The New Maritime Silk Road for a Prosperous Asia

Mr Li Guanding, Deputy Mayor, Ningbo Municipal People's Government
Mr Xu Zuyuan, Chairman, China Institute of Navigation
Mr Hu Xuming, Director, Zhejiang Province Port and Shipping Administration Bureau
Your Excellencies,
Distinguished Guests,
Ladies and Gentlemen,
Good morning. I am honoured to speak at this "Sailing for More" International Maritime Forum, held in conjunction with the China Maritime Day. Let me start by saying that the views expressed are my own.

China and the Ancient Maritime Silk Road
Historically, China has been perceived more as a land rather than a maritime power, except during the late Ming dynasty. China's maritime exchanges were most famously recorded through the seven voyages led by Admiral Zheng He in the early 15th Century. Zheng He's vessels were many times larger that of European vessels of the period, although they were built for different purposes. However, historical records suggest that trading links between Southeast Asia and China started as early as the 12th Century during the Song Dynasty. The network of sea trading routes that spanned much of Asia was also known as the ancient Maritime Silk Road, mirroring the famous land-based Silk Road between Asia and Europe.

Together, the Land and Maritime Silk Roads brought traders from different parts of the world together to exchange goods in high demand. Merchants from the Moluccas Islands introduced the world to spices like cinnamon, pepper, and nutmeg. Their Arab counterparts brought native goods such as frankincense, dates and sugar. Chinese junks came to barter China's world-renowned blue and white porcelain, tea and silk. Indeed, so well sought after were these goods that the Europeans jostled to control the trade of these items in the 17th-19thCenturies.

The Silk Road, however, traded more than just goods. It provided an opportunity for the exchange of cultures, ideas and religion. People came to know about Buddhism from Northern India, Christianity from Europe, and Islam from Arabia. Well known travellers that wrote about the Silk Road include Zhang Qian, a Chinese emissary, William of Rubruck, a Flemish Franciscan missionary and of course, the famous Italian explorer Marco Polo. China's opening of its doors to the rest of the world was unfortunately not a happy experience. The Opium Wars in the 19th Century and the commercial and territorial concessions extracted from China reinforced fears of the outside world, including Western domination, and left a deep impact on Chinese society and its dealings with the West. Rather than reaching out, China turned its back to the rest of the world for much of the early 20th Century.

However, it became apparent that the situation was not tenable as the rest of the world developed. Chinese leaders, starting with Deng Xiaoping, therefore took the strategic decision to change the course of China's development. Deng embarked on a southern visit in 1978, covering Thailand, Malaysia and Singapore. Singapore was his last stop. The late Mr Lee Kuan Yew, Singapore's first prime minister who passed away this year and who has met several generations of Chinese leaders, remarked that Deng "was the most impressive leader whom he had met. At 74, when [Deng] faced with an unpleasant truth, he was prepared to change his mind". And changed he did. Deng opened China to foreign investments and the global market. China has since not looked back.

Globalization therefore came late to China's doors. But the transformation that Deng introduced set China on a pathway of development that subsequent leaders have maintained to this day. Hundreds of millions of Chinese have seen their living standards raised over the course of the last three decades. Fast forward to the present - China today is a major economic power and some may even say an emerging superpower. Following its entry into the World Trade Organization (WTO) in 2001, China enjoyed spectacular growth averaging 10.5% between 2001 and 2010[1]. By 2013, it became the world's largest exporter and the second largest importer of merchandise goods. China increasingly depends on its trade with the rest of the world even as it stimulates domestic consumption.

The current Chinese leadership has decided that the Chinese economy should not develop at the breakneck speed of the last few decades. A more sustainable rate of growth at 7% is now being advocated, one that balances between economic growth with higher quality of life and social stability[2]. China's developmental needs however remain enormous, and it recognises that it needs to close the development gap between the coastal and inland provinces - an effort that will require decades more work. Even with a moderate rate of growth - which many would envy - we can expect China's economy, and its influence, to grow. But it is a growth that hinges more and more upon China's integration with the rest of the global economy.

