The new Silk Road

Growth locomotive: Huang

It carried spices and peerless porcelain, as well as medicinal rhubarb and (most famously of all) silk.

The Silk Road between China and the West dates back as far as 150 BC and evokes powerful images – not least of the intrepid Marco Polo spending three years travelling it from Venice to Beijing.

In its heyday, the Silk Road symbolised China’s vast economic lead over the medieval states of Western Europe. Along it would pass Chinese goods that could fetch enormous prices when they reached their European markets.

More than 700 years after Polo immortalised that trade route, the Mayor of Chongqing is invoking it once again, with a “New Silk Road” to Europe. This time round expect the cargoes to be a bit more prosaic (low-cost laptops and car parts).

Plus it’s no longer a ‘road’ at all. Huang is talking about a rail connection.

We’ve talked about Mayor Huang Qifan’s ambitions for Chongqing before (see WiC77). They don’t tend to be lacking in scale. Over the next decade he wants to welcome 10 million new residents to the city, roughly doubling its population.

And like Chicago’s founding fathers, Huang also views the city’s location as the key to its destiny. Chicago stands at the confluence of the Mississippi River and the Great Lakes watersheds, and became the starting point of the iconic Route 66 highway to America’s west coast. Chongqing sits next to the intersection of the Yangtze – China’s key inland river route – and the Jialing River. Like Chicago, it has also become a leading road and rail hub.

Twenty years ago, Chongqing was a poor city known predominantly for its artist colony and flagging munitions industry. But thanks to Beijing’s ‘Go West’ campaign (designed to shift development from the coast to the interior), Chongqing has been the beneficiary of massive infrastructure spending over the past decade.

Huang has successfully followed what economists might term the Kevin Costner formula: build it and they will come.

The talk today of a ‘New Silk Road’ rail line is another classic example. The train leaves Chongqing’s West station, travels via Xinjiang and then passes through a further six countries (including Russia) before reaching its final destination in Duisburg in Germany.

However, as the Chongqing Economic Times notes, the 11,179km route is still in the experimental stage. A ‘pilot’ train laden with electronics left Chongqing in late March and arrived in Germany 16 days later. Mu Huaping, director of the Chongqing City Commission of Economy and Information Technology, told the newspaper that the maiden trip was designed to test the efficiency of the line, the speed of customs clearance and how well electronic products coped with temperature conditions on the route.

The line could still turn out to be a huge boon for manufacturers that view Europe as a key market. At the moment they ship their goods down the Yangtze towards Shanghai, and then move them onto container vessels bound for Europe. That route is 22,000km long and the container cargoes can take up to 40 days to reach Rotterdam.

Shang You, president of Chongqing-based car and motorbike firm Lifan, says he’s convinced the new train route will succeed – assuming costs are competitive with shipping. In fact, he forecasts Lifan will export over 3,000 containers to Russia using the train, which he says will take just 11 days to get to market.

The Financial Times believes the timing could not be better. Given rising wages in Guangdong, a number of electronics manufacturers such as Acer and Quanta have moved production to Chongqing. Oliver Ahrens, president of Acer China, told the FT that Europe is the firm’s most important market and the new train could cut its transport time by two weeks. (Ahrens adds that the firm reckons 60% of its global PC shipments will eventually start out from Chongqing).

In fact, local officials told the FT that Chongqing will manufacture 100 million laptops next year – a third of global production. A lot of those will be sold in the domestic market. But many could also head along Mayor Huang’s New Silk Road to Europe.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.