The Silk Road Rail Connecting China and Spain
World's Longest Freight Rail Link Project
The world's longest rail link project is on its successful track from Yiwu to Madrid; China to Spain cities respectively. The Silk Rail route track has covered a breathtaking journey of 13,052 Kms at its first test travel. The goods carrier with block containers touches east to west; Kazakhstan, Russia, Belarus, Poland, Germany, France and Spain. It is said that it is a dream come true for the present President of China, Xi Jinping in establishing an economic belt along the silk route has inched closer to realization.
The Silk Road rail journey takes about three weeks to reach its destination; 40 containers arrived to Madrid for the first in the road rail history during the month of Christmas in 2014. The bulk containers are loaded with cutlery, toys and other consumer goods; while in return from Madrid the containers would load with wine, ham and olive oil. In the first half of 2014, international container traffic on the Trans-Siberian rail line rose 8%, to 865,600 teu (Twenty-foot equivalent units).
In future, freight rail links connecting Germany and China five times a week will be set shortly; it transports the parts for BMW cars and Hewlett Packard computers. China's Foreign Minister, Wang Yi, said, "The huge investments in overseas infrastructure are part of a new approach to global relations. As of the end of 2014, China established over 70 strategic and cooperative relationships, covering major countries and regions around the globe. This means China is taking a new road of building partnerships rather than setting up alliances".
Why Yiwu City?
Yiwu city is located in the East part of China; a small place in China the materialistic productivity manufacture is huge. May be the name of the place that you never heard but surely you would have come across many electronic goods, toys and other commercial goods 'Made in China'; most of the products are born here and sold all over the world. About 300,000 foreign buyers sourcing goods in Yiwu than shipping all over the world!
• There are about 30 Special Streets (Specialized market) around Yiwu and the International Trade City has 62,000 booths.
• More than 1.7 million items in Yiwu and you can source goods at Yiwu easily.
• The biggest inland logistics center in east China.
• The lower operating cost compare to Shanghai, Ningbo and Hangzhou.
• 12,000 foreign businessman resident in Yiwu, and enjoy their comfortable life in Yiwu.
China on Direct Marketing
The Silk Road rail seems like a fanciful adventure than a profitable one, extreme long distance rail service piece of the international shipping arsenal. Use of the Eurasian Land Bridge between China and Europe is well established at least as far as Germany, which receives some five trains a week. Long distance rail cargo splits the difference between airplane and boat delivery in terms of price and speed.
According to Miklos Kopp, director of freight at the International Union of Railways said, "Sending a 10-ton 40-foot container from Chengdu, China, to Lodz, Poland, takes 12 to 14 days by train and some six weeks or longer by boat. The price tag comes to some $40,000 by air, compared to $10,000 by train, and as low as $5,000 by boat. If you go from the center of China to the center of Europe, it's a good decision and development, though not as cheap as by sea".
'Still, carrying rail freight across the Eurasian Land Bridge comes with many problems', says Jean-Paul Rodrigue, a professor of global studies and geography at Hofstra University and lead author of the textbook 'The Geography of Transport Systems'.
Freight trains in Europe carry less than half the cargo of such trains in the U.S. because low bridges, tunnels, and other infrastructure problems prohibit the use of double-stack containers. Another problem is that the trip from Germany to Spain adds another week to the journey, cutting out some of rail's speed and cost advantages. Spain is not right choice in Europe to do a train trip. It's as far as you can get in continental Europe from Asia. It's a bit for show off, to demonstrate the technology and capability to put on these services.
Temperature on Rail Route
Glancing at the geographical problems; production, technology and operations meant to says that the average winter high temperature in Kazakhstan is 20 degrees Fahrenheit. Such cold temperatures require special containers for sensitive electronic goods not to mention Spain's big exports. The train can spend six to eight days in places with very low temperature and cannot have frozen wine or ham. Higher travel costs mean that this kind of train service will be best for high-value goods like electronics and medicines, not low cost toys, according to Libor Lochman, executive director of the Community of European Railway and Infrastructure Companies (CER) trade association.
