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Tuesday, September 13, 2016

Why China Subsidizes Loss-Making Rail Transport via Russia and Kazakhstan

Why China Subsidizes Loss-Making Rail Transport via Russia and Kazakhstan

Transporting Chinese goods to Europe by rail is far less profitable than sea transport, yet China subsidizes it to achieve its geostrategic goal of making a cluster of countries in the wide Eurasian space from China to Europe dependent on the Chinese economy and capital. The rail transport of goods from Europe to China may be much faster than sea transport, but it is also far more expensive: $6,000 per freight container, compared with about $1,000 to ship the same container by sea.
The demand for reverse transport from Europe to China is virtually nonexistent, and to top things off, many of the containers being shipped to Europe by train are actually empty: the transportation council of the Trans-Siberian Railway insists that trains have a standard length of 71 cars, regardless of how many are needed. This requirement also pushes up transport costs.
It’s not surprising, therefore, that only a tiny proportion (no more than 1–2 percent) of freight traffic is transported by land rather than sea. But bearing in mind that China-EU trade is worth $1 billion a day, it still constitutes an appetizing piece of the logistical pie worth competing for: China’s western provinces and Kazakhstan are successfully developing their transportation infrastructure, and now most freight transit passes through Kazakhstan rather than Siberia and the Far East before reaching European Russia. v

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