More opportunities than risks from China's global initiative
During the workshop organized in Lugano by Easternational and Hong Kong Trade Development Council on the impact of the New Silk Road on Switzerland (and on the rest of the Western world) a new interesting background of the Chinese dream was disclosed
The global revitalization strategy known as the New Silk Way, the One Belt One Road or the Belt Road Initiative launched by Beijing for a new economic, social and political approach arose interest and curiosity, but also uncertainties and hesitations as it could affect world balances significantly.
At the end of 2017, the direct train Mortara-China was launched and UPS recently announced its new FCL Full Container Load Europe-Hong Kong service from Duisburg, the German continental hub for transcontinental services.
Three months ago the Swiss Hupac announced its new intermodal service from its Busto Arsizio/Gallarate terminal and Chengdi (China).
However, during the workshop “Opportunities for Switzerland within the New Silk Road” - organized by Easternational and the Hong Kong Trade Development Council, with the support of Sviluppo China, Spediporto, Italy-Hong Kong Association, Hupac, International Propeller Club, Italian Chamber of Commerce for Switzerland and Invest HK, and sponsored by Omlog, Swiss Logistics Center, Logwin and Gamos – all participants acknowledged that there is still a long way to go for the 65 countries involved.
Mayor of Lugano Marco Borradori pointed out that the opportunities are for all European countries, especially south-Mediterranean ones, as Asian partners are the ones who will decide where to direct their traffics. He also added that Switzerland is a forerunner in this partnership as it signed a free trade agreement with Hong Kong in 2010 and with China in 2014, and it is collaborating with several Chinese Universities in the renewable energy and sustainability sectors.
Switzerland also contributed significantly to the development of infrastructures with its Alptransit project and the recent opening of the Gotthard base tunnel which, with the Ceneri base tunnel, will allow Italian ports to compete in Europe and recover traffics, provided that the creation of infrastructures (especially the Terzo Valico railway) continues.
“Genoa is our port of reference, but we lack the last 30 km to the Italian border” Borradori noted.
After him, the Head of business relations of the Italian Chamber of commerce for Switzerland Marina Bottinelli emphasized that this body acts as a facilitator “to connect Italy and Switzerland, thus allowing companies to seize the opportunities offered by the BRI. China is looking for an alternative to the Piraeus, and Italy can definitely be one”.
In turn, the Italian Consul General in Lugano, minister plenipotentiary Marcello Fondi, pointed out the need to complete the projects on schedule to allow Italy to play its part in the new Silk Road.
Spediporto Director Giampaolo Botta explained that Genoa is ready to compete with Northern Range ports.
“Thanks to our undeniable commitment and professionalism, since 2006 we witnessed an over 60% increase in traffics, reducing goods storage times by 40%. Spediporto already started two partnerships with Swiss and Hong-Kong freight forwarders”.
Easternational deputy president and President of the Italy-Hong Kong Association (as well as Omlog group Chairman and Milan Propeller Club president) Riccardo Fuochi explained that “the New Silk Road is a continuation of the Chinese Go West policy to involve other Countries in specific projects. The BRI currently boasts the participation of 65 countries representing 70% of the world's energy resources, 63% of the world's population, 23,000 billion dollar of GDP and 34% of the world's trade, and it is planning huge investments up to 8,000 billion dollars”.
Fuochi also observed that, besides the creation of infrastructures and logistics initiatives, the new Silk Road implies development initiatives in several sectors, such as agriculture, energy, manufacture, tourism etc..., which will lead to the opening of new markets, granting new wealth to all the Countries and companies that can seize these opportunities. “During the last 2017 summit held in Hong Kong, some 250 independent and interrelated projects were submitted, showing that this is a two-way opportunity”.
Easternational deputy president mentioned the 2013 Memorandum between the Swiss National Bank and the Chinese National Bank for the internationalization of the Yuan, and the 10 memorandum or agreements signed in January 2017 during the Davos forum attended by the Chinese President Xi Jinping. The logistics entrepreneur and freight forwarder also pointed out that Swiss exports in China increased from 8.8 billion francs in 2013 to over 25.5 billion francs in 2016, adding that with the BRI said figures will increase significantly. He also explained that this is a great growth opportunity for financial institutions, Swiss raw materials trading companies and for the Swiss customs systems.
Fuochi left the floor to his three guests from the Far East. After having point out that Switzerland is a member of the Asian Infrastructure Investment Bank AIIB (one of the two major financing bodies of BRI projects, with New Development Bank) since 2015, Europe Hong Kong Trade Development Council Regional Director William Chui added that Hong Kong plays a vital role also for Swiss investors, brokers and project-owners due to multidisciplinary teams of financial and legal advisors and other types of consultants who can provide high-quality services to Swiss companies.