China's outward expansion is therefore timely and in a sense belated. It is timely because it comes at a time when the rest of the world is enjoying slower growth. It is belated because China is catching up on its development after decades of being closed to the rest of the world. Indeed, China has now shifted from being a major investment destination to being a major investor abroad. China's total outward Foreign Direct Investment (FDI) has grown by more than 21 times, from US$5.5 billion in 2004 to US$116 billion in 2014[3]. In fact, the Chinese Commerce Ministry predicts that China will be a net outbound investment country in 2016.

One should therefore view the "One Belt One Road" initiative, first proposed by President Xi Jinping during his visits to Central Asia and Southeast Asia in 2013, in this broader context of China's development. Compared to earlier attempts to frame China's peaceful emergence, the latest initiative emphasises inter-connectivity as the basis of economic cooperation. The "One Belt One Road" initiative consists of the (i) Silk Road Economic Belt, and (ii) the 21st Century Maritime Silk Road. Funding mechanisms, such as the Silk Road Infrastructure Fund and Asian Infrastructure Investment Bank (AIIB), are also launched to support the initiative. Both the Fund and the AIIB will support investment in infrastructure and manufacturing industries in Asia, Europe and Africa.

Mutual Dependence between China and Rest of Asia
Asia will play an increasingly important part in China's overall externalisation strategy, including China's latest "One Belt One Road" initiative, in the same way that the earlier Asian economies, Japan and South Korea, expanded their markets. Geographical proximity makes China and Asian countries natural trading partners, mutually benefiting from a strong economic relationship. China's exports to Asia since 2001 have grown by more than seven-fold to US$840 billion in 2013. Likewise, exports from Asia to China have seen an equally dramatic increase to more than US$1 trillion[4]. China is also a major investor in the region. For instance, China's FDI in the Association of Southeast Asian Nations (ASEAN) countries amounted to US$8.9 billion in 2014, a 31% increase from 2013[5]. Asia has also invested in China - Singapore, Japan and South Korea were three of the top five investors in China in 2014[6]. These mutually dependent trends in trade and investments are likely to continue as Asia is expected to be the growth engine in the global economy for the coming decade.

Regional connectivity can only but increase with the trend of increased mutual trade and investment flows. On the maritime front, China has been investing in ports in the region such as Pakistan, Bangladesh and Myanmar. China's investments complement the region's investments into roads, highways, bridges, rail and airports. But to fully realise improved regional connectivity and efficiencies, the region needs to address the huge infrastructure gap. The Asian Development Bank (ADB) estimates an infrastructure gap of US$8 trillion between now to 2020, especially in the energy and transport sectors which, in turn, suggests enormous investment opportunities ahead[7].

Prospects for the 21st Century Maritime Silk Road
Therefore, from a regional perspective, the prospects for the 21st Century Maritime Silk Road are good if it incorporates what I see as four key elements:

Mutual Benefits and Cooperation
First, it should foster mutual benefits and cooperation. In an increasingly integrated global economy, stakeholders look to mutual cooperation and win-win outcomes. This must be the key attraction of the 21st Maritime Silk Road. It cannot be a one way passage. It has to operate both ways. It has to lead to wider economic spinoffs not only for the countries concerned but the entire region. Better connectivity, improved infrastructure - will all facilitate trade and drive investment flows.

The 21st Century Maritime Silk Road initiative will require massive funding not just from China, but multiple sources given the enormous needs of the region. The establishment of the AIIB is therefore timely and shows that new regional mechanisms can be formed to drive regional integration. By working together to develop the concept and rules, the AIIB garnered 57 founding members, ranging from Europe, Asia to South America. Singapore, as a member of the AIIB, plans to contribute US$250 million. The AIIB, with its authorised capital of US$100 billion, will lend a helping hand in meeting Asia's infrastructure requirements and support the region's economic and social development.

