Commentary RESEARCH

China-Europe Rail: Forging a new chapter in Asia-Europe cooperation

Aria

2023-10-31 06:30

ZHANG XIAOTAO and MIN YUE
Chinese Social SCiences Today

As the flagship project of the Belt and Road Initiative (BRI), the China-Europe Railway Express (CERE) has become a crucial platform for deepening practical cooperation among Asian and European countries and a widely acclaimed international public good. As of the end of September 2023, the CERE has operated over 78,000 trains, transported more than 7.4 million standard containers, and facilitated trade with a cumulative value exceeding 300 billion US dollars.

At the opening ceremony of the second BRI International Cooperation Forum, President Xi Jinping emphasized that “China will continue to work with other parties to build a connectivity network centering on economic corridors such as the New Eurasian Land Bridge, supplemented by major transportation routes like the CERE and the New International Land-Sea Trade Corridor and information expressway, and reinforced by major railway, port and pipeline projects.”

In 2021, President Xi further stated at the China-CEEC Summit that China should pursue high-quality Belt and Road cooperation and continue to support the development of the CERE. 

Fruitful results

On one hand, the CERE has opened a new land transportation route connecting Asia and Europe. It has grown rapidly and established itself as a vital link connecting the Trans-Siberian Corridor, the Central Asia-West Asia Corridor, the New Eurasian Land Bridge, and new international transport routes crossing the Baltic Sea, the Caspian Sea, and more. This has created a logistics service network covering the entire Eurasian continent.

At the same time, the CERE has pioneered and optimized the logistics transport model between Asia and Europe. Due to its minimal environmental impact, high stability, and low carbon emissions, it can effectively meet the specific logistics needs of high-value, time-sensitive, and environmentally friendly products. With advantages such as rapid transport, cost-effectiveness, safety, reliability, and environmental sustainability, the CERE has continually expanded and has become a primary logistics choice for international trade between Asia and Europe, alongside sea and air transport.

 

Furthermore, the CERE has effectively promoted the harmonization of international intermodal transport rules and enhanced customs cooperation in the countries along its route. By facilitating the alignment of railway infrastructure development plans and streamlining customs and inspection procedures in cooperation with the relevant authorities, the efficiency of customs clearance throughout the entire railway journey has improved significantly. These achievements mark the beginning of a new chapter in international transport cooperation.

On the other hand, the CERE has also played a significant role in supporting the economic and social development of the countries through which it passes. By connecting regions both internally and externally and spanning east to west, it has disrupted the international transport landscape dominated by sea shipping, thus enabling the countries and regions along its route to better integrate into open economies. With the opening of the CERE, landlocked Kazakhstan has been able to export wheat to Southeast Asian countries, and the inland city of Chongqing, which is not located on the coast and doesn’t produce coffee beans, has become the largest coffee trading center in China and the third largest globally, greatly optimizing the regional economic landscape.

The growth and development of the CERE have also significantly facilitated economic and trade interactions among Asian and European countries. In terms of commodity structure, electrical and mechanical products account for approximately 70% of the products exchanged between China and Central and Eastern European countries, showcasing high added value, and demonstrating the high-level and substantial nature of their trade cooperation. Through the establishment of supporting zones and projects in the countries along the railway route, the CERE has promoted the cross-border circulation of various resource factors and deepened international capacity cooperation. For example, Chinese company TCL leveraged the CERE to realize cross-regional production synergy, moving from domestic component production in China to assembly in Poland and sales across various European regions. This has significantly enhanced the competitiveness of their products.

Furthermore, the CERE has ensured the security and stability of international supply chains. It has not only functioned as a reliable trade transportation channel during “normal” times but has also demonstrated its strategic value in maintaining the security and stability of international supply chains during “emergency” situations. Since 2020, while other transportation channels such as air and sea routes were forced to close or reduce operations, the CERE defied the trend by providing customized services to over a hundred Chinese companies. It delivered production materials and raw goods to Europe and other countries along its route, supporting the resumption of work and production for businesses in those regions. This underscores its emergency support capabilities.

Great potential

As an increasingly important international transportation carrier, the CERE has significant room for development. Firstly, receiving support from the countries along its route is the primary requirement for unlocking the international cooperation potential of the railway. While the CERE has pioneered a new international transportation model based on close cooperation among multiple countries, it is not immune to the risks associated with great power competition and geopolitical factors. Since its inception, the railway has garnered high-level attention from the leaders of countries along its route, and consensus has been reached on deepening cooperation mechanisms.

Generally speaking, the macro-political environment for the development of the CERE is relatively stable. However, it is important not to ignore certain turbulent factors in the political environments of individual countries, which could potentially impact the adjustment and layout of the railway’s routes. Therefore, continuing to enhance the recognition and support from the countries along the route remains a paramount condition for advancing international cooperation involving the CERE. 