Chui explained that 62% of foreign Chinese investment flows pass through Hong Kong, and Chinese investments in Switzerland increased from 9 million dollar in 2007 to 576 billion dollar in 2016. The Chinese officer invited Swiss companies to the Belt&Road Summit of June the 28th to start business relations with the decision-makers of the Countries and companies involved in the project.
China Markets Strategy ICBC Standard Bank Chief China Economist Jinny Yan explained that the BRI is not only a Chinese initiative, rather a global win-win project for all those who take part in it. Yan observed that Switzerland can play a strategic role both in the financial services sector and in industrial and infrastructural projects needing integration with environmental and sustainability components due it its great expertise in this sector.
Chaingjiu Logistics General Manager Tian Lu emphasized two main challenges for railways: improving infrastructures in Poland and normalizing traffic on the Europe-China route to reduce costs and make them competitive.
The round table that followed focused both an economic and geopolitical issues.
Milan Cattolica University researcher Marco Bonaglia painted an interesting picture of the economy and society of the macroregion of the Pearl River Delta, which is expected to include also independent Hong Kong to create a maxi consumption pole of 60 million inhabitants, with a 1.5 billion dollar GDP. He also examined one of the 5 reference urban clusters in China, between the Northern cluster (Beijing-Tianjin) and the Yangtze river delta, one of the most attractive markets within the BRI project. “For this very reason, the Chinese Government is making connections with the former British colony faster through the construction of the Hong Kong-Zhuhai bridge and the strengthening of the Hong Kong-GuangZohu railway”.
Invest Hong Kong Italy and Ticino Chief Representative Stefano De Paoli, as well as representative of the Hong Kong S.A. Region Government and Sviluppo China Association President, made clear that the former British protectorate has no intention whatsoever to give up its individuality, and described the opportunities for companies to go to Hong Kong and the services provided.
“Hong Kong is a super-connector for investments in the BRI, and it is the only Country with an office to develop relations with Countries and companies intending to take part in the project”, De Paoli explained. He also emphasized the city-state's strategic position and the advantages represented by the Common Law legal system in force and by low taxes.
On the other hand, investigative journalist and economic intelligence teacher at the University Torvergata of Rome Antonio Selvatici – author of the book on the Silk Road “Project for a global invasion” - regards China as a strategic, ideological, economic and military challenge. “The Made in China 2025 initiative aims at increasing the quality and the brand of Chinese products, in particular technological ones, to distribute them in all the markets worldwide”, Selvatici pointed out. Selvatici gave interesting geopolitical insights including energy aspects of the BRI, which provides for the creation on China's part of 30 nuclear power stations abroad, as well as military aspects related to the creation of several bases – one of which in Djibuoti to control the Suez Canal – to become the world's second military power, controlling also the major maritime routes through the construction of new ports in the Mediterranean and Africa. “China's Going Out Strategy includes naval gigantism and the control over commercial ports and routes, favouring China's maritime expansion policy. The Chinese dream depends also on infrastructure policies, and the BRI is one of its instruments to become a global protagonist.
Grendi Group Chairman Bruno Musso relaunched its infrastructure project B.R.U.C.O. (Bi-level Rail Underpass for Containers Operations) revaluing Italian ports potentials (in particular Genoa), though subject to the creation of a 38 km tunnel beneath the Appennino mountains. Focusing on the relationship between Genoa and Switzerland within the BRI, Musso added that to serve Switzerland, the Po Valley and Southern Germany it is necessary to operate 20,000 TEUs vessels and to create a 500 hectares area. “We need a 10 million TEUs port, with 3,000 hectares of logistics spaces. A solution could be a quay expansion in the Volti-Prà Port to handle containers between ships and wagons, with the railway tunnel connected with a dry port to be built in Novi Ligure-Basaluzzo (Alessandria)”.
The Swiss economist Mario Tettamanti, currently working for Linktobeijing Consulting Partnership Enterprise – and author of a volume on the support of private finance to the Silk Road project entitled “China Belt and Road: The Initiative and its Financial Focus” - explained that “Switzerland can take advantage of the BRI due to rapid diplomacy, qualified engineering companies and financial institutions favouring the implementation of projects in all the Countries involved, with Hong Kong as its financial market”.
Hupac Director Corporate Development Peter Weber explained that the Silk Road Project must be global, emphasizing the need to reduce transit times of railway connections to China to favour exports of value added products by Swiss companies, and Hupac's great technological commitment to improve the quality of its services.
In cooperation with Only Italia, Hupac is developing a new connection between its Busto Arsizio/Gallarate intermodal terminal and Chengdu, boasting 15 million inhabitants, with a train that will reach the Sichuan region in 18 days.
