China should focus on benefits of ‘One Road’

By Mei Xinyu Source:Global Times Published: 2017/3/8 0:23:39

Illustration: Peter C. Espina/GT

China's One Belt and One Road initiative, or the Silk Road Economic Belt and the 21st-century Maritime Silk Road initiative, should prioritize the development of the "One Road."

In terms of economic volume and market capacity, the countries and regions along the Maritime Silk Road far exceed those along the Silk Road Economic Belt. As the world's largest exporter, manufacturer and second largest economy, China should not waste excessive resources on a few small markets while ignoring bigger ones.

Due to the differences in transport capacity, costs, efficiency and security, it would be a fantasy and unprofessional to believe that the international railway along the belt can replace transport by sea. International rail transport can only be a supplement to sea transport. This is true for not only China's foreign trade but also global trade. 

For China, water transport has an absolute advantage in terms of transport capacity and costs. According to official data, China's total cargo turnover reached 17.84 trillion ton-kilometer in 2015. Cargo turnover from water transport reached 9.18 trillion ton-kilometer, accounting for 51.5 percent of the total, while railway cargo turnover was 2.38 trillion ton-kilometer. For water transport, ocean cargo turnover was 5.42 trillion ton-kilometer, more than double that of the total railway cargo turnover.   

The cost advantage makes water transport more suitable for long-distance transportation. Partly due to this, ocean transport carries more than 90 percent of China's foreign trade cargo, including 98 percent of imported iron ore, 91 percent of imported crude oil, 92 percent of imported coal and 99 percent of imported grain. 

Meanwhile, the advantage of ocean transport over China-Europe Railway Express services is obvious in terms of cost and traffic volume. Although goods delivery via China-Europe Railway Express services takes only one-third of the time as sea route delivery, the cost is much higher. Take a 40-foot shipping container for example. The cost of shipping the 40-foot container from China to Europe by railway is around $6,000, at least three or four times that by sea. Even if a double deck container is adopted for China-Europe Railway Express services, the costs will still be double that of ocean shipping. Also compared with ocean transport, technical innovation of cross-border rail transport involves a lot of coordination.

The cargo volume on China-Europe Railway Express services is much smaller than by sea. According to data from the Belarusian Railway, 47,800 20-foot equivalent unit (TEU) containers were transported between China and Europe via Belarus in 2015, up 40 percent year-on-year. CSCL Globe, the world's largest container ship operated by China Shipping Container Lines (CSCL), can carry 19,100 TEU containers. Currently, a regular container ship from China can carry more than 8,000 TEU containers. This means that the annual cargo traffic on the Belarusian Railway could be handled by six standard container ships from China or two and half CSCL Globe vessels.

High-speed rail and heavy haul rail technologies are some of China's greatest strengths. The loading capacity of heavy haul trains in China is around 30,000 tons per train, ranking No.2 in the world behind the US which has a loading capacity of 44,000 tons. However, heavy haul trains in China and the US mostly carry primary commodities, such as coal and ore, and container capacity cannot reach that level. China's domestic railway can set world records in terms of speed and departure frequency, but international railway services cannot accomplish the same results.

Compared with land transport such as railways, roads and pipelines, ocean transport has a key advantage - it is basically free from the influence of local governance, social stability and diplomacy of the countries along the route. In contrast, land transport is susceptible to diplomatic changes which can cause uncertainty and raise costs.  

In the global natural gas market, natural gas in East Asia was historically priced at a premium to US and European hub prices. However, given the surge in liquefied natural gas trade by ocean transport, that premium is shrinking and is expected to diminish even more in the future. This reflects the advantage of ocean transport.

Certainly security issues cannot be overlooked. But if we deliberately avoid the sea route to seek security, the mentality is both unrealistic and wrong. As the world's largest manufacturer and shipbuilder, China is seeing its maritime strength continue to grow. Additionally, it is more cost effective for China to seek stability on sea route shipping than on land. In drafting its security strategy, China needs to look into the future instead of merely focusing on the present.       

The author is a research fellow with the Chinese Academy of International Trade and Economic Cooperation.


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