China has been making a lot of its grand One Belt One Road initiative, better known as OBOR. At the highest level, it is essentially about China transferring capital into neighbouring countries and developing factories in those regions, so that those factories can supply China. Along the way, Chinese labour and Chinese technology go into those factories and related infrastructure developments.
To call it a grand plan is an understatement. OBOR involves many countries, international banks and massive investments.
One part of this grand plan is to ensure the logistics are in place so that all that capital equipment, raw materials and finished goods can get to their intended destinations. For China servicing Europe, there are two choices as the feature image shows. This is where perhaps the most progress is being made in real terms. Rail freight between China and Europe is now booming.
To illustrate, consider these simple questions. How many rail services do you think presently run between China and Europe? How many Chinese cities presently offer rail services to Europe? How far into Western Europe does the China rail service extend?
The answers might surprise you. Right now, there are 23 rail services running out of 18 Chinese cities. Chinese trains now run into central Asia of course, but now reach down as far as Germany and even into Spain.
That’s as of now. According to some work done by Tristan Leonard, another 20 services are still to be added. In January, China ran its first rail freight service to London.
Running 20,000kms to London means 2 changes of railway gauge. As well, freight going into the UK must be transferred to special containers suitable for the Channel Tunnel. Still, the service to London takes 18 days off the time taken to send a container via sea freight. That’s a significant advantage for shippers of time-sensitive goods such as food, and especially good for managing cash flow. A friend of mine in Beijing who sells steel products into Europe uses rail to deliver to his customers. He says his customers are willing to pay the higher freight cost because they get their goods so much quicker.