Rail freight between China and the European Union has experienced 100-fold increase since the beginning of the 2010s. From 2011 when the first, there have been 6,637 freight trains in both directions when in 2017 there were a record 3,673 trips. This, according to Warsaw's Centre for Eastern Studies (OSW Osrodek Studiow Wschodnich), a state-sponsored think tank which did an exhaustive study on the development.

While the Eurasian Land Bridge was completed in 1990, when the railway systems of China and Kazakhstan linked up at Alataw Pass, it was only in October 2008 when the first "Trans-Eurasia Logistics" train reached Hamburg from Xiangtan travelling along the entire northern route. In July 2011, the line was first used as a regular freight route between Chongqing and Duisburg, Germany that things really got started.

In that time the value of goods shipped by rail has been estimated to have grown to US$22.9 billion, or four per cent of overall EU-China trade. More than two-thirds of trains run from China to Europe, reflecting much the same trade imbalance that exists in the maritime field. Some 200,000 TEU were shipped by train from China while the maritime container flow has reached 10 million TEU.

Not that there are not problems, even catastrophic threats. A Chinese media outlet reported the impact of subsidies that range from $3,000-$5,000 per container, indicate the whole project may be on artificial life support. The report claimed local governments in China were incentivised to inflate the number of train services with empty containers, to get the lucrative financial support from the central government, reported London's Loadstar.

But RailFreight.com says loaded trains from the top seven Chinese localities, which represent 73 per cent of all China-Europe cargo trains, increased to over 94 per cent for the first half of this year, after Beijing issued new restrictions that only fully loaded trains would be subsidised.

The Duisburg Gateway Terminal said a possible solution might be to increase opportunities for less-than-containerload (LCL) cargo to fill containers and reduce reliance on block trains for volume. “LCL development will meet growing demand from burgeoning e-commerce sales, as it addresses last-mile and first-mile delivery options,” said the Duisburg Gateway spokesman.

Rail transport is mainly used to move high value goods and capital intensive goods, a situation, which may enable China to gain a competitive advantage in logistics over Asian competitors in luxury goods and premium foods.

Thus, rail falls between cheap but slow maritime transport and fast but expensive air freight. By air, goods take five to nine days from one terminal to another. By rail, it's 15 to 19 days compared to maritime's 37 to 50 days. Rail becomes particularly attractive more places far from seaports.

Rail freight has enjoyed its greatest success in these northwestern areas along the upper reaches of the Yangtze, at the mega cities of Chongqing and Chengdu, which account for much of China's consumer electronics output.

The impetus for accelerated development of China-EU rail freight has been the Belt and Road Initiative, announced by President Xi Jinping in 2013. This is Beijing's long-term strategy to promote trade with central Asia and the EU to stimulate economic development in China's interior as well as increase the role of Chinese companies in the EU.

This plan was also developed in the hope of creating new logistics infrastructure and facilitate China's economic expansion in these countries. There are plans to build industrial parks along the rail line to attract Chinese investors. Eventually, this is expected to translate into increased rail use, greater interpersonal contact and boost tourism.

Another Chinese ambition was to use China-Europe rail as a diplomatic tool to enhance the growing role of local municipal and provincial governments as key actors in this development. This would manifest itself as active support for Beijing's plans. Individually, popular support among the people does not matter much in China, but the support of municipal and provincial authorities can range from the foot-dragging to the gung-ho, which can spell success or failure for any mega project.

As it has turned out, rail connections with Europe are also treated as important element of the local economic development strategies and play a major role in supporting specific subsidies as municipal and provincial authorities vie with each other for a tract in trade flows from other parts of China.

One line runs from Yiwu, a trading centre 300 kilometres (190 miles) south of Shanghai. From there the train reaches London. Another advertised route is even longer to Madrid. But the train has long been broken up into smaller units in Poland or Germany depending on the route.

These routes were opened in January 2017, making London the 15th European city to have a railway route connection with China, which takes 18 days to complete. Other European cities with China-Europe railway routes include Hamburg, Madrid, Rotterdam and Warsaw.

