Rail crucial to trade network between China's central region and Western Europe

The latest Eurasian Land Bridge linking Lianyungang in East China's Jiangsu province with Rotterdam in the Netherlands started rolling out about two decades ago, and a subsidiary line from Chongqing to Europe via the Xinjiang Uygur autonomous region began running last year.

With the completion of this rail link across Eurasia, China's central region will benefit from unprecedented growth in its logistics sector, which will in turn help reshape its trade network.

Wealth is generated from labor and realized through trade and the basis of trade lies in transportation. Modern logistics needs to protect the unimpeded flow of supplies around the globe in the shortest time possible. In an era of globalization, capital flows need to be supported by an international financial network. Likewise, the flow of cargo goods requires an international transportation network that can adapt to local conditions at a reasonable cost.

In view of the high costs of air transportation, there are only two practical ways for large-scale logistics - sea and land freight. But rail is the only viable model for intercontinental land transportation.

Most of China's first-tier cities are located in its eastern coastal areas, and they have the natural advantage of Pacific maritime trade. But China's economic transformation has to be gradually realized through the development of its inland region.

Trade between China's central region and Western Europe can only be realized through land transportation via Central Asian countries and Russia, as geography limits the development of its logistics sector.

The Eurasian railway system that began opening 20 years ago can be described as the "New Silk Road" of China's modernization. It has significant economic and strategic value, as goods produced in the central region for export to Europe do not have to use sea transportation via the country's eastern ports.

Besides the development of Central China, the country's western regions can also benefit from the new Eurasian Land Bridge, with this "New Silk Road" comprehensively breaking the barriers and bottlenecks in China's regional logistics flow. As the latest link to the new land bridge, the Chongqing line is also of great importance to the areas around the southwestern municipality.

Chongqing became a municipality to help simplify administration, boost economic development in the area and drive growth in the country's vast central and western regions.

Located near the geographic center of China, Chongqing is also an important city for national security because of its inland position as well as the protection offered by the world's highest plateau in its west. But Chongqing's geo-strategic advantages also become a barrier for it to reach out to the world.

Linking it to the Eurasian Land Bridge helps it address this weakness.

Regional development must ride on the back of rapid national economic development. On the one hand, the coastal areas, supported by human and natural resources inland, have established close economic cooperation with the wider international community. These more developed areas stand at the forefront of China's economic reform. On the other hand, as labor and material costs in the coastal areas rise, the growth of foreign trade in these areas is slowing down. The financial crisis in Europe and the United States has also hampered international trade. As such, the regional imbalance in China's economic development should be used to consolidate the competitiveness of the country's exports.

In this context, foreign investment in China is moving to the central and western regions including Chongqing. The latest development in the land bridge significantly increases the export capacity of Chongqing and its surrounding areas.

In recent years, Chongqing has been promoting its production capacity of laptops to reach 1 million units annually, which is the total of six coastal provinces. This strategy alone is a major boost to the economic boom of Chongqing and the central and western regions. The smooth flow of the "New Silk Road" through Chongqing offers one of the best logistics options available, and the megacity will realize unprecedented economic value from the move.

While some worry that the Chongqing subsidiary line could weaken the strategic and economic value of the older continental rail link, most of which is in Russia, an increase in the amount of Chinese goods headed for Europe using the Chongqing line will continue to benefit Russia.

But the current Chongqing addition to the land bridge is still not the most effective in terms of distance and the Chongqing-Lanzhou Railway is expected to shorten the journey further when it is completed. Given the obvious geographical advantages, even Southeast Asian countries will be able to take advantage of the land bridge framework to realize a logistics revolution in Eurasian transportation.

The "Malacca dilemma" is also an issue that has cropped up in discussions over a Eurasian rail link. While a new Eurasian continental bridge does not change the geographical constraints of transport through the Malacca Strait, it will effectively slow down China's geo-economic vulnerability. Since a considerable part of Sino-European logistics will be carried through the new Eurasian continental bridge, China's continental advantages will be fully realized. Reducing the dependence on sea transport, especially through a reduction in the use of the Strait of Malacca, will be conducive to the diversification of China's economic cooperation with other countries and help improve the country's diplomatic independence and autonomy.

The author is a professor of international relations at Fudan University.

(China Daily 06/08/2012 page7)