Second, improving quality and efficiency is a robust guarantee for unlocking the potential of international cooperation via the CERE. In recent years, the number of CERE services has been increasing annually, and its market prospects, economic value, and social significance have been widely acknowledged by the countries and regions along the route. However, the existing hardware and software facilities are still unable to effectively meet growing demand.

In terms of “soft connectivity,” there is at present a lack of uniformity in transportation, quarantine, and other standards among the countries along the route. International cooperation mechanisms in policy formulation, infrastructure connectivity, security guarantees, transportation organization, customs facilitation, and planning coordination are still in need of improvement. These issues not only seriously reduce transport efficiency but also increase additional operating costs.

In the context of “hard connectivity,” the carrying capacity of ports along its route is currently relatively saturated, and infrastructure development lags behind, leading to longer cargo transfer times, limited logistics warehousing, and even severe congestion at border crossings.

Third, meeting the development needs of the countries and regions along the route serves as the fundamental support for unlocking the potential of international cooperation with the CERE. Against the backdrop of accelerating the establishment of a new development pattern, the CERE has become an important bridge for connecting domestic and international markets. China’s economic strengths complement those of Central Asian and Central and Eastern European countries, and bilateral economic and trade cooperation has prospered along with the growing strength of the CERE.

Currently, the level of industrial coordination between the CERE and the countries and regions along the route needs further improvement. The development of new models such as “CERE + industrial parks,” “CERE + cross-border e-commerce,” and “CERE + overseas warehouses” in the “railway express+” category is insufficient and cannot yet meet the development needs of the Asia-Europe international industrial and supply chains.

High-quality development

In the face of a complex and ever-changing international and domestic landscape, it is necessary to clarify the focus and starting point for achieving high-quality development of the CERE.

First, we need to gather cooperation consensus and promote recognition and support. To start with, we should be vigilant in preventing and resolving external risks, strengthen political mutual trust with the countries along the route, and adhere to a security concept that is common, comprehensive, cooperative, and sustainable to create a stable political environment for the development of the CERE. 

Next, we should enhance government-to-government cooperation and establish a multi-level, multi-domain cooperation mechanism between China and Europe for the railway express, jointly conducting research on major issues such as security guarantees, policy formulation, facilitation of customs clearance, and infrastructure connectivity to reduce the institutional transaction costs. 

We should also deepen regional economic cooperation by signing high-standard free trade agreements and strengthening legal and policy coordination in the field of international market supervision to jointly create a fair, just, standardized, and transparent market development environment for the railway express.

Second, we must ensure the basic support and accelerate quality and efficiency improvement. On the one hand, it is essential to achieve “soft connectivity” in terms of institutional rules, strengthen communication and coordination with the countries along the route, explore unified international railway transport rules for Asia and Europe, collaboratively establish a transport system and standards, enhance the recognition and participation of the countries along the route, and resolve obstacles related to information, rules, standards, and other aspects.

On the other hand, we must also optimize “hard connectivity” in terms of infrastructure. For the domestic segments of the freight route, it is important to strengthen government guidance and demonstration and encourage business participation in investment and operation of the CERE. We must provide support for expanding and upgrading congested routes and key ports, while continuously optimizing the layout of consolidation centers and exploring new formats and models for multimodal transport. For the international segments of the route, it is crucial to continuously explore new investment and financing models between Asia and Europe. Leveraging the role of institutions such as the Asian Infrastructure Investment Bank and the Silk Road Fund, introducing Silk Road-themed bonds, and encouraging and supporting the construction and transformation of international railways in the countries along the route, as well as the development of supporting infrastructure such as overseas warehouses and logistics centers, are also necessary steps. Through coordinated efforts domestically and internationally, a hierarchical and efficient China-Europe freight rail transportation network system can be established.

Finally, we should integrate the corridor into industries to meet development needs. This involves further leveraging the function of the CERE as an international public good, closely aligning it with the development needs of the Asia-Europe international industrial and supply chains, and continuously optimizing the organization and key processes of railway express transport and innovate new formats such as “railway express+.”

Simultaneously, efforts should be made to enhance the level of digitalization and informatization, ensuring comprehensive improvement in the level of services and capabilities of the CERE. Promoting the construction of economic and trade cooperation zones, free trade zones, industrial parks, and other facilities in the countries along the route, fully utilizing local resources and deepening international industrial capacity cooperation will help drive stable growth in demand for CERE transportation, stimulated by the development of industries in countries along the route. 

Zhang Xiaotao is dean of the School of International Trade and Economics at the Central University of Finance and Economics (CUFE). Min Yue is a doctoral candidate at the School of International Economics and Trade at CUFE.

 


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2023-10-31 02:29
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