A container belonging to China Railway Express is being moved at Duisburg Intermodal Terminal (DIT) in Duisburg, western Germany. Photo: XINHUA

---

 

Since the introduction of the Belt and Road (B&R) Initiative, China has made great progress in infrastructure connectivity with countries along the route. China Railway Express train, which is known as the China-Europe freight train, as the backbone of connectivity, has been developing rapidly, with a continuous increase in the total number of trains in operation and in the total freight rail lines.

However, problems have arisen in the development of the China Railway Express train. It is necessary for the government to strengthen overall management to improve the cargo trains’ economic performance and ensure the project’s long-term development.

 

Steady growth
As an important platform to promote the implementation of the B&R, the international trains are becoming a realistic logistical option for shipping between China and Europe.

Over the years, China Railway Express trains have continued to grow in number. By the end of March 2018, there were 43 cities in China running international trains, with more than 50 lines connecting 42 cities in 14 European countries. Statistics show that more than 8,000 China-Europe freight trains have been dispatched.

With the launch of China-Europe freight trains, cities can effectively integrate the regions’ freight demands, make use of the advantages of railway transport, promote the diversified development of local transportation, and constantly shape the new pattern of China’s opening up to the outside world.

Considering shipping times and air freight prices, international trains can effectively save time, improve logistics efficiency and promote the development of import and export trade. Thus, the volume of imports and exports that the cargo trains have been carrying has been steadily increasing.

At present, the international trains mainly export bulk e-commerce products, light industrial products and high-tech electronic products from China, and they take back advanced equipment and industrial raw materials. This exchange not only benefits the export of domestic production capacity but also helps promote the industrialization and industrial upgrading of cities along the routes.

With the continuous improvement of logistics hubs and transport channels, the freight agglomeration effect has begun to show. Three international railway routes have been initially formed, and the logistics network has gradually sped up the cross-border circulation of commodities and data, and customs clearance has become more convenient.

 

Multiple challenges
With the deepening of B&R construction, the economic and trade exchanges between China and other Eurasian countries have been developing rapidly, thus raising requirements for the international cargo trains. However, the development of China-Europe freight trains faces severe challenges.

To start with, the trains of each region depend on local financial support, and the subsidies are shared by the provincial and municipal governments of the places where the trains are located. However, the support of local finance for the trains varies greatly. As of today, the subsidy has evolved into a competition among local governments, which aggravates the competition among the freight routes and forms an arms race effect on local subsidies. Worse, it indirectly causes the waste of domestic logistics and transportation capacity.

Disorderly subsidy competition entices companies to transfer their goods to high-subsidy areas, which deviates from the principle of proximity and the goal to stimulate local economic development. It also wastes domestic capital and reduces efficiency.

The insufficient demand in the foreign market has resulted in a high degree of homogeneity in the sources of goods from different regions, which has restricted the long-term development of the China Railway Express brand. The high degree of homogenization of the goods intensifies the competition between the different freight routes.

Most of the outbound goods are mainly mechanical and electrical products and light industrial products, while the return goods are mainly raw materials such as wood products. There is no big difference in the categories of the goods carried by each train, and the small amount of return goods and the high rate of returning empty boxes can lead to vicious competition between freight routes.

In addition, the domestic sources of goods in the cargo trains are excessively concentrated, and some of the goods transported are not matched with local industry. Some trains carry less than 20 percent of local goods abroad, which makes it difficult to fulfill their goal of driving the local economy.

In cross-border operation, China-Europe freight trains are also haunted by limited operating efficiency caused by different standards, such as gauge standards, container standards and customs clearance standards. The continuous rail changing caused by the cross-border non-uniform standards for railway tracks reduces the operation efficiency.

The non-uniform standards for freight containers in some transit countries is another headache. For example, according to the regulations of the Russian railway department, trains entering Russia need to use a designated container. The container replacement affects the efficiency of cargo transportation, and unnecessary transfer increases the transportation cost.

At the same time, the inspection and quarantine standards and customs clearance standards among countries along the routes have not yet been fully unified, which has increased the circulation, storage and management costs of the rail transport, limited the operation efficiency and reduced the competitiveness of the cargo goods.

 

Policy advice
In view of these problems, the government should strengthen its  overall management and improve the operational efficiency of China Railway Express trains in the following three aspects.

We need to coordinate the management of subsidies and explore new mechanisms for market operations. We must strengthen the guidance and overall management of local governments’ fiscal subsidies and avoid the waste of resources brought about by disorganized subsidy competition.

In this regard, it is suggested that the Ministry of Finance issue a set price for local subsidies to halt the disorderly competition of local subsidies. To be specific, the China-Europe Rail Freight Committee should take the lead in promoting information and management sharing to improve the efficiency of local fiscal subsidies and to avoid the disorderly competition between trains.
At the same time, we should actively explore the new market operation mechanism of the trains. At present, there is a lack of effective and mature models for market operation, and some logistics enterprises and private capital lack effective access to participate in the operation of the international trains.

Local governments should strengthen the sharing of research and experience on the issues, striving to establish a new sustainable and reproducible market operation mechanism.
Moreover, we need to coordinate the management of goods and promote the differentiated development of trains. Regional trains need to change the current mode of transporting all types of goods, instead selecting corresponding types of goods according to the local industrial advantages.

Local governments should not only explore the transport value of the trains, but also take the initiative to improve the commodity and information flow of the trains, so as to lay a foundation for network cooperation among the trains.

In addition, we should follow the principle of proximity to improve the economic accessibility value of the trains, to limit the competition for the same sources of goods with the help of policy adjustment, to avoid the waste of domestic transportation capacity and resources, and to strengthen the driving role of the cargo trains in the local industry and economy.

Traditionally, land transport has been seen as a supplement to air and sea transport due to factors such as safety, volume and cost. However, with the advancement of technology and the increase of trade volume between China and Europe, the advantages of land transport such as high speed, high flexibility and multimodal service will be further recognized in the future.

While launching new trains, we need to strengthen the overall management of domestic trains, provide efficient subsidies, present a diversified supply of goods, and promote the integration of cross-border transportation rules. This will form a benign cycle of cargo trains driving logistics, logistics driving business, and business driving industry, which in return will increase the demand for cargo trains.

 
Su Ruina is from the Nanjing Administration Institute.