How the Logistics Industry Can Best Support the Belt and Road Initiative

A FedEx byline by Eddy Chan, President of FedEx China, on how local enterprises in the logistics industry support the Belt and Road initiative.

In the four years since President Xi Jinping first put forward the Belt and Road Initiative, China has been proactively working to break the slow recovery of the world economy by connecting and integrating policies, facilities, trade, capital and the will of people. The result has been a thriving emerging regional economy; in 2016, the total import and export volume between China and the countries along the Belt and Road reached US$953.59 billion.

Huge trade volume requires the support from logistics industry, which can facilitate the unimpeded flow of trade and improve resource efficiency. How to take part in the Belt and Road Initiative is something every logistics enterprise needs to consider.

Leverage the transportation network to integrate into the regional economy

The Road and Belt Initiative has inspired enterprises to do business with the world. We are pleased to see that many regions are helping local enterprises better connect with the Belt and Road markets by “building a logistics hub”, which presents an excellent opportunity for logistics enterprises, especially international logistics companies.

The transportation network is key to keeping the channel clear and the flow of goods unbroken. Logistics enterprises should think about how to connect their own transportation network with the city’s vision of “building a logistics hub” – all linked to one with another in order to help local customers integrate into the Road and Belt economy.

Logistics companies have the expertise to help in the step-by-step planning required to build an effective logistics hub. Take the air transportation network as an example, logistics companies can connect their own mature international air hub network with the region’s domestic transportation network. By using their international shipping routes, logistics companies can easily help cities resolve the problem of a lack of an international transportation network. The approach is practical, cost-effective and has immediate impact.

Today, China has quite a few air hubs with high throughput capacity and powerful international shipping routes, such as Beijing, Shanghai, Guangzhou, Chengdu and Shenzhen. Some highly internationalized and experienced global logistics enterprises have their own gateways and hubs in the above-mentioned cities. For example, FedEx has built a China hub in Hangzhou and an Asia Pacific hub in Guangzhou along with gateways in Beijing, Shanghai and Shenzhen. In Shanghai, FedEx will officially open an International Express and Cargo hub by the end of this year, which will greatly enhance the shipping efficiency and connectivity between East China and the American and European markets.

FedEx makes full use of its resources to integrate the Belt and Road Initiative target countries into its vast network.

For instance, since the acquisition of TNT, FedEx opened global European routes in April this year and global American routes in July to further support the multilateral trade. Currently, the FedEx service network covers almost all the countries along the Belt and Road.

Break the physical boundaries with information and speed up customs clearance

Excellent logistics solutions not only include an extensive transportation network, but also value-added services throughout supply chain. Transporting goods to countries along the Belt and Road is only the first step; equally important is a smooth customs clearance process.

Presently, goods are very likely to be held up by customs in the countries along the Belt and Road due to different countries of origin,various categories of goods and diverse transportation modes. Customs delays have proven to be the main factor that restrains enterprises from shipping abroad. Customs clearance delays not only increase customers’ logistics costs and thereby squeeze profit margins, they are a constraint on the regional economic development at the macro level.

To take advantage of the opportunities presented by the Belt and Road Initiative, logistics enterprises should establish macro policies and adjust the flexibility of customs clearance services. For example, during the period of “integrated regional customs clearance”, many logistics companies seized the opportunity to introduce adjusted customs clearance services such as reducing the paperwork to be prepared by customers for the import and export of goods, which cut the costs of personnel, time and transportation and enhanced customers’ competitive advantage in the market. FedEx combined this positive change with its rich customs clearance experience in order to offer “integrated customs clearance” services for all types of customers. On July 1 of this year, the nationwide “integrated customs clearance” model was officially launched, which provides enterprises with an unprecedented range of options in planning export paths.

Customs clearance continues to evolve in positive ways for customers shipping overseas. It is encouraging to note that China Customs has effectively launched a series of measures to speed up the clearance of goods related to the Belt and Road Initiative. The Xi’an Declaration; the Framework Agreement between China, Mongolia and Russia on Cooperation in the Development of Frontier Ports; the establishment of customs green channels; and other measures, have promoted the mutual recognition of information and supervision between customs in different countries. Logistics enterprises need to grasp the change in policies quickly and merge them with their information-driven network to help enterprises break the physical boundaries and move steadily into the Belt and Road markets.

Focus on SMEs and the efforts of innovative enterprises to ship abroad

“Made in China 2025” has set the goal for China to transform from a “big manufacturing country” to a “powerful manufacturing country”. In the manufacturing sector, SMEs have formed the main force of innovation and development. According to a Harris Interactive survey commissioned by FedEx, in 2016 the average annual exports of China’s SMEs reached US$880,000, with the export revenue accounting for more than half of their total income. The dual-core drive of Internet and the Belt and Road Initiative enables SMEs to project their strategic vision in a broader international market.

Regardless of size, active innovation is the driving force for carrying out business. Even though they own core technology and innovative business models, SMEs will still be held up by some challenges when they go abroad. First, the countries along the Belt and Road have different customs clearance laws and regulations, homologation and inspections. Second, financing, exchange rates, account settlement and other financial challenges are becoming increasingly prominent. Third, how can SMEs accurately observe the demands of various markets and match supply with demand? Last but not least, do SMEs have the “soft power” or knowledge of local customs and the business culture in other countries?

The key to SME success is effective access to accurate information and professional services related to information processing. The core value of a logistics service provider lies in providing real solutions to customers by precisely analyzing their needs and actively exploring service technology.

FedEx provides SME customers with flexible international shipping solutions to solve problems such as complicated shipping processes, incomplete information, and an inability to keep up with the latest regulations. At the same time we work closely with customers to provide efficient customs clearance services, including specialized services for vertical industries such as the health care industry and customized solutions for E-commerce businesses. These solutions aim at removing the difficulties SMEs encounter when shipping abroad. From the macro point of view, we can take advantage of the abundance of information available and integrate regional resources to set up a dynamic, one-stop platform that connects to the local customs network. Through this platform, we can play an important role in helping SMEs obtain trade information, work up their business plan, handle customs clearance and carry out other business operations. Similarly, for all logistics enterprises, it will be worthwhile to focus on the right market to help customers design and implement platform services and integrate the logistics information network with customs.

The Belt and Road Initiative embodies China’s long-term expectations for economic development. The logistics industry is an important driving force in realizing industrial transformation and boosting the economy. Logistics enterprises should play on their strengths and take an active part in the Belt and Road Initiative. By helping customers successfully ship abroad, logistics enterprises will realize the value in economic development.