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Beijing pushes hard for ‘one belt, one road’: the story behind one of the key projects

In an effort to transform her home economy and remake her sphere of influence, China is mobilizing vast resources from public budgets and private enterprises for the One Belt, One Road (OBOR) program. Official numbers cited in Beijing put the price tag at nearly a trillion US dollars, and some Western analysts are expecting that number to rise.

What is OBOR? The official pronouncements are numerous, but the best way to see OBOR is in the field, where the vast sums of money are being spent. OBOR leaders have decided that Hubei, the region hosting the Three Gorges Dam, must create Public-Private Partnerships to improve critical facilities providing logistics services. These offer vital links in the chain that make multimodal freight transportation more efficient.

Baiyang Port and Logistics Park (BPLP) secured US$446 million of new funds from public and private sources, including a US200 million World Bank loan. BPLP‘s site is removed from the main urban transport corridors, and hence does not add to city congestion and air pollution. But it is close enough to serve Yichang’s urban freight logistics demand.

BPLP connects to key transport modes, including the national expressway system; the nearby Ziyun Railway Marshalling Yard; and the Three Gorges Airport. The success of such logistic parks has always been determined, in part, by how efficiently they connect to multimodal transport systems.

BPLP‘s Baiyang Port will serve containers, bulk cargo, general cargo, liquid bulk, and roll on-roll off’ trucks. BPLP‘s Logistics Park will be used to process shipments for equipment, building material, food industry, steel and city distribution.

The emergence of new manufacturing zones, located far from the major consumption centers and major export-focused ports, led to an increased emphasis on freight movement. Efficient freight movement becomes critical to any efforts aimed at ensuring that the government’s new consumption-based economic growth model delivers on the promise. Freight that’s moved long distances will need to use more sustainable transport modes in order to reduce the adverse environmental impacts associated with freight transportation, especially air pollution and carbon emissions. Yet, for long distance freight transport, the more cost effective and environmental friendly modes, namely inland water transport (IWT) and rail, have been underutilized. This was due to lack of mode connectivity and to a lack of uniformity in standards.

At the core of YREB’s strategy is to utilize the Yangtze River as a freight transportation corridor. About 60 percent of the total freight volumes that now flow on China’s inland waterways along the Yangtze River, which saw cargo traffic rise to 2.18 billion tons in 2015, up 45percent from 2010.

Hubei –along the middle reaches of the Yangtze River – lies at the crossroads of the east-west Yangtze’s IWT corridor. Hubei connects western regions with the Yangtze River Delta in the east, and the south-north expressway and railway corridor that connects the north-central regions with the south’s Pearl River Delta. Wuhan, Hubei’s capital city on the Yangtze, is the economic center in the central region with a national transport hub.

Yichang is a prefecture level city located upstream from Wuhan, on the Yangtze. Yichang has been a major distribution center, transit node, and trading post in the central western region. Yichang is a gateway to the west. This is where topography transitions from the vast fertile plain in the east to the mountain ridges in the west. Before expressways and high-speed railways became available, it was the only viable access to resource rich Sichuan Basin. And it points to the west, towards the Yangtze that traverses through the mountain ridges. Recognizing its strategic location, in 2014 the State Council designated Yichang as one of six regional transport hubs slated for strategic development.

As a second-tier city, and as a traditional industrial base, Yichang’s started to recently develop its service sector –with a focus on building value-added industries. Since 2013 Yichang’s municipal government focused on developing six ‘high value-added’ industries: fine chemicals; bio-pharmaceuticals; high tech equipment manufacturing; new materials; cultural tourism; modern logistics services.

In support of such economic transition strategies, Yichang’s long-term program centers on developing three core clusters along the Yangtze River: tourism, industrial, commercial. The World Bank’s assisting with all of this; one of the Bank’s team leaders, who works with the local authorizes, says that goal of this entire effort is “to fully leverage accessibility to IWT and take advantage of the connectivity to both railway and expressway systems”.

 

China’s logistics costs be as high as 18 percent of total GDP, as compared to logistics costs inside the US: 8 percent of GDP. Why such extra costs in China? One reason is China’s GDP depends heavily on primary and secondary industries — and the outputs from these require more logistical effort to get the final goods to market. Goods moved and good stored multiple times, before reaching end-customers, is the definition of an inefficient logistics supply chain.

Yichang’s leaders have been working to develop competitive (and relatively new) local industries– while simultaneously attracting established businesses from China’s coastal regions. Yichang’s ability to deliver efficient logistics services will be an important determining factor in the relocation decisions made by businesses in the more efficient regions. For businesses focused on several of those six priority industries a majority of the necessary raw materials are sourced from areas close to Yichang.

With a total investment of $446 million of combined resources — provided by the central government and the World Bank – BPLP will be serve local and regional freight, while in the longer-term serve transshipment freight.

BPLP is located inside BIP, a high value-added manufacturing development zone situated 40km downstream of Yichang, 70km downstream of the Dam. BIP is one of eight such ports which are now being developed along the Yangtze River; each one will have a different industrial concentration. BIP’s focused on fine chemical, equipment manufacturing, new materials, high value-added light manufacturing. By 2016, BIP attracted US2B. It’s expected that an additional US4B will have been invested into BIP by 2020. With an occupancy rate of more than 60 percent, a majority of the businesses inside the park are local, with a small but increasing number of businesses coming from the coastal regions.

BPLP will be the first integrated freight transport and logistics hub in Yichang. It aims is to be tightly connected to the national expressway network. A new 675-meter overpass will connect the BPLP to the nearby Ziyun Railway marshaling yard. This ensures BPLP is connected to railway networks.

BPLP is designed to accommodate anticipated future container traffic growth. The port will be an important node in the east-west road-IWT and rail-IWT corridors (Khorgos, Xinjiang, Lanzhou/Xian, Yichang, Shanghai). BPLP primarily serves Yichang and the BIP. It will, in the long term, specialize in value-added logistics services supporting manufacturing goods and products, construction materials, and container shipments.

Proximity to the Dam provides opportunities for Yichang to become an important transshipment hub. Total IWT freight passing through the Dam is expected to reach 163M tons by 2020 and 248M tons by 2030. Its current operational capacity of 100M tons was reached in 2011. About 80% of current volume is bulk (construction materials, minerals and coal) or semi bulk (fertilizer, cement, steel) — but future growth will be general cargo and domestic container freight.

Maoping Port is under construction, upstream of the Dam, with roll-on roll-off and general cargo berths, providing transshipment for IWT-highway freight transport. Baiyang Port, in conjunction with the upstream Maoping Port, will provide transshipment for long distance cargo movements that bypass the Dam.

There’s been a general lack of comprehensive planning for logistics parks by Chinese authorities. So too for China’s integrated freight transport and logistics hubs. A majority of existing logistics parks are located away from railways and inland waterways. They therefore serve primarily as wholesale trading venues, and warehouses. Many of these logistics parks are underutilized.

This writer is a freelancer and can be contact at (gordon.feller@gmail.com)

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