Over the past years, China has managed to get the attention of the press and of the international political class through its extraordinary strategy of accessing the global market and the rapid ascension of economic development, by penetrating new markets and developing its presence in the markets already conquered. The “One Belt, One Road” strategy is, in this context, not just a slogan, but also a growth strategy of connectivity and global collaboration, including Asia, Europe and Africa.
In 2013, when the Chinese President announced its worldwide strategy by launching the “One Belt, One Road” Initiative, many state representatives and governments immediately expressed their support or, on the contrary, their misbelief in the odds of this initiative. Known as a more than ambitious strategy that attracted a strong analysis, either negative or positive, four years after its launch, the initiative has managed to gain the support of many countries. The forum organized by China in May stands proof. The event was attended by 29 heads of state and government, over 1500 delegates and 70 international organisations. According to the declarations of President Xi Jinping, “over 100 countries and international organisations have supported this initiative and brought a contribution to its implementation. Important resolutions passed by the UN General Assembly and Security Council contain reference to it. Thanks to our efforts, the vision of the Belt and Road Initiative is becoming a reality and bearing rich fruit.”
Belt and Road is a strategy that completes the development strategies of many countries involved in the process. Through this initiative, during these four years, China has managed to contribute to improve coordination with the political initiatives of several countries such as the Eurasian Economic Union (initiated by Russia), the Master Plan on ASEAN Connectivity, Bright Road initiative of Kazakhstan, Middle Corridor (Turkey’s Initiative), Development Road Initiative (Mongolia), Two Corridors, One Economic Circle (Vietnam), Northern Powerhouse (Great Britain), Amber Road (Polonia). China signed cooperation agreements with over 40 countries and international organisations and concluded cooperation agreements on production capacity with over 30 countries.
Achievements
Since the launch of the initiative, China and the countries involved, promoted the facilitation of trade, of investments and the optimisation of the business environment. According to the declarations of President Xi Jinping, in 2014-2016, trade between China and the Belt and Road countries exceeded USD 3 trillion, while China’s investments in these countries exceeded USD 50 billion. Also, the Chinese companies set up 56 industrial cooperation areas in over 20 countries, generating over USD 1 billion from fiscal revenues. They also created 180,000 jobs.
Regarding the financial activity, China engaged in several financial commitments. For example, through the Asian Infrastructure Investment Bank, USD 7 billion were granted to 9 projects that will be implemented in the Belt and Road countries. The Silk Road Fund invested USD 4 billion and the financial holding 16+1 was inaugurated between China and Central and Eastern Europe countries. Moreover, other multilateral financial institutions are also encouraged to participate to establish an efficient complementarity.
A Joint Communication of the Belt and Road Forum for International Cooperation was signed at the Beijing Summit where cooperation objectives, principles and measures are established. The measures reaffirm the necessity to prioritise political consultations, trade promotions, infrastructure connectivity and financial cooperation. The promotion of practical cooperation relies also on the development and harmonisation of the transport system, including all transport modes, as well as the development of multimodal interconnected corridors, such as the Eurasian Land Bridge, Northern Sea Route, East-West Middle Corridor and of mainlines to set an international and efficient infrastructure network.
Cooperation agreements with 68 countries and international organisations were signed during the forum, including with the United Nations on the support for the proposed projects. 76 articles, including over 270 concrete results from five main areas, such as politics, infrastructure, trade, finance and “people-to-people” connectivity, were drafted following the forum.
As financial activity, China’s president announced that USD 124 billion will be granted for the implementation of the Belt and Road initiative, an amount that also includes USD 9 billion for the consolidation of China’s connections with trade partners. USD 14.5 billion will be granted for Silk Road Fund and China encouraged financial institutions to use the national currency to sign contracts with a total value of CNY 300 billion (USD 43.5 billion). To promote cooperation between China’s Northeast and Russia’s Far East, the National Development and Reform Commission will set up a Russian-Chinese development fund with a total cost of USD 14.5 billion and an initial capital of USD 1.45 billion. Moreover, a series of financial agreements were signed with many participating countries and, as regards financial institutions, the Chinese Ministry of Finances signed memoranda of understanding with Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, European Investment Bank, New Development Bank and World Bank Group. The Multilateral Development Finance Cooperation Center will be established with the multilateral development banks.