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It could also offer more competitive prices if it was regular and direct train to Spain (instead of dropping off and picking up goods along the way), operators could further lower the costs by finding high-value goods to sell back to China, making sure containers do not return empty. That will be difficult, as Spain ran a €13 billion trade deficit with China in 2013. (Right now, many containers are sent back from Europe empty; others are filled with cars, car parts and manufacturing equipment). Despite the hurdles, China-Europe rail trade will most likely to grow in the coming years. While traversing a gaggle of countries on the 21st Century Silk Road may seem good and perhaps even profitable, the method comes with geopolitical problems that plane and boats don't have to contend.
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In addition to the product companies, several large Chinese companies are currently knocking at Spain's door; for example China Development Bank (CDB). This is basically due to the combination of two factors; to go on global policy, while Chinese companies have simultaneously experienced growing pressure to expand and diversify their investments. Other; the state of the Spanish economy is creating downward pressure on all types of assets, increasing their attractiveness for Chinese companies.
Due to this context, we can identify a variety of other more concrete factors, more specifically related to the sector of activity, which explain why Spain is attractive to Chinese companies; access to technology is a possible driver of investments by renewable energy companies.
Mutual Strategy for Economic Relations
Spain's strategic position within Europe especially while it is access to the Mediterranean; in some cases, the investment is aimed at developing new lines of production, such as CITIC's acquisition by of the Galician heavy steel fabricator, Gandara Censa. Spain is also seen as the ideal partner for allowing companies to enter Latin American markets more quickly and on a more solid footing. This is the case of CDB with Banco Bilbao Vizcaya Argenteria (BBVA), China Construction Bank (CCB) with Santander, and ZTE with Telefonica.
In short, Chinese companies are aware that Spain offers an excellent direct market with a population of over 45 million and a per capita income around US$30,000. Moreover, investments in Spain provide access to the world's largest market in terms of purchasing power; the European market and to one of the regions with the highest growth rate. Latin America; through joint investments or partnerships with Spanish companies, which are leaders in the region. Other advantages, such as tax benefits, human capital and costs, leading Chinese companies also carry out projects and investments of high added value in Spain, which are quite unrelated to the profile of the operations carried out in African countries, which are mainly aimed at the extraction and commercialisation of raw materials.
The main challenges Chinese companies face in Spain fall into two categories; one shared with the rest of Europe and the other specific to Spain. The common challenge is the cultural and linguistic barrier as well as a certain degree of mistrust in the host country with regard to inward investment or a negative perception of Chinese brands and products. The specific challenges are those associated with the localisation of the activity and are related, from an operative point of view, to the investment climate. Examples of these challenges include the management and processing of work and residence permits, bureaucracy which hampers investment procedures and the contraction of the consumer market due to the economic crisis. On the other hand, other factors related to the Spanish business environment, such as infrastructure, R+D taxation, the workforce and labour costs, are valued positively by Chinese managers. Similarly, upon arriving in Spain, Chinese companies can count on support from the authorities, both at state and regional levels, through their investment attraction and development agencies, which are highly useful to ensure a soft landing10.
Conclusion
In summary, it is clear in the current economic context that these two countries need benefits. 'China needs Europe and Europe needs China'; in this view, Chinese companies come to Europe mainly in search of technological and management knowledge, in order to become global competitors. Although in many cases this does not involve production in Europe, it does add value, for example through the creation of new jobs and it is helping Europe to recover its position within the global economy.
Highlights
- The cargo train from Yiwu to Madrid led a feverish effort by China and Russia to revive the ancient silk route and shift the balance of power in Eurasia towards the East.
- 13, 052 Kms, the distance is more than the Trans-Siberian Railway.
- Starting from Yiwu, a major trading hub 300 Kms south of Shanghai, cross Altaw pass in Chain's Xinijiang province before entering Kazakhstan.
- Pass through 5 countries; Russia, Belarus, Poland, Germany and France, before completing its mammoth destination.
- Train is from China is run by Trans-Eurasia Logistics, a joint venture of Germany's Deutsche Bahn AG and the Russian Railways (RZD).
- It symbolises the growth of transportation links among Beijing, Moscow and Berlin countries; to revive the silk route corridor and a heart of trade between Asia and Europe.
- The dream of an economic belt demands that a string of growth clusters is established along the New Silk Road. One such economic hub within China is Chongging; a major junction along the Eurasian corridor.
- An intricate rail and road network that connects it with west and middle China has enabled Chongquing to emerge as the growth locomotive for the entire delta area of the Yangtze River, which flows to the south and is a major trade artery.
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