Open and Inclusive Approach

Second, an open and inclusive approach for all stakeholders is both a sensible and practical one for the 21st Century Maritime Silk Road. It is heartening to note that these principles are articulated in the "Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road" issued by the Chinese government.

As perceptions can easily shape the reality, such perceptions should be properly addressed. It would augur well for future directions if China and interested parties can work together to define the vision for the new Maritime Silk Road, instead of embracing a singular pre-determined vision. This approach will require open dialogue at various levels such as this, from the leaders to the senior officials, scholars and experts like you. Creating more of such platforms as well as leveraging on existing platforms will provide opportunities to build a climate of trust and confidence that will be crucial to the success of the initiative.

Integration with Existing Regional Architecture
Third, how the 21st Century Maritime Silk Road interfaces with existing regional architectures will be critical. The region is well-known for its political, economic and socio-cultural diversity. This diversity is compounded by historical differences and rivalries, and unresolved territorial claims. The ongoing South China Sea dispute is one example of such differences, and will have to be well managed to prevent them from boiling over. Any regional instability could severely set back the region's potential at a time where it needs stability most.

Therefore, new initiatives such as the 21st Century Maritime Silk Road should leverage on and co-exist with existing regional architectures. The peace and stability in the region over the last few decades has hinged upon good neighbourly relations built upon mutual understanding and trust, and underpinned by an interlocking network of regional mechanisms such as the ASEAN (Association of Southeast Asian Nations), ARF (ASEAN Regional Forum), EAS (East Asia Summit), APEC (Asia-Pacific Economic Cooperation) and SCO (Shanghai Cooperation Organization). These regional mechanisms are good platforms for building trust and cooperation.

The 21st Century Maritime Silk Road could even complement the Master Plan on ASEAN Connectivity (MPAC). MPAC has already identified strategies and projects that will improve connectivity within ASEAN in three key areas - (i) physical connectivity, (ii) institutional connectivity and (iii) people-to-people connectivity. The New Maritime Silk Road can leverage or enhance existing infrastructure plans to enhance regional integration through air, land and sea connections across countries. By weaving the 21st Century Maritime Silk Road into current regional architectures, synergies can be achieved.

Sharing of Best Practices, Ideas and Technology

Fourth, the 21st Century Maritime Silk Road comes at a time of exciting ideas, innovative technology and rapid globalisation. The maritime sector of the 21st Century is facing new technological advances and environmental challenges. We are entering into an era of mega-ships and mega-alliances, smarter vessels and terminal systems, pervasive sensors and more automated ports which use Automated Guided Vehicles (AGVs) and automated stacking cranes and even drones. China is already a major player in the ongoing technological revolution of the maritime industry. It has scale, size and a growing wealth of technological knowledge. In addition, China is becoming a key global maritime player. Shanghai and Hong Kong are two major shipping hubs in Asia. Zhenhua Heavy Industries Company cranes, better known as ZPMC to many, are used in many ports across the world, including in Singapore. 7 out of the top 10 container ports in the world are now situated along China's coast, and Chinese ports themselves are re-positioning themselves. For example, the Port of Ningbo is positioning itself as a comprehensive transportation and logistics hub through higher automation, use of intelligent systems and the Internet of Things. With growing environmental concerns, China is also exploring the switch to cleaner fuels. Yesterday, I visited Ningbo Port and noted that the prime movers are powered by LNG. I also understand that the National Offshore Oil Corporation (CNOOC) has received the first of two tugboats, Hai Yang Shi You 525, ordered from the Zhenjiang shipyard, which will run on LNG.

Good ideas, best practices and knowledge can spread faster through closer collaboration. This is particularly relevant for the maritime sector which is global in nature. One example of collaboration is the inaugural Port Authorities Roundtable, organised by Singapore in April. Participating ports from Asia and Europe, including Ningbo, shared their plans to improve their efficiency, competitiveness and sustainability. Many of the ports today face common challenges - such as the onset of mega-vessels, higher labour costs and shortage of skills, and having to meet the growing number of international and domestic regulations. It is in our common interest to create a level playing field for the maritime community to conduct their activities as efficiently and seamlessly as possible. Forums, such as this "Sailing for More" International Maritime Forum, and others organised by the International Association of Ports and Harbours, are therefore important platforms for sharing and collaboration.

