Kerry commits to China-Europe rail freight, the keystone of the Belt and Road Initiative
 TO boost export revenue by forging greater connectivity with Europe, China can now boast of a 21-day rail freight service through 12 cities in China and six in Europe, spanning 12,000 kilometres from Yiwu to London and Madrid.
Hong Kong's Kerry Logistics Network having tested the service with 80 containers on a China-Madrid run last August, is now fully committed to playing a major role in the service, the keystone of Bejing's mighty arch called the One Belt One Road Initiative.
Said Kerry managing director William Ma: “We are extremely excited to be the first Asia-based global 3PL to move eastbound freight from Europe along the One Belt One Road trade route".
Quite when or how Beijing's central planners decided to revive Marco Polo's old Silk Road as a symbolic marketing tool is unknown. The very meaninglessness of its official name, the "One Belt and One Road Initiative", eventually simplified to "Belt and Road" added to the mystery.
First, it appeared to involve far more than "one road", though conceptually it corresponded to Marco Polo's 14th century camel train route to Europe, though the new version shared little with that except a general east-west direction.
Nonetheless, the creation of rail service from Yiwu, a city of 1.2 million, 280 kilometres south of Shanghai to Madrid, 10,000 kilometres away was stunning. That was 741 kilometres longer than the Trans-Siberian Railway, the world's longest railroad up till that point and more than twice the length of the trans-Canada railway.
At first the China-EU rail service had few takers, and was largely sustained by one-way east-west shipments of high-value consumer electronics with Hewlett Packard (HP) leading the way, shipping computers from Chongqin to Duisburg, an hour's drive from Dusseldorf and Cologne, and 200 kilometres from Rotterdam. The route was fraught with problems. As it traversed Kazahstan and Russia the rail cars were beset by thieves who broke into and gutted their contents on flat cars. There were also stops to change bogies, or more often hoist containers onto Russian gauge rail cars.
(Fearing military attack, Russia has always been careful to retain its separate rail gauge from Europe and China.)
Freight would also be subject to damaging winter weather. There were also changing customs regulations, imposing different levels of severity depending on the varying temperatures of an ever changing diplomatic climate, still suffering a Russo-EU chill over the Ukraine and Syria.
But one by one these problems were addressed and mitigated just as European gunboats on the Yangtze managed to sidestep the conflicts between their countries in the 19th and early 20th centuries to see that a mutually beneficial trade continued unmolested.
From the China-Europe rail option appealed to electronics producers in Chongqing and Chengdu, who received concessions for setting up high-tech factories there in the "Go West" development drive to migrate the new prosperity enjoyed on the coast to the then stagnant Chinese interior.
At the time, more than a decade go, consumer electronics were hot fashion items which had to use air freight or lose the shelf space and sales to rivals. But in recent years, a more cost-conscious world began to see rail as fast enough to deliver high volumes cheaply over vast distances in time for sales when mobile phones were being increasingly viewed as standard equipment rather than objects of envy.
The number of freight trains operating between Chengdu and Europe is expected to double this year to 1,000, said the Chengdu International Railway Services Company.
Chengdu, the capital of Sichuan province, operated 460 freight trains to cities in Poland, the Netherlands and Germany last year - more than any other Chinese city. Globally, Chengdu alone delivered 73,000 tonnes of goods valued at US$1.56 billion in 2016, reported Xinhua.
The southwestern hub has planned three major rail line services to Europe, with a middle route to Germany, Poland and the Netherlands, a southern route to Turkey and beyond, and another northern route to Russia.
New routes linking Chengdu to Istanbul and Moscow will also be launched this year, according to company chairman Fan Jun. The train journeys to Istanbul and Moscow will take 16 days and 10 days, with each route operated by 200 and 150 trains, respectively.
Another factor likely to play into the hands of this rapidly growing rail freight service, are rising fears of moving lithium batteries by air, or even by sea, where combustion may start in the depth of an inaccessible container stack mid-ocean. However catastrophic a lithium battery explosion may be on a train, it is likely to do less damage and is more easily isolated than a conflagration on an aircraft or ship.
Last year there were 33 battery fires on airlines and experts say the US Federal Aviation Administration needs to update its guidance on how to deal with the lithium battery threat.
China is clearly anxious to make a success the China-EU rail freight service if only because it so represents the Belt and Road Initiative if only because it is so illustrative of what the Belt and Road represents, and most closely resembles its initial inspiration, Marco Polo's Old Silk Road.
As such it is likely to get every official encouragement, having enjoyed strong backing of President Xi Jinping from the start, and widely viewed as an effort to improve trade between countries in Europe, Africa and Asia, as well as forge diplomatic ties.
China's western Xinjiang province, a key trade and logistics hub, is likely to be benefit the most while smaller cities like Lanzhou and Xining will also open up. Strengthening railway infrastructure through much of mainland China and outwards into Russia is also a priority.
Walking softly and carrying big loans and loan guarantees appears to be the policy. China reckons Belt and Road investment will run from $4 trillion to $8 trillion over an indefinite period. “On the basis of respecting each other’s sovereignty and security concerns, countries along the Belt and Road should improve the connectivity of their infrastructure construction plans and technical standard systems, jointly push forward the construction of international trunk passageways, and form an infrastructure network connecting all sub-regions in Asia, and between Asia, Europe and Africa step by step,” said one high official, according to state media.
Logistics links are the core of this ambitious scheme. Some analysts see it as a means of subliminally hard-wiring international co-operation and trade relationships. They say the freight rail service is part of the strategy to link China to Tehran. This connection links Iran with the central Asian countries of Kazakhstan, Turkmenistan and ultimately China. Which in turn will also enhance China's political influence over an increasingly important global region.
Not surprisingly, Belt and Road has aroused American suspicions in that it appears that it is a way to extend Chinese influence at the expense of the US. Fitch Ratings said the plan to built ports, roads and railways in under-developed Eurasia and Africa is politically motivated and not based on a real demand for infrastructure. Fitch also doubts Chinese banks' ability to control risks, as they have not done a good job allocating resources at home.
Whatever the whys and wherefores behind such speculation, it seems that the keystone of the arch of China's major transport policy is now in place, and that it is likely to enhance global infrastructure in the developing world as more corporate giants like Kerry Logistics get behind it in a spirit of enlightened self-interest. |
