Why is China investing RMB 200m in the Eurasian rail network during a pandemic?
China has allocated 200 million yuan roughly 28 million US dollars to support the construction of transportation hubs in five cities to improve the China Europe freight rail service initiated nine years ago. The intercontinental network is now a major part of the Belton road initiative. Despite the COVID-19 pandemic, it has maintained steady operations. For more on this Su Yi invited Adjunct Professor Ivo Ganchev (Beijing Union University) to join him on The Beijing Hour. You can listen to the full episode of the show from Sep 14, 2020 on the China Plus website and to the interview excerpt from the Listen section of this website. A full transcript of the excerpt is also available below.
Su Yi: So first of all, why is this necessary to improve the China Europe rail freight services.
Ivo Ganchev: Well, if it gets scaled up rail freight should provide a transport service which is faster than the phrase and cheaper than air freight. So, what the investments of 200 million Rand mean V will do is provide more opportunities for trade between China, the EU and the Eurasian countries along the railway line between them. Now, in terms of China here relation, trade is essential because China is now the EU’s second biggest trading partner, and the US China’s biggest trading partner. So, first we know that the bilateral trade relationship is here to stay, and hopefully develop further. And second, we know that this is a pillar of China your relation. This is a robust relationship and rain or shine Chinese and European companies are trading. And third, we know that in the long term trade between the EU and China works best if it’s well balanced, and the rail freight connection provides a direct link that could help keep a good balance if used appropriately so in these times when many countries in the EU and the EU itself are concerned about the global COVID-19 pandemic, and various other internal issues, it is important to provide added security and stability to international trade relationship, making sure that you maintain what you already have.
Su Yi: So how do you define the role of the rail network during the COVID-19 pandemic?
Ivo Ganchev: What we saw during the pandemic is a glimpse of the strategic importance of opening up a new third type of freight channel between China and the EU, in addition to air and sea freight so during the pandemic what’s happened was, first we saw dropping global air cargo capacity by around 35%, and this means that whatever goods were extremely urgent got shipped by air, and many others had to be shipped by sea. Now, this move alone would have slowed things down but then it got further exacerbated by COVID related regulations. So, we saw many e ports, imposing restrictions on vessels and crews including proficient that stuff, for instance, route changes in certain cases and in this context, the China Europe rail network turned out to be really valuable, especially when it comes to certain goods that could be, for instance large quantities of medical gloves or other personal protective equipment, and this is because sometimes the delivery requests or parameters might not be always urgent enough to use the freight, and you know at the same time that it would surely be slowed down significantly. If you use sea freight so that’s when you have to use rail freight, and from an economic perspective, to develop further the rail network we always needed to see two things. First, we needed some sort of a move to propel the use of rail freight by market forces, and second, we needed to see an increase in the volume of trade, as the more goods are shipped the cheaper the transport price per unit becomes because of economies of scale, and during the covid 19 pandemic what we saw was the fineness of both of these things. So, I suspect that witnessing this potential for deepening rail freight demand or rather even need to use the rail network more actively was a part of the motivation behind China’s new investment.
Shane Bigham: That was Ivo Ganchev at Beijing Union University, commenting on the upgrading of China Europe freight rail services during the coronavirus pandemic.