China Wants to Own Shipping's Digital Operating System

How the Digital Silk Road is Digitizing Shipping with China as the Sole Network Administrator.

At the heart of US dominance as an information empire back in 20th century was the AT&T Company. For decades, AT&T deployed its expertise to solve some of the most complex and sensitive telecommunications puzzles of the era. This included helping to develop nuclear weapons technology, a ballistic missile warning system and a secret communications network for Air Force One.  

In the 1930s, AT&T was also responsible for ship to shore radiotelephone system, which consisted of high seas service stations dotting the Pacific and the Atlantic Coasts, operating under the WOO call-sign. In those days before the satellite technology became widely available, mariners could only communicate using telephone calls placed by contacting an AT&T marine operator on VHF (Very High Frequency) channels.

The contours of shipping’s telecommunication technology have changed from the historical era of AT&T dominance and are shifting to a future one, which seems imprinted in China’s Digital Silk Road (DSR).

DSR is the largest deployment of transnational digital infrastructure ever witnessed. Its backbone is thousands of miles of subsea fiber optic cables beneath the world’s oceans. The nerve center is China’s “Big Three” state owned telecommunications firms - China Telecom, China Unicom and China Mobile. They assist in carrying, storing and mining of data passing through the subsea cables encircling the earth, while at the same time keeping China’s networks out of foreigners’ reach.

Essentially, these firms are doing the final leg of China’s global physical footprint through the Belt and Road Initiative (BRI). For every visible Chinese investment in transport infrastructure, there is an invisible attempt to streamline its digital dimension.

Take the case of the Chinese-controlled Piraeus port in Greece. The benefit of the investment is not just in expanding the port’s physical capacity, but its network systems have also been overhauled courtesy of Huawei. This is in addition to installing routers, which are now supplying free Wi-Fi to the port’s staff and tourists at the cruise terminal. As Jonathan Hillman says in a new book, The Digital Silk Road: China’s Quest to Wire the World and Win the Future, “China has been packaging digital infrastructure with the traditional infrastructure, and the world desperately needs both.”

In September, Huawei launched its Smart Port solution during the Huawei CONNECT 2021 forum. It is targeting the countries building world-class ports, and it wants to deploy the technology in making cargo handling more intelligent and convenient. The application focuses on four areas: intelligent customs clearance, visualized collaborative command, convenient clearance systems and comprehensive port campus management. According to a company statement on the Smart Port application, the use of Big Data, AI and cloud computing technology gives the application a unique proposition for operations in busy ports.

With this, it is now a matter of ‘when’ and not ‘if’ the technology will readily find its way to Chinese-backed ports, from Lamu in Kenya to Sines in Portugal.

If there is one thing we have learned during the current debate on supply chains, it is their dependence on China. Some commentators see “decoupling” of these supply chains from China as the best shot at the problem. But is it possible that the discussion is one step behind China’s strategy?

In a recent article, Andre Wheeler, author of the book China’s Belt Road Initiative, sees the next mega-trend being in China’s intent to use DSR to cover all BRI participants into a seamless digital platform that integrates all trade.

“One of the key differences between China’s DSR and the West is that the DSR is a closed software platform constructed along a single digital spine and skeleton, essentially owned and controlled by the State. This would have key data centrally stored, disseminated and controlled by a state instrument in Beijing, rather than in neutrally accessible data warehouse or cloud-based data storage,” explains Andre.

The European Chamber of Commerce in China captured similar sentiments in a 2020 report. It concluded that Chinese-built telecommunications networks and ports are set up in ways that make it hard for European shipping companies and computer software providers hard to compete.

The entire value chain of China’s shipping sector falls under the State-Owned Assets Supervision and Administration Commission (SASAC), the owner and regulator of the nation’s state-owned enterprises. Thus, the greatest concern is whether the growing dominance of SASAC monopoly - through key investments in 100 ports spread out in 60 nations - will permit a fair global competition with other shipping lines. Further, is it possible SASAC can export some of the China’s restrictive cabotage laws to the terminals it operates?

 “If China becomes the world’s chief network operator, it could reap commercial and strategic windfall. It could reshape global flows of data, finance, and communications to reflect its interests,” predicts Jonathan Hillman. “It could [also] possess an unrivaled understanding of market movements, the deliberations of foreign competitors, and the lives of countless individuals enmeshed in its networks.”