Rail agreements
The initiative is an important strategy for connecting Asia to Europe and Africa and, apart from the old commercial routes, it will contribute to setting an efficient network for both trade and infrastructure. The Silk Road Fund plays an important part in the development of infrastructure projects. “There is a major lack of financing for important projects, such as infrastructure construction projects in the countries involved in the Belt and Road Initiative. It is necessary to inject large sums in the Silk Road Fund to unlock financing sources”, declared Yi Gang, Vice-president of People’s Bank of China. To that end, the injection of USD 14.5 billion in this fund was announced during the forum. According to the Asian Development Bank, the financing demand of infrastructure construction projects in Asia is USD 26 trillion by 2030. In the first trimester of the year, financing agreements of USD 6 billion were signed through this fund. Established in 2014 with the objective of contributing to trade and transport infrastructure development, the Chinese President announced that Silk Road Fund will contribute with USD 40 billion to support the projects in these sectors. Also, within the Belt and Road, the State Council of China announced in March that New Development Bank plans >
> to co-finance the infrastructure projects together with the Asian Infrastructure Investment Bank. “There will be unlimited opportunities to co-finance projects with the AIIB in the future along the Belt and Road, because we share so much in common while selecting projects,” Leslie Maasdorp Vice President of New Development Bank said.
By combining maritime and land transport, Belt and Road Initiative will connect the east of China to Western Europe, Africa and Southeast Asia. Practically, the initiative includes two routes, with several branches obviously, to provide efficient connection between China and Europe, Africa and Asia. At the end of April, the Ministry of Transport announced that within the initiative, over 130 bilateral and regional transport agreements have been signed in the past 3 years, including road, railway, maritime and air transport. “Transport connectivity is the founding priority of the implementation of the Belt and Road Initiative,” Spokesman Wu Chungeng said.
Transport development and optimisation agreements were signed at the forum with the objective of setting an efficient connectivity between the Belt and Road countries. For example, China committed to consolidate international transport and to coordinate the transport strategy by signing agreements with Uzbekistan, Turkey and Belarus, but also with Cambodia, Pakistan and Myanmar.
In the railway sector, an important project included the conclusion of a cooperation agreement on the development of container block trains. The parties included China Railway, Russian Railways, Belarusian Railway, Deutsche Bahn, Kazakhstan Temir Zholy, Ulaanbataar Railway and Polskie Koleje Państwowe SA (Polish State Railways). The announcement has been initially released by the Russian railway company which also mentioned that a joint working group would be established to implement de agreement and to be in charge with container rail traffic development between China and Europe. According to the document, it is planned to increase volumes, intensify efforts of achieving logistics infrastructure facilities, optimise transport organisation and introduce new technologies to reduce travel time. Also, the parties involved will support the development of competitive tariffs for container rail transport observing the national legislation specific to each country and will make efforts to create seamless services standards.
The seven signatory countries plan to significantly increase the rail transport market share.
Last year, Russia’s railway network recorded a double increase of freight volumes with a 30% increase of container flows for Europe-Asia transit. The increase has been the result of launching new regular container trains services, the geographic extension of deliveries from China to Europe using the Trans-Siberian Ralways, but also due to the RZD transport and logistics development.
It is important to mention that EU-China trade have recorded a significant increase over the past years, China being EU’s largest source of imports and the EU’s fastest growing export market. Also, EU has become the largest importer of China, while total trade between the two parties stand at over EUR 1 billion/day.