From Yiwu the track passes through nine countries: China, Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, France and the UK. To get to Britain, the route passes through the Channel Tunnel from Calais to Folkstone in Kent, with the train terminating at the DB Eurohub in Barking, East London.

Trains are run by different companies. To start with, they depart from London once a week transporting household items, garments, bags and suitcases.

It's not a straight-through run. There are two breaks in rail gauge westbound. First, there is the shift from standard gauge in China to Russian and in the former Soviet Union states of Kazakhstan and Belarus. Then a shift back to standard gauge when crossing into Poland. Because of the difference in gauges trains go through a wheel assembly bogie changes, or where inconvenient, containers are reloaded to flatcars of the right gauge.

The Belt and Road policy calls for three distinct routes: north, central and south. The Yiwu-London train takes the northern route through Central Asia, Russia and then Europe. The central route goes through Central Asia, West Asia, Persian Gulf and the Mediterranean. The southern route goes through Southeast Asia and to the Indian Ocean.

Since 2011 then several other European cities have established rail freight connections with China. London is the latest European city to establish such a freight route when the Yiwu-London route opened in January 2017. It is expected that the importance of the railway trade routes will increase with time, as anticipated cumulative investment over an indefinite timescale for Belt and Road policy is estimated to be between $4 trillion and $8 trillion.

The China-Madrid railway line has experienced success by transporting olive oil back to China and it is expected that in order to become as successful, the China-London line will need to establish a similar export flow. The export flow will most likely consist of British designer goods, providing an opportunity for companies to expand to Chinese markets.

Last November, the first freight train on the southern route from China to Europe went through Istanbul. Turkey sees its side in the Belt and Road development as a source of diversification, as it needs to improve its technology, infrastructure and gain self-sufficiency in energy. The Chinese want a greater economic presence in Turkey, but there have been teething troubles.

For their part, the Chinese have taken a wait-and-see attitude because of the recent border troubles between Turkey and Syria. There is also the Uighur troubles in China while Turkey is in the throes of Islamic resurgence, and there are the frequently voiced concerns that Belt and Road is a debt trap for recipient nations.

One of the largest Chinese investments in this part of the world is the Greek Port of Piraeus, China's maritime gateway to Europe. According to the media, Chinese demand for expansion has been refused by the local authorities because it reached the city limits of Athens. For China, there cannot be a single-entry point and this is why Turkey is important.

Certainly at the EU terminus of the northern route, the German Port of Duisberg, facilities are state of the art as it teams up with Cosco Shipping Logistics to make it so.

According to port operator Duisport, the EUR100 million (US$110.5 million) the Duisburg Gateway Terminal will be built by 2022 on a 240,000-square metre site, with an intermodal facility that will include six gantry cranes, 12 block train platforms, five loading areas, three berths for inland vessels and a 60,000-square metre stack yard.

Backed by Beijing’s Belt ans Road Initiative, China-Europe rail volumes have enjoyed a rapid rise, jumping from 142,000 TEU in 2016 to 370,000 TEU in 2018. Thirty per cent of all rail-based trade between China and Europe now runs through Duisburg. That's 35-40 trains a week. At full capacity annual throughput is expected to be 850,000 TEU upon completion. Duisport and China’s Cosco Shipping Logistics each own 30 per cent of the new venture, while Swiss intermodal operator Hupac and Dutch inland waterway company HTS both hold a 20 per cent share.

Those who are on aware of these developments are often astonished that regularly scheduled trains travel from China to Western Europe but there are still fears that unsustainable Chinese subsidies are turning the burgeoning rail route into a “huge bubble,” due the large number of empty block trains leaving China.

Of course scandal-prone railway development has been with us ever since the iron horse made its debut in 1812. More than 200 years later in 2013, Chinese Railways Minister Liu Zhijun was sentenced to death for taking bribes (though later reprieved), so things of this nature have a long history which did not much impact of the success of railway dreams and schemes, many, if not most, of which paid off in the end and are still paying off to this day.

Source: ShippingGazette.com