How will the western land-sea trade corridor boost links to Southeast Asia?

The Western China land-sea trade corridor, once focused on improving transportation to Singapore, has advanced to include a much more ambitious and inclusive plan.

Photo from CFP

Photo from CFP



When Zhejiang’s industrial conglomerate Zhengkai Group opened a new office in Chongqing, it was meant to be little more than an outpost, destined to take care of clients, and potential clients, in China’s southwest. Last year, however, the company elected to build a new factory there, in the least-known of China’s megacities. The office will now be expanded and take on greater importance. In fact, all export matters are to be dealt with there, though it is perhaps a curious choice of location - Chongqing is a landlocked city.

The decision would have been a ridiculous one five years ago before the coming of the Western China land-sea trade corridor. Western China is very different from the highly industrialized South and East. It not only lacks roads, railways, and ports but suffers from little or no recognition by overseas enterprises with none of the glamour and vibrancy associated with Shenzhen, Shanghai or Beijing.

Gateway to the ocean

Until recently, a company like Zhengkai which wanted to send goods from Chongqing to Hanoi had only two options. It could either ship them by air, which is expensive, or take the circuitous water route down the Yangtze River and then all the way around China’s entire southeast coast. The journey took about 20 days, a completely unfeasible timescale for a journey of little more than 1,000 kilometers as the crow flies.

The land-sea trade corridor is designed to change all that. The plan was first conceived in 2017. At that time the corridor was focused on improving transportation times to Singapore, but as time and economic situations have advanced, a much more ambitious and inclusive plan has taken shape.

It is no longer a single route that connects A to B, but an ever-expanding network of railroads, highways and shipping routes covering vast areas of land and sea. In the past year, high-speed trains have begun to carry passengers and cargo from Kunming to Lao capital Vientiane. Those operations began with considerable fanfare in December, and now a 73-billion-yuan canal is planned to connect Guangxi’s capital Nanning to Qinzhou Port, 110 kilometers to the south. It is an important gateway to the ocean on the Gulf of Tonking.

The scope of the network is awe-inspiring. Today, cargo that originates in Western China can reach 315 ports in 107 countries through Qinzhou – but the core business flows along three principal routes that run almost parallel from Chongqing and its surroundings in the north to ports on the Guangxi’s Gulf of Tonkin coast.

Now, goods shipped from Chongqing to Hanoi first travel by rail from Chongqing to Guangxi, and are then loaded onto cargo vessels bound for Vietnam’s ports of Ha Long and Haiphong and thence to the capital. The entire journey takes a mere seven days.

Vietnam is currently the largest overseas destination of the network. About 20 percent of the cargo (in terms of both volume and value) makes its way there. Vietnam is often talked about as China’s rival in outsourced manufacturing, but the two countries are also partners. Factories in Vietnam buy numerous components and parts from China and sell the finished products back. Most notably, China buys large amounts of its agricultural products from Vietnam. The land-sea trade corridor will make the flow of everything from carrots to car parts faster and less costly, a big benefit for businesses on both sides.

Similarly, the corridor is destined to boost all kinds of trade between China and its Southeast Asian neighbors. The bloc now handles 14.5 percent of China’s total foreign trade. China has been working hard to take the economic relationships to a new level, mainly through trade agreements, most importantly, a comprehensive regional economic partnership that comes into effect this year. Instead of competing with one another for outsourcing contracts, China and Southeast Asian countries have the chance to work together on infrastructure projects and create a new manufacturing hub for chemicals, textiles and heavy machinery.

Competence in the spotlight

The corridor has learned many lessons from the operation of the China railway express, a rail freight network that runs from Rotterdam in the Netherlands to Shanghai through Russia and Central Asia. Both are connecting Western China to the rest of the world. Both are set to play vital roles in the creation of jobs and encouraging investment, both from domestic neighbors on the prosperous east coast, and trade partners beyond the national borders.

About 30 percent of cargo moved along the land-sea trade corridor still goes through Chongqing. This percentage has been steadily dropping as the network expands and other provinces begin to pick up volumes. Since 2017, the corridor has seen more than 6,100 new train services in the six western provinces of Gansu, Guizhou, Qinghai, Sichuan, Shaanxi and Yunnan. The governments of these provinces are shareholders in a company that manages part of the network. Freight volume has been growing exponentially and in the first half of this year, the network moved 379,000 containers, a 33 percent increase from H1 last year.

Many small cities that were previously without access to rail networks are now connected. A train that started operating in June takes only two days to carry all kinds of goods from deep in Hunan Province to ports in Guangxi. Local governments are hopeful that the better infrastructure will attract more companies and even entire industries inland, following the Zhengkai model.

Increased volumes put the capacity and managerial capability of new stations and ports in the spotlight. Some of the freight terminals in Chongqing, especially those which are on both the land-sea trade corridor and China railway express, are already congested. Qinzhou Port is more expensive and less efficient than ports on the east coast, and faces financial and legal obstacles to further expansion.

More trade means hard choices

The foreign trade to GDP ratio of the west is only a third of that of the east, an obvious gap that is neither desirable nor sustainable. Plenty of researchers have pointed out that openness doesn’t only mean foreign trade, and that it takes more than infrastructure alone to boost trade and invigorate an economy.

Western provinces need to build whole industries, but this does not necessarily mean they should accept just accept everyone who has been priced out of the expensive east or compete directly with their prosperous neighbors. The land-sea trade corridor creates opportunities, but the cities and regions on the route need to find the best way to take full advantage.