New rail lines, customs agreements changing trade between China and Europe

The world’s longest direct link rail journey recently ended after a train from the coastal Chinese city of Yiwu completed a journey to Madrid, Spain that spanned over 8,000 miles.

The railway, dubbed the “21st-century Silk Road” by Li Qiang, governor of Zhejiang province, where Yiwu lies, passes through Kazakhstan, Russia, Belarus, Poland, Germany and France along the 8,111 mile-long journey to Madrid, the Guardian reported. The route is longer than both the Trans-Siberian railway and the Orient Express. The cause behind the journey was for the most part celebratory.

While one may expect cargo of the most serious variety on such a historic trip, the freight train carried 30 containers of mostly presents a few weeks ahead of Christmas. The 1,400 tons of toys, stationary, and other products shipped over for the holiday season were received by China’s ambassador to Spain, Zhu Banzao. The train will return to China carrying wine, jamón and olive oil in preparation for the Chinese new year in February.

The state of trade between Europe and Asia

After the European Union as a whole, Spain is China’s biggest trading partner, according to the Guardian. Bilateral trade between the two countries is worth about £16 billion ($25.15 billion). China is also Spain’s third largest source of imports following Germany and France. In September the Spanish prime minister, Mariano Rajoy, was in China, where he was rumored to sign over £6.3 billion in deals.

The journey from Yiwu to Madrid was a test to see if current trips from China to Germany can be expanded to other corners of the European Union (EU). Trains currently make the trip between China and Germany five times weekly. This trip links the Chinese city of Chongqing – an industrial center in the south-west corner of the nation – with the German city of Duisburg, and also connects Beijing with Hamburg.

Following customs agreements between China, Kazakhstan, Russia and the European Union that allow for block trains – those that have been booked entirely for a single customer – rail connections between Asia and Europe have become a topic of strong interest, the Journal of Commerce explained. The agreement between the three countries and the EU allowed for block trains to be cleared at the Kazakhstan border, a process that takes mere hours and cuts out further inspections and other delays until destination arrival.

How the world’s longest railway is changing trade between Asia and Europe

The agreement has sped up transit times, according to the transportation news outlet. The trip from Yiwu to Madrid, at 21 days, was 10 days faster than ocean freighters, thanks to the removal of excess delays along the way. Rail freight to Europe holds advantages over both air and maritime shipment. Moving goods by rail is one-tenth the cost of by air, and up to thirty days faster than moving cargo by sea. Some of the larger cities in Europe can be reached from China in as little as 14 days by rail.

Additionally, moving goods by train is good for the environment, the Guardian noted. Transportation by rail produces about 44 tons of CO2, compared with 114 tons for road routes – a 62 percent reduction. Increased speed, cost savings and environmental benefits make the Yiwu to Madrid railway an attractive option for shippers interested in moving goods between Asia and Europe.

The journey wasn’t prefect though, as there were several issues along the way, the publication explained. For example, the train’s cargo had to be transferred three times through the journey because of incompatible railway gauges. The locomotive also had to be switched every 500 miles.

There are also logistics issues that still have to be worked out due to the number of countries that the railway passes through on the journey from Yiwu to Madrid, the Journal of Commerce explained. However, as more forwarders get on-board with the project, these problems are being worked out.

There has been increasing demand from both Asia and Europe for more block trains between the two continents, according to the publication. Demand for products such as fruit and automobile parts is high through the route that stretches between the two continents.

The “New Silk Way” initiative was launched by China and Kazakhstan, according to the Journal of Commerce. The campaign’s goal is to expand trade links with Europe and Central Asian economies. Thus far, China has invested $40 billion in rail and logistics infrastructure in order to fuel the growth of railway projects and mitigate dependence on ocean and air carriers. While the railway is a viable alternative to ocean forwarders in terms of time, it still does not serve as a threat to maritime shippers. The cargo volumes moved by railway shippers are miniscule compared with that of ocean carriers.