Francisco A. Laguna & Wojciech Kornacki
This week, we continue our discussion of China’s One Belt – One Road project to establish a 21st Century Silk Road over land and by sea, focusing on the development of high speed rail connections between China and the European Union.
China is creating a network of new high speed train rail links connecting it to the European Union via Central Asia. As more and more factories move deeper into the Western parts of China, Chinese officials and businessmen alike realize that it is very expensive and time consuming to move their products to the international markets by air or water. To remedy this, China is spending billions of dollars to build new rail links across Central Asia.
US$ 242 Billion in Investments over the Next 8 Years
China envisions two major train rail links. The first one will go through the Russian Federation and Belarus to Poland and the rest of Europe. The second one will travel through Kazakhstan and Ukraine to Southern Europe. It is expected that China will spend approximately US$ 242 billion over the next 8 years on a 7,000 km high speed rail link from China to Moscow alone. This will mean massive Chinese investment and spending across Central Asia. It will also mean thousands of new jobs, major growth potential for many cities, and the need for supporting infrastructure. When finished, this will be the longest rail network in the world moving trillions of dollars in goods.
The Benefits of Shipping Goods by Train
Shipping goods by train is cheaper, faster and more environmentally friendly. According to the Eurasia Express Bridge, transporting goods from China to and from Europe takes approximately 14 days. This also includes customs clearance for many different countries. The delivery of the same products by sea takes almost twice or three times as long, and is more expensive.
Typically, China transports its manufactured goods to its coast, and then uses maritime shipping companies to ship it to Europe or elsewhere via the Suez Canal. To mitigate time and expense, China is currently looking to utilize train links to transport it directly to Europe, in essence creating the 21st century version of the Silk Road.
Several European businesses have been sending products to China by train for years. This includes BMW and other major manufacturers. It is similarly cheaper for European businesses to transport goods to China by rail than by sea or air.
In 2013, one of the first trains from China loaded with electrical supplies arrived in Łódź, Poland. Since then, the number of connections and the volume of products have grown rapidly, and they expected to grow even more. These trains also travel to other parts of Europe, including France and Spain. Beijing estimates that the annual trade between Europe and China is expected to exceed $ 2.5 trillion in a decade once the rail links are completed.
If you are interested in learning more about future business opportunities involving the new high speed silk road, TransLegal or call 1.703-566-9427.