Last but not least, Gamos Group Passione Italia deputy chairman and co-founder Stefano Devecchi Bellini detailed some logistics and distribution phases between the two countries, in particular as regards food products, pointing out that the infrastructures provided by the BRI in China (especially railways) are essential and that logistics costs are still limiting exports of Made in Italy products.
“We provided a practical contribution on the BRI project state of the art and on the opportunities for Swiss companies. As concerns Italy, it is necessary that infrastructure projects such as the Terzo Valico and TAV tunnels continue steadily. Euro-Asian integration is inevitable, and Italy can play a strategic role. I hope that the European Union will negotiate with China with a greater bargaining power”, Easternational President Marco Marazzi concluded.
Besides all the favourable opinions, the last question is whether the BRI project is only an opportunity for Italian and Western citizens and entrepreneurs, or it implies also risks.
Will the railway between East and West damage intercontinental maritime transports? Will Mediterranean ports benefit from the infrastructure revolution which is taking place?
The supremacy of Mediterranean transhipment ports could be jeopardized, while the Chinese chose the Pireaeus as their western port. The presence of PSA VTE Pra Terminal Europe managing director Gilberto Danesi could be an indication of the possible future development of gateway ports, including Genoa and Trieste.
The Chinese are still thinking about creating a European logistics hub in northern Italy, possibly close to Vado Ligure, where the giant Cosco already became a 40% shareholder of the Danish group AP Moeller (Maersk-APM Terminals).
As regards financial implications, the Chinese Silk Road Fund invested 40 billion dollar.
However, 27 EU countries out of 28 criticized the Silk Road as it opposes the trade liberalization program resolved upon by the EU.
Between 2010 and 2016 Chinese investments in Europe increased from 20 to 35 billion dollar, with Italy as China's third destination market. From 2000 to 2017, 250 Chinese groups invested in Italy: in 90% of the cases they became controlling shareholders; 70% are greenfield investments, and 30% are acquisitions.
It is only fair to wonder whether they want to copy and steal know-how, or whether they are a positive factor for Italian companies and economy.
In summary, the most densely-populated country and the potentially strongest economy is craving after world's supremacy. In the past five years, its government launched a growth strategy aiming at turning China into a capitalist economy.
The deadline for this transformation is the Made in China 2025 project, aiming at creating an advanced manufacturing sector, focusing on hi-tech, green and innovation.
However, as Selvatici rightly pointed out, the BRI has also a political and military significance, as shown by Chinese investments in Djibouti, a strategic garrison to control naval flows related to oil transport.
The BRI aims at connecting (at least) 68 countries in 3 continents (including part of Africa), covering 65% of the world's population along 6 corridors.
Beijing is planning to revitalize Transcaucasia countries, although there are several land-bridges across borders, as well as northern maritime alternatives, the Polar Silk Road, which could go through the Russian port of Sabetta and the Norwegian port of Kirkennes and then dispatch goods on a new railway connected to Finland to a new submarine tunnel reaching Estonia, from whence it could connect to the Trans-Baltica route heading towards Poland and central Europe.
The railway Silk Road is expected to have a maximum capacity of 100 120 TEUs trains per day. If they travelled 300 days per year, their yearly capacity would amount to 3.6 million TEUs per year, which are not comparable with the world's maritime trade.
As a matter of fact, these carriers have mainly an urgency significance as transit times on the Asia-Europe route are as follows: ship 30 days (from 24 to 40); railway 15 days (12-18); air plane 1 day /2); polar ship 25 days (30-35).
2° Lugano Commodity & Shipping Club Networking Dinner focusing on Switzerland-China
After its debut two months ago, the second Lugano Commodity & Shipping Club Networking Dinner organized by Finlantern and Ship2Shore at the hotel View of Paradiso was attended by some 50 guests, who discussed the issues examined during the meeting “Opportunities for Switzerland within the New Silk Road”.
Riccardo Esposito (Finlantern) and Angelo Scorza (Ship2Shore) introduced the speakers Riccardo Fuochi (Omlog), William Chui (HKTDC), Gianluca Mirante (HKTDC), Antonio Selvatici (Università Torvergata) and Marco Marazzi (Easternational).
The dinner was attended also by representatives of VTE (PSA), Furlog, Grendi, Spediporto, Autamarocchi, AON Benfield, Studio Legale Abbate, Genoa Chambers, Kazmunaygas Trading, BC Insurance, UBS, Filhet-Allard Maritime, Sogeco, Studio Bonelli Erede.
The 3° Lugano Commodity & Shipping Club Networking Dinner is scheduled for the end of September.