China’s Belt & Road Initiative – Blog #18

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This is the eighteenth Blog in a series based on The Geopolitical Significance of the Chinese Belt and Road Initiative and What it may Mean for Supply Chain Operations Worldwide, a Whitepaper (52 pg, 260 endnotes) researched and written for RAAD360 LLC ( The goal is to alert supply chain managers worldwide to the complex risks inherent in BRI. RAAD360 provides RAAD™, a cloud-based supply chain risk management platform.

Worldwide Supply Chain Risk Series

China’s Belt & Road Initiative

Blog #18 – How China Benefits – Ports, Sea Lanes


China has a key strategic objective of controlling the world’s maritime conduits and ‘Belt and Road’ plays a vital role in accomplishing this.  China declared plans to make $20 billion in investments in a year’s time, from mid-2016 to mid-2017, in nine overseas ports.[1]  China already controls or owns, through state-owned entities or private Chinese firms, the ports of Gwadar in Pakistan, Piraeus in Greece, Doraleh in Djibouti (near a Chinese naval base and a U.S. military base), Hambantota in Sri Lanka, Zeebrugge in Belgium, and ports in Myanmar, Bangladesh, Tanzania, Turkey, and Oman, plus rail lines connecting ports to major cities, such as the line between the port of Mombasa and the capital city, Nairobi, in Kenya.[2]  It has port ownership or significant port investments in 34 countries, as of September 2017, and plans for investment in an additional 12 ports in eight countries in the near future.[3]

China recently moved to acquire control of another crucial port—Haifa, Israel, with a vantage point on the eastern Mediterranean where it can have an impact on all Mediterranean maritime activities, including movements of the United States Navy’s Sixth Fleet.  The Shanghai International Port Group will take over a new private seaport at Haifa, a traditional port of call for ships of the Sixth Fleet, in 2021.[4]

All of the ports have strategic geographic locations and form a wide, well-connected maritime network. The port of Gwadar, located where the Gulf of Oman joins the Arabian Sea, is in proximity to the port of Chabahar, Iran’s only ocean port (Gwadar is about 700 km from Karachi but only 75 km from Chabahar),[5] and  provides China access to the Indian Ocean  through Pakistan by way of the land route linking Gwadar and Kashgar in China’s western Xinjiang province.[6]  It is “positioned right in the middle of energy routes between the Middle East and Asia, similarly to how Yamal LNG lies between East and West in the Arctic.”[7] (See map below, which shows ports that are militarily strategic, as well as ports owned by or that have major Chinese investments in them).

Source: C4ADS, in Asia Times, “Ports in a storm ‘stealthily’ expand China’s naval presence,” 2 June 2018

India sees China’s Gwadar activity as a direct threat to its interests in the region: “There is little doubt in Delhi about Chinese aims to deploy Gwadar in the medium to long term as a dual use port, allowing the PLA (People’s Liberation Army) key access into the Indian Ocean as well as bolstering Pakistan’s ability to deter any Indian advantage in the naval realm.”[8]

The Chinese role in Hambantota on Sri Lanka’s east coast and the older port of Colombo on the west coast also deeply concerns India.  India is  now virtually ringed, west-south-east, by ports under Chinese control.  The Sri Lankan government has said that it will not allow China to turn Hambantota into a Chinese naval base but there is considerable skepticism about this, even though Sri Lanka has moved its own southern naval command into Hambantota, perhaps to make a point.[9]  This naval activity could interfere with commerce except for the fact that Hambantota has had little commercial traffic so far.

The port of Doraleh is not only in proximity to both U.S. and Chinese military bases, it sits on the Horn of Africa, at the mouth of Bab el-Mandeb Strait that leads to the Suez Canal, through which about 30% of the world’s shipping passes.[10]  China has recently stepped up its development in and around the port.   It has strengthened  its political support from the local government and pressed to have the Dubai firm DP World pushed out of its position as port operator and a Chinese firm replace it, giving China control of this key facility.[11]  DP World challenged Djibouti’s arbitrary termination of its contract and won an injunction from a UK tribunal and a separate verdict from London’s High Court but Djibouti responded by nationalizing the facility.[12]  In the meantime, China has built a new free trade zone at Doraleh.  It is Chinese-financed and will be Chinese-operated by an SOE—China Merchants Holdings.

The geopolitical connotations of the escalating Chinese presence in Djibouti are obvious:  “China has already built a military base at Doraleh, next door to the container terminal, and this spells trouble for the U.S., whose own military installation, the massive Camp Lemonnier, is just a short walk away.”[13]  China has already engaged in hostile actions (lasering U.S. pilots) and the fear is that if China is in full control of Doraleh, it could prevent U.S. ships from refueling there and supplying  Camp Lemonnier.    Djibouti’s debt position vis-à-vis China is already a worry.  Debt is more than 75% of Djibouti’s GDP.  This is the classic “debt trap” situation China has used to acquire ports in Sri Lanka and Pakistan.

Gwadar, Hambantota, Doraleh, Darwin, Tanjun Priok, the Melaka Gateway and other major Chinese-invested ports are located at critical shipping lane chokepoints where China not only can protect its own maritime activities but also impact the flow of all ship traffic.   Verbal assurances from the Chinese have not been sufficient to allay concerns, especially in light of belligerent actions in the South China Sea and in Djibouti.

