that in the short to medium term, it is increasingly evident is that to trade with China will require incorporation into their DSR.

The article was first published on the Splash247 website. 

About the Author

Andre wheelerAndre Wheeler is the CEO of Asia Pacific Connex with more than 20 years’ experience in international business, with a diverse network throughout the USA, Asia, SE Asia , Africa and the United Kingdom. Holding a B. Science (Hons) degree and an MBA, he is currently working towards his Doctorate on the Impact of the China One Belt One Road initiative. Andre has expertise in oil/gas, construction, marine services and mining.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.