Free Market in Its Twenties: Modern Business Decision Making in Central and Eastern Europe

2.3. The New Silk Road: China and the Emerging Opportunities for CEE

– 121 – CHAPTER IN BRIEF:  The New Silk Road is a plan to develop land-based transportation between China and Europe.  The New Silk Road responds to China’s key economic, strategic, and geopolitical objectives.  The New Silk Road will encourage development of the Chinese interior. O n 31 August 2012, the 11,179-kilometer Yuxinou (Chongqing-Xinjiang -Europe) International Railway was officially put into operation . It starts at the megacity of Chongqing in Central China and ends at Duisburg near Germany’s western border. It leaves China through its northwestern border with Kazakhstan and crosses Russia, Belarus, and Poland before entering Germany. Via the new railway, goods from Central China can reach the heartland of Europe in only two weeks, significantly faster than the five weeks it would take by sea. Thus, the railway is more suitable for transporting high value and short shelf-life goods. When the Railway opened, trains departed for the long journey every week; but there are plans to increase the frequency to one train daily. In addition, the operator will increase the efficiency of reloading; a necessity when changing from standard gauge tracks used in China and Western Europe to broad gauge tracks used in many of the former Soviet Union countries . This and further efficiencies will reduce travel time to about thirteen days. THE NEW SILK ROAD: CHINA AND THE EMERGING OPPORTUNITIES FOR CEE Paul Lacourbe C h a p t e r 2 . 3 . i6 FM.indb 121 2014.06.05. 12:20 – 122 – Chongqing, the final station of the Yuxinou Railway in China, is one of the country’s four direct-controlled municipalities (the other are Beijing, Shanghai, and Tianjin), and the only such municipality in inland China. It has a population of around 30 million people. Since separating from the Sichuan Province in 1997, the city-district has emerged as one of China’s fastest-developing regions, vital to central government’s efforts to develop inland China. The annual GDP growth has averaged around 14 percent over the last decade. The city hosts a number of economic and technological development zones to target growth in specific industries. Among many products, the city has an impressive annual laptop manufacturing capacity of 120 million units,1 which currently accounts for 20 percent of the world’s total laptop output. Since 2011, HP has transported 4 million notebook computers into Europe via the Yuxinou Railway. Further, the city is well-connected to the coastal regions of China, facilitating the rail transport of goods from eastern China to Europe. China’s Key Strategic Objectives In 1937, aided by its modern military and especially powerful navy, Japan managed to capture most of China’s coastal areas in a relatively short period of time. China had lost the areas that accounted for the majority of its economic output and was cut off from the key routes through which it may have imported weapons.This desperate situation made the Chinese resistance ineffectual and cost the Chinese millions of lives.This tragic episode demonstrated two of China’s key strategic weaknesses. First, that most of its economy was dangerously centralized in the coastal regions; and second, that the country was heavily dependent on foreign imports. These two challenges made the country strategically vulnerable, especially in the face of a militaristic and aggressive adversary with a powerful navy. Today, China’s key challenges resemble in many ways the ones of the past. It has been the coastal regions that have benefited the most during the past The Yuxinou Railroad Figure 2.3.1. CHINA KAZAKHSTAN RUSSIAN FEDERATION BELARUS Moscow Urumal Xran Chongqlng Lianyungang Dulsburg GERMANY POLAND Rotterdam THE NETHERLANDS Antwerp BELGIUM S o u r c e : M i n i s t r y o f C o m m e r c e , C h o n g q i n g M u n i c i p a l G o v e r n m e n t . i6 FM.indb 122 2014.06.05. 12:20 – 123 – three decades of rapid economic reform and growth. This is largely due to the role international trade has played in driving the development of the Chinese economy and the proximity of these regions to this economic activity. Further , China continues to rely on transportation by sea for exporting goods and importing energy and other vital supplies. And, despite some recent modernization initiatives, the Chinese navy...