Shifts in global shipping routes persist, even amid the US-China tariff ceasefire agreement
China's trade diversification efforts are set to continue reshaping shipping routes for the remainder of the year, according to industry experts. This strategic shift, which began in earnest in Q4 2019, has seen China pivot its trade orientation towards the Global South, encouraging overseas expansion of Chinese firms and enabling participation in emerging markets less affected by US-China tensions.
Key elements of these trade diversification efforts include the signing of new free trade agreements (FTAs) with countries such as Mauritius, Cambodia, Nicaragua, Ecuador, and Serbia, as well as upgrading existing FTAs with countries like Chile and Pakistan. China has also launched enhanced regional agreements like the upgraded China-ASEAN FTA and joined the Regional Comprehensive Economic Partnership (RCEP) to integrate with broader Asian regional supply chains.
These initiatives have boosted maritime traffic along key routes connecting China to the Indian Ocean, the South China Sea, and beyond, reshaping traditional shipping patterns that previously centered more on trans-Pacific and trans-Atlantic corridors. The Belt and Road Initiative has facilitated the development of new port infrastructure, logistics hubs, and industrial zones across these regions, supporting diversified shipping routes branching from China’s eastern seaboard and southern ports.
This strategic pivot is expected to continue weighing on US import volumes, with a full-year decline in volumes on the US-China trade lane anticipated, according to Jarl Milford, a maritime analyst at Veson Nautical. The decline in China-US box volumes for Maersk during the April-June period was around 35% year on year.
The changing shipping dynamics have also had an impact on freight rates. The rates from Shanghai to the US west coast and east coast have fallen by more than half from their peak in early June. The Shanghai Containerised Freight Index, which tracks spot freight rates for containerised cargo from Shanghai to major global destinations, has declined for nine consecutive weeks.
However, it is unlikely that tariffs will be completely eliminated, according to Jarl Milford. This decline in volumes will apply further pressure on freight rates, making them more competitive for shippers looking to diversify their supply chains.
In summary, China’s trade diversification efforts through FTAs, the Belt and Road Initiative, and regional partnerships have accelerated a strategic shift of trade flows toward the Global South. This has led to measurable changes in global shipping routes, with increasing Chinese maritime traffic directed at emerging markets via new and upgraded seaports and corridors, reflecting a broader transformation of international trade and supply chains driven by geopolitical and economic factors.
The ongoing trade diversification efforts by China, as demonstrated by the signing of new free trade agreements and the upgrading of existing ones, have fostered an increase in Chinese business in emerging markets like Mauritius, Cambodia, Nicaragua, Ecuador, and Serbia, simultaneously boosting finance in the form of investment and technology in these regions. As a result, finance industries are experiencing growth as Chinese companies expand overseas, and technology sectors in these regions are observing new opportunities for collaboration.
With China's enhanced participation in regional agreements such as the upgraded China-ASEAN FTA and the RCEP, technology advancements are set to play a crucial role in streamlining trade operations across broader Asian regional supply chains, ultimately reshaping the finance landscape for businesses involved in these partnerships.
