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Chongqing – Rotterdam Link to Open a New Trading Frontier
China Daily ran a story today detailing plans to link Chongqing to Rotterdam via an inter-continental rail line by 2012. Although not alluded to in the article, the link has been in development for some time on both the European and Chinese sides and, when completed, has the potential to connect China not only with Europe but also Central Asian and the Middle Eastern states, all of which had developed into prosperous export markets prior to the recent trade slowdown.
In 1993, the European Union launched the Transport Corridor Europe Caucasus Asia (TRACECA) program in a bid to link Europe to Central Asian republics (Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan) and three Caucasian republics (Georgia, Azerbaijan and Armenia). Between 1993 and 2005, approximately EUR 1 billion has been spent on project infrastructure including ports, railways and roads.
China’s huge investment in rail transport, particularly in Xinjiang, will dovetail with European plans. Last year, the government spent RMB 330 billion ($48 billion) on railway investment, and has plans to nearly double that figure in 2009 by spending RMB 600 billion ($88billion). Of that total, $17.6 billion will be spent on railway development in Xinjiang alone and will complement recent projects, funded by the World Bank and Asian Development Bank, aimed at improving transport networks in the region.
For many years, the inhospitable terrain separating China from Central Asia has limited China’s ability to channel trade westward, but the development of a rail link has the potential to shift the axis of China’s external trade away from Eastern ports. Eastern harbor cities have provided the trading platform that has underpinned China’s recent development, but, according to a 2006 paper by Professor John Garver of the Georgia Institute of Technology, the inability to channel trade westward has hampered China’s ability to recreate development experienced by the United States in the second half of the 19th century. This historical parallel has not been lost on the Chinese government, which has channeled recent spending into making Urumqi , the capital of Xinjiang, a logistics hub to handle increased trade flows and a key stop on the Chongqing – Rotterdam rail route.
Though it has been under development for some time and a rail link to Europe is planned for 2012, the plan still has a long way to go to be able to handle trading volume even similar to some of the smaller East coast ports. Challenges abound including: how to develop the rail lines and communication networks to root the project as well as how to establish co-operation between the many states through which the line intends to run. However, it seems that political will to build the link does exist; the Shanghai Cooperation Organization including China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan has been hatching joint plans around these ideas since its founding in 2001. With efforts on the European side also, the link will become more prominent in the coming years and should open up a new frontier for Chinese exporters.
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Spencer Sheehan edits sector research.