Singapore and Maritime Silk Road initiative
On this note, Singapore welcomes China's initiative to develop the 21st Century Maritime Silk Road, as it is a positive step towards greater regional integration. We believe that increased trade and cooperation in the region is not zero-sum game and can only be beneficial. As a small country, we have always appreciated the need to participate fully in free-trade talks and work with other countries to enhance our interactions and win-win partnerships.

Like Ningbo, Singapore's historical development has been closely related to the growth of its port. Singapore is a global hub port that lies at the confluence of major sea and air routes and can be an important node in the 21st Century Maritime Silk Road. Our strategic location allows our port to function as a global transhipment hub, connected to more than 600 ports in over 120 countries. With comprehensive port facilities, the Port of Singapore provides competitive, efficient and reliable marine and port services. Singapore also offers a sound and stable financial system and is a recognised international financial centre. It has a pro-business environment, a skilled labour force and is highly ranked for institutional frameworks[8]. The Straits of Malacca and Singapore remains one of the busiest and most important shipping lanes in the world, carrying approximately one third of the world's trade. As a littoral state along this crucial waterway, Singapore is committed to ensuring that the Straits of Malacca and Singapore remains safe, secure and open for efficient shipping.

Moreover, ties between China and Singapore are deepening. In fact, this year marks the 50th anniversary of Singapore's independence and the 25th anniversary of Singapore-China relations. China was Singapore's top merchandize trade partner in 2014, with trade amounting to over S$121 billion[9]. PSA International, Singapore's port operator, has invested in more than 10 terminals across different cities in China, the latest being the Beibu Gulf-PSA International Container Terminal in Qinzhou City (Guangxi Province, China). Successful collaborations between our governments include the 1994 Suzhou Industrial Park and 2008 Tianjin Eco-City. Chinese businesses also enjoy a strong presence in Singapore. One of the world's largest ships, China Shipping Container Line's 19100 TEU CSCL Globe made her imposing maiden call on Singapore in December last year. Another called at our new Pasir Panjang Terminals 3 & 4 last month when Prime Minister Lee Hsien Loong commissioned the new berths. These examples of on-going cooperation bode well for better and closer relations in the future.

Conclusion
To conclude, the 21st Century Maritime Silk Road holds much promise for China and the region, together with the rest of the world, to build an even stronger regional community that is open and inclusive. Just as with the ancient Maritime Silk Road that thrived on the basis of close inter-connectivity between the people, ideas and trade that traversed across the regions, the 21st Century Maritime Silk Road would have to leverage on the new geopolitical and economic realities of a multipolar world, a win-win approach based on mutual trust, and emerging trends in technology and global interconnectivity to remain relevant. With these in place, the 21st Century Maritime Silk Road could take Asian economic growth and integration to a new level, leading to a successful and prosperous Asia.

Thank you.

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[1] World Bank Data, GDP Growth (Annual %)
[2] Xinhua, China Lowers Economic Growth Target to Around 7 percent, 5 March 2015
[3] UNCTAD, World Investment Report 2015
[4] World Trade Organization, International Trade Statistics
[5] ASEAN statistics, Foreign Direct Investment net inflows in ASEAN from selected partner countries/regions
[6] Ministry of Commerce, The People's Republic of China
[7] Asia and the Pacific is changing fast and so is ADB, Asian Development Bank (ADB), 28 April 2015
[8] Ranked overall 2nd, and 3rd for institutional frameworks, see The Global Competitiveness Report 2014- 2015, World Economic Forum.http://reports.weforum.org/global-competitiveness-report-2014-2015/top-10/
[9] IE Singapore, Review of 2014 trade performance