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From Silk Road trade to Belt and Road e-commerce

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Fu Heng e-commerce warehouse in Hangzhou. In e-commerce, the logistics flow is complex and varied.

Between 1200 and 1350, Hangzhou was believed to be the largest city in the world with a population of nearly two million people. London then had a population of only slightly over 80,000.

Marco Polo described Hangzhou as "greater than any city in the world". As a key production hub of silk and embroidery, as well as its strategic location as the south terminus of the Grand Canal, Hangzhou's glory and prosperity were driven by the bourgeoning Silk Road trade and the well-developed transportation infrastructure.

Hangzhou over the last few years has found its way back onto the world stage, hosting the G-20 summit in 2016 and seeing the rapid rise of e-commerce in China, led by Alibaba in Hangzhou.

Just like the ancient Silk Road trade that was driven by demand for silk, spices and other novel products from the East, the recent demand for online shopping is shaped by lifestyle changes, need for convenience and product variety of the new generation of Chinese consumers.

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The Silk Road trade would have been impossible if not for the peace in Central Asia and bravery in using of new routes, which shortened the travel and delivery time - no different from the changes in logistics infrastructure and the last mile delivery capabilities in modern China. Camels, horse carriages and wooden ships that carried products and trade through the continental and maritime Silk Road routes have been replaced by delivery vans and electric tricycles ploughing the streets of China.

China's e-commerce has overtaken the US by a huge margin. Online retail sales in the US for 2017 is forecasted at US$315 billion while China is expected to ring up US$972 billion. The e-commerce market in China is projected to top US$1.4 trillion in 2020.

The People's Republic of China will be 70 years old in a couple of years. It has taken China that long, particularly the last 30 years, to build the extensive transportation infrastructure that we see today.

Though its development story has been almost magical, more has to be done to reach the remote areas of China. An efficient transportation infrastructure with great connectivity will generate enormous business activity.

The Belt and Road Initiative proposed by Chinese President Xi Jinping is an ambitious plan to build up and realise the economic potential of the region with the cooperation and participation of the Asian countries. Asia has great needs for infrastructure projects and not enough projects have been completed.

OPPORTUNITY

The initiative is an opportunity for Asian countries to take advantage of the technological capabilities and financial resources pledged by the Chinese government to help accelerate the infrastructure build-up in Asia.

President Xi has said on many occasions that this ambitious plan will take the efforts of many countries and China cannot accomplish this by itself.

Since its launch in 2013, President Xi has invited many countries to come forward and join this "project of the century" and work together to realise the dream for the millions in the region.

Now more than 100 countries have pledged to work together on the many initiatives in the region.

Forchn Group has witnessed the growth of e-commerce in China and has, in our own small way, contributed to building of the infrastructure for the e-commerce ecosystem in Hangzhou and China.

As a founding shareholder of Cainiao (Alibaba's e-commerce logistics data platform) as well as our own Ruyicang (Forchn's e-commerce logistics service providers), we have serviced and grown in tandem with our e-commerce customers such as Alibaba Express, VIP.com in China.

New forms of trade require different fulfilment capabilities and our customers have pushed us to adopt innovative systems and practices to meet the challenges.

E-commerce logistics differ from traditional logistics because of the small pack size of the delivered goods and the short turnaround time.

In e-commerce, the logistics flow is far more complex and varied. It requires enhanced data platform and warehouse design as well as efficient operational capabilities to handle potentially small but high-volume packages.

With more of our customers moving into omnichannel distribution, our systems have also evolved to handle both e-commerce and traditional logistics simultaneously.

Underpinning the services and information flow is the physical warehouse assets that facilitate the operational capabilities of our e-commerce fulfilment company.

Warehouse assets are the unsung heroes of the trade routes. They provide protection and storage for the goods, and offer flexibility in repackaging and rerouting of the items throughout the manufacturing and distribution process.

Our two million sq ft of e-commerce warehouse assets in Hangzhou has seen strong growth in our customer base, with an increasing need for effective fulfilment operations in enhancing online shopping experiences.

With the recent entry of other Chinese e-commerce players, we are excited over the opportunities to expand with South-east Asia and Chinese partners in developing the e-commerce markets here.

According to a 2016 report by Temasek Holdings and Google, the Internet economy is going to expand six-fold to a market size of US$200 billion in 2025, with 90 per cent driven primarily by e-commerce and travel.

E-commerce market alone is estimated to reach US$88 billion in 2025, almost sixteen-fold increase from 2015.

Singapore is expected to have an e-commerce market of US$5 billion in 2025, larger than the casino industry in 2015. This will be driven by a thriving young population (70 per cent of South-east Asians are under 40, compared to 57 per cent in China), an increase in Internet speed and penetration as well as a more conducive payment system.

One of the challenges is the improvement of logistics infrastructure to better service the region, both in last mile delivery capabilities and fulfilment warehouses.

Singapore has traditionally been an important transportation and transhipment hub for South-east Asia as well as a hub for finance, talent and information flow.

IMPORTANCE

I personally believe that with Singapore's distinctive value proposition and sound governance, it will have an increasingly important role to play in developing the e-commerce markets in Asean.

With the recent affirmation of support for the Belt and Road Initiative by Premier Li Keqiang and Deputy Prime Minister Tharman Shanmugaratnam in Dalian, Singapore's role and impact on the initiative will bring about new business opportunities not only for Singapore, but also for the Asean community.

This will be boosted by the timely conclusion of the China-Singapore Free Trade Agreement and the Regional Comprehensive Economic Partnership among 16 countries.

It is with this commitment and belief in Singapore's continued relevance and synergies with China that Forchn has decided to list its Hangzhou e-commerce and logistics warehouse assets in the EC World Real Estate Investment Trust on SGX mainboard in July 2016.

At the time of the listing, EC World Reit was among the Top 10 Chinese Assets listed on SGX. The media in China commented that the listing had created an innovative way to structure industrial and logistics real estate operations in China.

Forchn has also consolidated its overseas headquarters in Singapore, Forchn International, and put together a strong Singapore management team with the objective of expanding our business footprint into the South-east Asian region along the Belt and Road Initiative.

I believe in the complementary synergies in having both a Chinese and a Singapore footprint where we will be able to develop strong and deep understanding of both the South-east Asian markets as well as Chinese business opportunities.

The signing of the Strategic Cooperation MOU between the Singapore Chinese Chamber of Commerce and Industry (SCCCI)and the Zhejiang Chamber of Commerce in Shanghai last month marks a strong beginning of a new partnership.

SCCCI chairman Roland Ng and myself, as executive vice-chairman of the Zhejiang Chamber, agreed that the two chambers and their members would benefit if we cooperate further in offering our respective strengths and work together on business opportunities along the Belt and Road.

China has undergone phenomenal growth since the economic reform marked by the visit to the south by Comrade Deng Xiaoping.

China is no longer just the factory of the world, producing cheap goods. It has become a centre of innovation and new business models.

It now leads the development in many areas, such as e-commerce, globally.

As Marco Polo wrote in his 13th century book when he travelled to Hangzhou, "the number and wealth of the merchants and the amount that passed through their hands, was so enormous that no one could form a just estimate thereof".

This same phrase could well describe the state of the Chinese e-commerce market today.

As the Chinese experience starts to be recognised in the South-east Asian market, it will have great impact on the development plans of the transportation infrastructure in the region.

I am confident that we will see an increasing role for Singapore in shaping this development and contributing to the success of the Belt and Road Initiative.

  • The writer is chairman of Forchn Holdings Group, Forchn International Pte Ltd and SGX mainboard-listed EC World Reit.
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