Talk of the Town
Media is beginning to take note of the war’s impact on one of the BRI’s flagship projects, the China-Europe Railway Express (CRE), an extensive network of cross-continental railways that transports Chinese exports to Europe and carries back imports, including everything from agricultural products to car parts. The network is now experiencing major disruptions to train routes and financial uncertainties in connection with freight settlements.
A CRE service provider based in Chongqing recently told Singapore’s Chinese-language newspaper Zaobao that freight transportation to Europe had declined by as much as 50% since the war began. Another source told the paper that major logistics providers such as DHL had all but stopped offering CRE services as “you just don’t know what will happen along the 20-day train trip, especially when West Ukraine is being bombed.”
Russia (and to an extent Belarus) is an indispensable part of all three major routes of the CRE - Eastern, Central and Western - that connect a number of Chinese provinces with European destinations such as Warsaw, Budapest and Duisburg. A small number of trains go through Ukraine on their way to Hungary.
Compared with direct, physical disruptions to transportation, which is so far relatively limited, the sanctions on Russia are a bigger concern for traders. This is reflected in the amount of goods transported to Russia through CRE, which has witnessed a “90% drop” as one Chinese interviewee told Zaobao. South China Morning Post also highlighted the possible impact on freight settlements for the Russian section of the routes, as US and Europe moved to exclude Russian banks from the SWIFT system. This is echoed by Chinese state media Economic Daily’s interview with traders in Hebei, who struggled to settle payments in US dollars.
In light of the new situation, CRE operators are also making adjustments to retain hard-won business over the past two years. The involvement of insurance companies is one way to address market anxieties. The lowering fares and faster turnaround as a result of reduced demand may, in themselves, serve as a self-balancing mechanism, as the economics of train freight improves vis a vis other means of transportation.
For China’s landlocked manufacturing centers such as Chongqing, it is also a moment to test the dependability of new transportation routes such as the New Western Land-Sea Pathway (西部陆海新通道), a 2017 initiative aiming to better channeling goods from China’s western provinces by land to Guangxi province’s Beibu Bay port facing the South China Sea. Yao Shujie, an economics professor at Chongqing University, believes that this new option will help the provinces reduce the impact brought about by the disruptions to CRE services.
As Panda Paw Dragon Claw has written before, the CRE’s turnaround in the pandemic years is testimony to the BRI’s resilience. It seems that the cross-continental railway network will once again become a touchstone for the BRI’s ability to adapt to the increasingly challenging global political and economic environment.