连接中欧的新桥梁

The
emergence of the EU-China railway connections, also known as “The Silk
Railroad”, is one of the first tangible results of the Belt and Road
Initiative. Within less than 5 years, the number of trains dispatched
annually reached 3673, carrying up to 7% of the overall EU-China trade .
The Silk Railroad has a potential to transform high-tech value chains
linking both economies, and to support economic growth of inland regions
in both China and Europe. The rapid growth of the rail freight market
would not be possible without a close cooperation of governments and
companies along main Eurasian transport corridors. As the market
matures, a number of challenges regarding the efficiency and balanced
development of train connections need to be resolved, both on the
Chinese and European side. The emergence of Poland as a major logistics
hub along the Silk Railroad will bring more efficiency and
competitiveness to EU-China railway transport, opening the way for it to
compete with the dominating maritime and air transports.

Economic potential: a valuable niche
Eurasian
rail freight solutions opened new possibilities within the global value
chains, enabling companies that operate in both China and Europe to
link their production facilities using regular trains. Therefore, global
companies are currently the most important customers of EU-China rail
connections. At present, the main categories of goods transported
between China and Europe include automotive parts, electronic devices,
electrical machines, pharmaceutical and chemical products. However,
within the last 3 years, an increasing number of logistics companies
offer less-than-container load (LCL) transport, which opens new
possibilities to small and medium enterprises. The opening of the rail
connection to e-commerce has created an opportunity to transport at
least a portion of the large market of parcels sent from Europe to China
and vice versa.

Railway
transports attracts relatively high-value goods and businesses where
quick delivery is in high demand. According to some estimates, around
65-67% of deliveries by train involve goods of a relatively high value.
Although rail freight between China and Europe cost is 3-4 times higher
than using the sea route, it is profitable for some high-value goods
producers to use it, especially those operating in inland regions of
both continents. The need to “freeze” goods on a container ship for
several weeks generates high capital costs for companies, in particular
those using external funding. A relatively short time of rail deliveries
(15-19 days) attracts goods that need to be transported quickly (such
as spare parts or returning orders), making rail transport attractive
for goods that have so far been dispatched by air.

The
logic of Chinese cities and provinces that engage in organizing railway
connections to Europe, which are currently the main driver of market
development, is to subsidise railway carriages in order to create new
business opportunities and attract investments. This strategy proved
highly efficient, as it attracts global electronics and automotive
producers to less-developed inland regions, and stimulates booming local
logistics sectors. The economic effects of the Silk Railroad are also
visible on the European side, especially in Central and Eastern Europe
that is becoming a major logistic hub facilitating trade with Eurasia.
For countries along the route, the development of logistics services
linked with rail freight can stimulate growth and diversify local
economies.

However,
due to the extensive use of government subsidies, the ultimate business
potential of the project is still unclear. The Chinese cross-regional
competition to increase freight capacity set the rail freight cost up to
60-70% below the market level (estimated at 8-10 thousand USD), with a
high price volatility. This attracted some businesses which, without a
subsidy, would not probably choose railway to trade between China and
Europe. It is estimated that if goods in a 40-foot container are worth
more than 1 million USD, the cost of railway freight (including the cost
of capital) is actually lower than that of maritime transport.
According to the Chinese central government, subsidies are planned to be
phased out in the following years. If successful, it can make EU-China
railway connections development more sustainable and market based, but
may also slightly reduce the customer base, especially of low-end goods.

Another
challenge to the business feasibility to the Silk Railroad is the lack
of balance in west-bound and east-bound transports. Currently more than
65% of trains come from China to Europe, carrying more than 90% of the
overall value of railway trade. This increases the financial burden of
Chinese provinces, who often need to run a subsidized empty or
half-empty trains back to China (as railway platforms and containers
need to brought back anyways). Though a more balanced trade is partially
dependent on the response of the European exporters, some additional
measures can be taken to bring more balance to the railway freight, such
as reducing tariff and non-tariff barriers, as well as expanding import
licences on the Chinese railway terminals. Those actions could also
benefit the development of Chinese inland provinces, as the distribution
of European goods can stimulate local logistics, retail and e-commerce
sectors.

Up
to date, rail freight is still a business niche, although a valuable
one. In 2017, about 300 thousand TEU (twenty-foot-equivalent containers)
of goods were transported between EU and China using railway
connections. This constituted less than 2% of the overall volume of
trade between those two economies. However, when it comes to the value,
railway transportation’s importance is much more visible – it is
estimated that up to 7% of the EU-China trade was transported in this
way in 2017. According to most estimates, it can potentially facilitate
15-20% of the EU-China trade value. Despite being a business niche, it
may still transform the high-tech of global value chains linking both
economies, and promote investments that use the factory-to-factory rail
link model, especially in Chinese and European inland regions.    

