Paying trade-connectivity dividends
China-Europe freight trains a Belt and Road flagship, defy the pandemic’s global disruption
The suspension of air and sea travel due to the novel coronavirus pandemic has dealt a heavy blow to international trade and logistics. Yet in the first half of 2020, China-Europe freight trains made 5,122 trips, an increase of 36 percent year-on-year. And in August, 1,247 freight trains carried 110,000 TEUs (twenty-foot equivalent units) between China and Europe, up 62 percent and 66 percent year-on-year respectively.
The China-Europe freight trains have played an important role in transporting goods between China and European countries and other Belt and Road countries during the pandemic. As such, they can be considered a flagship of the Belt and Road Initiative.
The project has made breakthroughs in five areas. First, in spite of the differences in customs clearance procedures, the project has promoted information sharing, mutual recognition of regulation and mutual law enforcement among the countries along the routes, and thus reduced repeated, unnecessary checks and facilitated trade.
Second, China Postal Service has signed mail agreements with its counterparts in the countries along the routes. The successful delivery of 139 mail packages from Chongqing to Frankfurt in October 2016 marked the beginning of direct mail links by rail between China and Europe and opened up a new channel for crossborder e-commerce.
Third, countries along the route used to run trains according to their respective schedules and did not give due importance to cross-border trains, with different countries collecting fees at different rates. After proper coordination was established among the railway authorities of the countries along the routes, they began according priority to the China-Europe freight trains. They have also established a five-point operation plan, demarcating the loading sites, and fixing the routes, train numbers, running time and prices. Hence, the average freight cost on the route dropped from $1 a box per kilometer to $0.5 a box per km.
Fourth, regular communication and proper coordination have helped settle other issues such as security risks, cold winters and the collection of empty containers.
And fifth, as more Chinese cities vie to join the China-Europe freight trains network, the authorities are making efforts to create unified brands, organizations, prices, service standards, management teams and coordination platforms to link them.
China has shared its reform and opening-up dividends and experiences with Belt and Road countries, highlighting their economic complementarities. But despite their excellent performance, the China-Europe freight trains face new challenges because the pandemic has caused a serious decline in international investment and trade.
To begin with, the authorities should focus on the five aspects of connectivity — policy, transportation, trade, currency, and people and culture — which President Xi Jinping underlined while proposing the Belt and Road Initiative in a speech at the Nazarbayev University in Kazakhstan in September 2013. Connectivity in the five areas will promote cooperation in wider areas and help expand regional collaboration while contributing to the Silk Road Economic Belt.
The authorities also need to adopt a phased and priority-based approach to promote connectivity. Take the ChinaEurope freight trains for example. Effective policy connectivity led to infrastructure connectivity, which in turn boosted trade connectivity.
Roads, bridges and other large-scale heavy-asset investments are not necessarily the first step of the Belt and Road construction. Instead, we should take stock of the existing facilities and networks first, and give full play to these through policy and people-to-people connectivity.
There is also a need to establish synergy among capital resources because the Belt and Road construction is not a one-country show. Speaking at the opening ceremony of the Second Belt and Road Forum for International Cooperation in Beijing in April 2019, President Xi emphasized that China welcomes multilateral and overseas financial institutions to finance Belt and Road projects.
Besides, the Chinese authorities should deepen cooperation with neighboring countries and regions. China is already engaged in extensive trade, and people-to-people and cultural exchanges with neighboring countries and regions, where the majority of overseas Chinese live. In addition, China has long upheld the policy of forging friendship and partnership with its neighbors based on the principles of amity, sincerity and mutual benefit.
With the COVID-19 pandemic still raging in many parts of the world, and the global industrial and supply chains undergoing restructuring, China should leverage its geopolitical advantage of long-term friendships and good neighborliness to reach more bilateral and multilateral free trade agreements.
Further, the process of the renminbi’s internationalization should be accelerated. Last year, RMB reserves were the fifth-largest in the International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves, with a market share of just 1.95 percent, 0.88 percentage points higher than 2016 when the Chinese currency was included in the Special Drawing Rights. Also, the RMB accounts for only 4.3 percent of global foreign exchange transactions and has a share of just 1.76 percent in major international payment currency markets. Surely, these figures do not reflect China’s position as the world’s largest trader.
The good news is, thanks to Belt and Road projects, the RMB has become more widely used in other countries.
The author is former mayor of Chongqing and academic adviser to China Finance 40 Forum. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.