The Yixinou rail line, which connects the wholesale city of Yiwu, East China's Zhejiang Province with Madrid, the capital of Spain, is one of the Sino-European rail links. It is seen as one of the emblematic projects of China's "One Belt and One Road" initiative. Over the first four months of 2016, Yiwu exported $84.16 million in goods to Europe, up 81.1 percent year-on-year, according to customs data. However, the line, which is the only Sino-European rail link operated by a private company, has also been dealing with many challenges.

A sign reads "New Silk Road, New Starting Point" at the Yiwu West Railway Station, where Yixinou, one of the Sino-European rail links, departs each week for Spain. Photos: Chen Qingqing/GT

Graphics: GT

Chairman of Yiwu Timex Industrial Investment Co

Xia Yongping, 49, a Chinese immigrant who lives in Spain, has been in the export business for 17 years. He owns a 13,000-square-meter market in Madrid, where he sells about 30,000 types of daily necessities imported from Yiwu, East China's Zhejiang Province, known as the world's largest wholesale market.

Xia, whose company earns annual revenues of about 50 million euros ($56.57 million), said he was approached one day by Yiwu government officials, who advised him to take part in the "One Belt and One Road" (B&R) initiative.

The B&R initiative, which was proposed in 2013, is also known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

"They suggested that I not only export 'Made in China' products to Europe, but also bring quality European products back to China," Xia told the Global Times on Saturday.

Xia smelled opportunity. More and more Chinese consumers, especially those from upper-middle class, prefer imported goods such as olive oil.

At the same time, European demand has been sluggish, and "the euro has depreciated a lot in recent years, which has made the exporting business more difficult," he noted.

Other Chinese merchants living in Europe share a similar sentiment. 

"One way we can play a role in the B&R initiative is by helping normalize the operation of Yixinou," Xia said.

Two-way trade

The first cargo that Xia exported from Spain to Yiwu via the Yixinou arrived two weeks ago via the 13,052 kilometers rail line that connects Yiwu and Madrid. The products are all "Made in Spain" home cleaning and personal hygiene products.

The first train to travel the Yixinou  route left Yiwu West Railway Station on November 18, 2014, carrying 1,400 tons of cargo. It passed through China, Kazakhstan, Russia, Belarus, Poland, Germany and France before arriving in Madrid 21 days later. The train run both ways, but trade is unbalanced.

"A freight train [from Yiwu] carries at least 41 twenty-foot equivalent units (TEU) every week, and each one is stuffed with about 26 tons of goods," Feng Xianfa, who works at the railway station, told the Global Times Tuesday.

The railway station is about a 20 minute drive from the center of Yiwu. On weekdays, trucks begin lining up outside the station at 8:30 am to unload their containers. The train departs every Friday at 8 pm. It travels nonstop to Poland, where the first part of the cargo gets unloaded. More cargo gets dropped off in Berlin and Duisburg before the train makes its final stop in Madrid 17 to 19 days after leaving Yiwu.

Transporting cargo by freight train costs about 50 percent less than by air, said Feng Xubin, chairman of Yiwu Timex Industrial Investment Co, which runs the Yixinou rail line. "Although it's more expensive than shipping by sea, it saves much more time, which is a better option for some companies," he told the Global Times on Tuesday.

Several merchants in Yiwu who have been in the export business for many years told the Global Times it costs about $2,000 to $3,000 to ship a container by sea and about $5,000 to transport it by rail.

However, the trains only come back once every month from Madrid to Yiwu, which weighs on the operator's bottom line.

In 2015, exports from Yiwu jumped 42.8 percent to $33.86 billion, but imports to the city fell 25.2 percent to $360 million, according to data from the local bureau of statistics.

Staying on track

Merchants did not immediately take to the idea of transporting cargo between China and Europe by rail because most of it gets shipped by sea.

To convince merchants to consider sending their goods by train, Feng reached out to Chinese immigrants like Xia, who know how to source sufficient products to import to China, so the train could return with cargo.

Still, there are challenges. It is currently difficult to maintain a constant temperature on railway freight cars, which makes importing certain products impossible, said Zhou Xufeng president of the Yiwu-based Mundiver Spanish Business & Food Center, an importer of Spanish products.

To keep the business running smoothly, Yiwu Timex Industrial Investment has been trying to stabilize the schedule of cargo in recent years.

This rail line could be seen as a political exercise rather than a commercial one, a source close to the issue, who declined to be named, told the Global Times on Sunday.

"However, as a private company, we have less favorable policies in terms of financing and subsidies compared with State-owned enterprises in the same business," he noted.

Q&A with Feng Xubin

GT: As a private company, why did you start a railway project?

Feng: It was because of the business opportunities that we occasionally found. A few years ago, most exports from Yiwu to Central Asia moved by road. As the export volumes to countries such as Kazakhstan and Uzbekistan steadily grew, I started wondering if we could transport those products by rail, which would be faster and more convenient. It took us more than two years to get customs' permission to start the business and we later signed a contract with the national railway operator China Railway Corp. Now we manage the container train and the supply chain. We also pay freight fees to the national operator.

GT: What do you do to source sufficient products to import to China via the railway?

Feng: Currently, we have one train coming back from Europe every month, which is stable compared with a year ago. The company will also run its own trade business in Europe by importing, for example, wine and mineral water. As the only private company that operates a Sino-European rail link, we have to consider our profitability, for sure. In Europe, we are trying to hire more people and do more marketing work to strengthen connections with small and medium-sized enterprises, which are considered the firms with most potential to export a lot of goods to China in the future. 

GT: Some think your company is carrying out more of a political mission than a commercial one under the B&R initiative. What do you think?

Feng: The B&R initiative is a long-term plan. No one should be too eager for rapid success. Building connections is our first step. The company is trying to become more market-driven, which also takes time. It's likely that we will consider tapping the capital markets to let more players take part in the project.


Newspaper headline: Trying to balance on a rail