Competing transport corridors
The
emergence of the Silk Railroad would not be possible without an
extensive transnational cooperation of governments and companies along
the main transport corridors linking China and Europe. For the logistics
business, where the overall shipment security and reliability is as
important as the delivery time, both hard and soft infrastructure is
crucial to conduct operations. The hard infrastructure consists of the
railway tracks, transhipment terminals and border crossings
infrastructure, determining the daily capacity of a transport corridor.
However, the trains could not cross Eurasia in mere 3 weeks without the
soft infrastructure – such as norms and standards of shipments,
waybills, custom clearance procedures, as well as cooperation of
national railway operators. These factors determine the overall
reliability and punctuality of shipments, which are crucial for global
companies, often operating in just-in-time delivery models. Therefore,
the competitiveness of a given transport corridor results from a
successful cooperation of governments, railway companies and logistics
enterprises along a given corridor.

The
development of rail connections between China and the European Union
has so far been almost exclusively based on the three northern corridors
that run from China through Kazakhstan or Mongolia, Russia, Belarus and
enter the EU territory through the Polish eastern border. Those
corridors have the best hard infrastructure of all existing routes,
offering the highest transport capacity. Due to intensive cooperation of
governments, railway companies and logistics sector along the route,
the rail freight time is decreasing, with its reliability  increasing.
All railway transports from China enter the EU on the Belarus-Polish
border, in the key transhipment terminal in Malaszewicze, Poland. Being
Europe’s biggest standard-to-broad gauge railway trans-shipment
terminal, it is currently the most efficient and the highest capacity
‘gateway’ to the European Union. Although the rapid growth of EU-China
railway transports resulted in temporary bottlenecks, the logistics
operations and custom clearance at the Malaszewicze terminal is being
constantly improved. Poland is also actively developing alternative
border crossings in the vicinity of the main gateway, increasing the
hard infrastructure capacity.

However,
northern corridors had already shown some limitations. Due to the
Russian sanctions on the railway transit of some European products to
China (including foodstuffs), as well as the business need to provide
viable alternatives to existing routes, countries in Europe and Asia
work on establishing alternatives. The trans-Caspian land and sea
corridors running through the Caspian Sea, the Caucasus and the Black
Sea are one potential alternative to the currently used northern
corridors. However, the transport of goods using this route is much more
complicated and requires complex intermodal solutions (such as ferry
crossings). Another potential alternative to China-EU rail traffic is
the southern route that runs through Turkey. However, the present work
on the development of the southern corridor is mainly intended to build
permanent connections between China and Turkey, and not to transit goods
to the EU. In both cases, significant investments in hard
infrastructure, as well as more intensive collaboration of standards is
needed to increase competitiveness of those alternative corridors.

Poland’s role in the EU-China railway connections
Poland’s
geographic advantage, developed infrastructure, as well as its booming
logistics sector is a great starting point to improve efficiency of the
Silk Railroad. Logistics centres in central Poland (Łódź and Warsaw)
already facilitate more than 25% of the overall volume of EU-China
railways connections, second only to west German hubs in Duisburg and
Hamburg. Poland becomes a major distribution hub servicing trade between
China and the Central and Eastern Europe, Scandinavia and south-eastern
Germany. Being a railway “gateway to Europe”, as well as a booming
logistics centre well connected to the EU’s transport network, Poland
could become a railway transport what ports of Netherlands are to
maritime transport – a major intercontinental transhipment hub.

Poland’s
advantages are crucial to provide companies involved in the Silk
Railroad with a logistics competitive edge on the European market.
Central Poland (Łódź city area) is located at the crossroads of Europe’s
north-south and east-west transport corridors, and is well connected to
the European highway and railway networks.  Polish local transportation
companies have the EU’s biggest truck fleet (more than 330 thousand
trucks), which is crucial for the logistics and final distribution
(pre-carriage and post-carriage) of goods transported by rail between
Europe and China. Poland’s logistics competitiveness is based on a
relatively well developed storage and transhipment terminals, highly
skilled workforce, and low labour costs. That is why an increasing
number of big global companies – such as Amazon or DHL – are moving
their operations to Poland. Polish logistics and transport companies
have a vast expertise in transhipments, cargo consolidation, custom
clearances, and distribution of goods within the EU. This brings new
opportunities for Chinese companies to invest and establish partnerships
with their Polish counterparts.

Concentrating logistics operations in
Central Europe can also play a positive role in the overall long-term
development of the Silk Railroad. Over the last 3 years, China’s central
government and the NDRC has been actively involved in the process of
coordinating the Silk Railroad in China, under the banner of CR Express
project. It aims to guarantee a more balanced development of the
transport market, bringing a greater coordination in the process of
organising railway connections and the expansion of China’s logistical
infrastructure. The concentration of logistics operations leads to
optimization and better use of the existing capacity. In order to
maximize the efficiency and minimise the need for subsidies, a similar
trend should be expected on the European side, covering the activity of
Chinese intermodal operators in Europe. By using Poland’s excellent
location and strong logistics business base, the Silk Railroad can
increase its overall efficiency and gain competitiveness vis-à-vis other
means of China-EU transportation.(All data used in the article comes
from the OSW report: “The Silk Railroad: The EU-China rail connections:
background, actors, interests”, OSW studies, 2018)