China’s aggressive campaign to get Thailand to agree to let it build and run the Kra Canal would, if successful, afford China the ability to avoid the Malacca Strait and to control shipping in Asia.

More troubling than the sheer number of ports around the world with a major Chinese presence and/or control, is the concentration of Chinese port influence.  China now has “direct stakes in the ports that clear approximately two-thirds of the world’s container volume, aided by its role as a top sea freight handler through COSCO Shipping.”[14]

State-owned COSCO, which purchased Hong Kong’s OOCL line in July, is a giant port operator and owner.  In the words of Chinese officials, with massive state financial backing COSCO seeks “to control one of the world’s busiest trade loops. Ports on the route, running from Asia through the Suez Canal to Europe, would give priority to Chinese vessels.”[15] (emphasis added).  Since 2010, COSCO, China Merchant and China Overseas Port Holding Co. have spent more than $4 billion to buy into 21 of the top 50 container ports.[16]

China has also made major port acquisitions well outside the lines of ‘Belt and Road’, in places like Seattle, Washington, and Long Beach, California.  COSCO’s goal of control of the Long Beach terminal became a stumbling block in finalizing the takeover by COSCO of shipping rival Hong Kong-based Orient Overseas International Ltd., which owned the facility.

The Committee on Foreign Investment of the U.S. reviewed the deal and required  COSCO to separate the terminal ownership from the purchase of the shipping company, putting the facility in trust to be sold.[17]  The Long Beach terminal is one of the most important in the U.S., one of the few that is almost entirely automated and capable of handling the largest cargo ships.  It has been expanding to take on ships carrying 20,000 TEUs.[18]  Were China to gain control of the port of Long Beach, it would have significant control of both ends of a major China-U.S. trade corridor.

In addition to state-owned COSCO, another major Chinese-affiliated port owner and operator is CK Hutchison Holdings of Hong Kong.  Its portfolio also includes telecom, energy, infrastructure companies, and port-related businesses.  The firm is in 22 port locations in 18 countries across ‘Belt and Road’ and has ambitious plans for rapid expansion.[19]


Questions –

Where does my supply chain intersect with China’s “Belt and Road” transportation network?

What about my supplier’s supply chain?

Can China’s monopoly power increase transportation times in my supply chain?

Can China’s monopoly power increase transportation costs in my supply chain?


BRI Blog next Monday will be:

How China Benefits – Energy Security, Political Power


There is a wealth of information in the end notes to each Blog article.  Click the URLs to bring the sources onto your computer screen for review.

[1] Economist Intelligence Unit.  “China’s expanding investment in global ports.”  11 October 2017.  “China’s expanding investment in global ports.”

[2] Ibid.

[3] Ibid.

[4] The Maritime Executive.  “Chinese Port Operator at Haifa Will Mean Questions for the U.S. Navy.”   14 September 2018.

[5] Shahani, Imran.  “Gwadar vs Chabahar—Op Ed.” Eurasia Review.  9 February 2018.

[6] Singh, Sinderpal. RSIS.  “South Asia and Maritime Silk Road:  Far from Plain-Sailing – Analysis.”  30 March 2018.

[7] Bennett, Mia.  “Will All Roads Lead to China?” The Maritime Executive . 3  December 2017.

[8] Singh, Sinderpal.  RSIS.  Op. cit.

[9] South China Morning Post/Agence France-Presse .  “Sri Lanka to base navy’s Southern Command at Chinese-run Hambantota port.”  30 June 2018.

[10] Manson, Katrina.  “China military to set up first overseas base in Horn of Africa.”  CNBC /Financial Times  31 March 2016.

[11] Mooney, Turloch.  “China Merchants to revamp old port of Djibouti. JOC. Com 17July 2018. jibouti_20180717.html

[12] Ibrahim, Malik.  “Djibouti’s Attempts to Vanquish Dubai Ports Operator Spells Trouble for Washington. Geopolitical Monitor.    20 September 2018.

[13] Ibid.

[14] Chamorro, Dane.  “Belt and Road: China’s Strategy To Capture Supply Chains From Guangzhou To Greece”.  Forbes.  21 December 2017.

[15] Paris, Costas.  “Chinese Shipping Giants Seek Control of ‘Maritime Silk Road.’”  Wall Street Journal.  7 April 2017.

[16] Ibid.

[17] Bloomberg News. “ Pledging to Sell Long Beach Terminal, COSCO Clears U.S. Hurdle on OOCL Deal.”  8 July 2018.

[18] Paris, Costas, and Joanne Chiu.  “U.S. Questions Cosco’s Takeover of Cargo Terminal in Long Beach.”  Wall Street Journal.  20 April 2018.

[19] Chen, Celia and Peggy Sito.  “Here’s how Li-kashing dominates trade along the Belt and Road Initiative.”  South China Morning Post.17 May 2017


© Shirley M. Loveless, Ph.D. 2018

Dr. Loveless is a consultant, author, and educator in transportation systems, supply chain risk analysis, emergency management, and economic development.  She is a Member of the Transportation Research Board of the National Academies of Sciences, Engineering and Medicine, and an appointed member of several TRB Standing Committees.  She works with RAAD360 LLC as a supply chain transportation consultant.