Yao Hongzhi (right), general manager of COSCO Shipping (France) Agency, and the representative of the French ordering group in front of the freight train container in Valenton, southeast suburb of Paris, France on June 23.
On board the train were 20 million face masks, 45 million pairs of protective gloves, and other epidemic prevention products worth more than € 10 million.
According to the Société Nationale des Chemins de Fer (SNCF), France’s national state-owned railway company, as the country has emerged from the worst situation of COVID-19 pandemic, it chose to change the transport vehicle for anti-epidemic supplies bought in China from aircraft to trains. The cost is 30 times cheaper and the carbon emissions are 15 times lower, said SNCF.
Booming Against All Odds
According to the latest data released by the China State Railway Group Co., Ltd., the number of China-Europe freight trains in operation in May reached 1,033, an increase of 43 percent year on year. The trains shipped 93,000 twenty-foot equivalent units (TEU) of goods, up 48 percent year on year. In the first five months of this year, China-Europe freight railway saw a total of 3,953 trains carrying 355,000 TEU of goods going back and forth between China and European countries, an increase of 28.5 percent and 32 percent year on year, respectively.
Due to the COVID-19 pandemic, major economies across the world have been facing downward pressure since the first quarter this year. China’s GDP shrank by 6.8 percent year on year over the period when the country was most seriously affected by the epidemic. Japan witnessed its GDP fall by 3.4 percent, the Eurozone by 3.3 percent, and the entire European Union by 2.7 percent. The pandemic hit European countries and the United States even harder starting from March.
Against such a backdrop, both the number of trains in operation and the total amount of goods shipped along the China-Europe freight lines bucked the downward trend and rebound with robust momentum. What are the reasons behind this?
Advantages of Cross-Border Railway Transportation
There are two reasons. First, affected by the pandemic, many countries had to close ports and airports, resulting in limited cross-border transportation by sea and by air. As cross-border railway transportation is less affected by the pandemic, more businesses changed the transportation of their goods from sea or air routes to railway services. This led to the growth of both the number of China-Europe freight trains and the amount of goods they shipped in the first five months of this year amid the global pandemic outbreak.
The other reason is about demands for railway transportation. Due to their inland location, central and western provinces and regions in China and many countries in Central Asia and Central and Eastern Europe need railway freight services to transport goods in and out. With the proposal of the Belt and Road Initiative (BRI) and the implementation of related construction projects, all parts of China, especially the central and western provinces and regions, such as Shaanxi, Chongqing, Sichuan, Xinjiang, and Gansu, have taken an active part in cooperation with countries in Central Asia, Central and Eastern Europe, and other regions. They joined forces to boost cooperation in trade, infrastructure connectivity, production capacity, and construction of overseas economic and trade cooperation zones. The demand for China-Europe freight trains has increased substantially as a result.
The BRI was put forth in the fall of 2013. Over the last six years from 2014 to 2019, the number of China-Europe freight trains in operation rose 285 percent, 165 percent, 109 percent, 116 percent, 72 percent, and 30.6 percent annually.
Judging from the current development momentum, the figure for the entire year is expected to rise substantially. As cooperation under the BRI framework deepens, the freight services will welcome broader development prospect.
China-EU Economic Cooperation Boosted
Although the freight trains have only been in service for nine years since the opening on March 19, 2011, the number has risen substantially by 384-fold. At the beginning, there was only one line from Chongqing in southwest China to Duisburg of Germany. Now, more than 60 Chinese cities are connected with over 50 cities in 15 European countries by the railway services.
The well-connected railway freight network has played a fundamental role in promoting economic and trade cooperation between China and European countries.
The freight services are directly conducive to establishing a stronger industrial supply chain between China and Europe, and promoting cooperation between the two sides in production capacity.
For example, the trains transport auto parts produced by companies in Wuhan, China to BMW and Mercedes-Benz plants in Germany, and then the German auto makers ship the finished automobiles back to the Chinese market. In this way, Chinese and German companies are connected in the same industrial chain.
Similarly, electronic products produced by Chinese companies are also shipped to Germany, France, Poland, the Czech Republic, and other European countries in large quantities. On the way back, China purchases high-tech electronic products from Germany and France.
The services help boost trade between China and European countries. In the end, it will be a win-win outcome. China presents a huge market for European products ranging from mechanical and electrical equipment to aircraft, ships, vehicles, chemical products, raw materials, parts and components, special agricultural products, and high-quality livestock products. European countries are also an important destination for Chinese goods including apparel, petty commodities, food, and medical supplies currently needed in Europe. China-Europe freight trains can help the two sides further expand trade cooperation.
Last but not least, the freight services enhance investment cooperation between China and the European countries. European investors have been bullish on the Chinese market. They have invested heavily in some high-tech sectors in China and raked in big returns, particularly in such sectors as auto making and chemical industry. Chinese companies have also increased investments in Europe since 2008.
The future of their cooperation in investment is also promising. China and the European Union are expected to strike a deal on bilateral investment agreement by the end of 2020. The two sides have already carried out fruitful cooperation under the framework of the BRI, and enhanced mutual understanding and trust in the joint fight against the COVID-19 pandemic. They have built a broad consensus on multilateralism, economic globalization, sustainable development, climate change, and biodiversity among other agendas.
As China-Europe rail freight services reach more and more European countries, developing countries in the continent will embrace more opportunities for economic growth. It is also of great significance to improving the transportation connectivity in Europe.
HU BILIANG is the dean of Emerging Markets Institute of Beijing Normal University.