Another agreement set during the Belt and Road Forum referred to the modernisation of Main Line 1 and the construction of Havelian Dry Port in Pakistan. The MoU was signed between the China’s National Reform and Development Commission and Pakistan’s Ministry of Planning and Development. “The MoU will help in rehabilitation and upgradation of Karachi-Lahore Peshawar to Landi Kotal (ML-1) Railway Track,” Pakistani Minister for Planning Development and Reform, Ahsan Iqbal, said. The ML-1 project includes the modernisation of 1,750 km of railway that links Kiamari (Karachi), in the south of the country, to Peshawar/Torkham (in the north-west) crossing through Hyderabad, Rohri (Sukkur), Multan, Lahore and Rawalpindi. It is the country’s North-South corridor and, apart from the actual length, the railway also includes branches that are 91-km long (between Lodhran and Khanewal) and 55 km between Taxila and Havelin, the total length reaching 1,872 km.
Under the project, modernisation works include the railway, the tunnels, civil engineering works, the installation of signalling and telecommunications systems, as well as the construction of Havelian dry port (the second largest city in Pakistan) to meet the estimated container traffic demand for China–Pakistan Economic Corridor (CPEC). The project was estimated at USD 8.2 billion and, initially, it should have been partially financed by Asian Development Bank with USD 3.2 billion.
Indonesia is another country which has been taking advantage of a rail agreement signed with China. Thus, China Development Bank and PT Kereta Cepat Indonesia signed the essential financing documents for Jakarta – Bandung high-speed railway which is 142 km long. At the beginning of April, the engineering, procurement and construction contract was signed between a consortium of Chinese and Indonesian companies and KCIC, the company responsible for project development. When the contract was signed, the financing was under negotiation with China for the allocation of USD 4.7 billion and the agreement was signed during the forum. The cost of the project is USD 5.5 billion. The 50-year concession contract was signed last year and will become effective as of 2019 when the railway will be put into operation. The concession is held by Kerata Cepat Indonesia China consortium, where China Railway Internaional Co holds 40%. Domestic companies include Wijaya Karya, national railway operator PT KAI and operator and toll road operator Jasa Marga. Within the agreements, CRRC Sifang will supply 8 high-speed trains. The railway, designed for speeds of 350 km/h will reduce the travel time between Jakarta and Bandung to 40 minutes from the present 3 hours.
One of the highly debated European railway projects, with China’s participation, is Budapest-Belgrade railway. During the forum, an agreement was reached to allocate a USD 297.6 million financing for the modernisation of the existing section and the construction of the double railway between Belgrade and Stara Pazova. The agreement was signed between the Serbian Ministry of Transport and Exim Bank of China. ”For Serbia, the high-speed rail from Belgrade to Budapest is the most important project as is part of China’s initiative One Belt, One Road. The section has a great importance for us as it will be the main rail link allowing fast transport passenger and freight services to the European countries. It will connect Belgrade to Vienna and other European important cities,” Serbian Minister of Transport Zorana Mihajlović said at the signing ceremony. Hungary’s Prime Minister Viktor Orbán has also talked with the Chinese president, prime minister and investors to implement the project on the territory of his country. According to Orbán “the most spectacular of these agreements is the modernisation of the Budapest-Belgrade railway line, and the financial conditions of which were also discussed. This means that the public procurement tenders can soon be made public and construction work on the project can begin.”
The project of the 370-km railway is estimated at USD 2.89 billion and includes the modernisation of existing sections and their doubling, as well as the construction of missing links to provide direct connection between the two capitals. At the beginning of the year, the Serbian Ministry of Transport announced that RZD International should launch the construction works of the double line on Stara Pazova-Novi Sad section, part of Belgrade-Budapest railway. Last year, Serbian authorities signed the USD 338 million contract for this section which includes Russian financing.
Of the total length of the railway, around 335 km will need conversion and electrification works, while 166 km of railways will be upgraded in Hungary.
This article was published in the June issue of the Railway PRO Magazine that analyses the latest and most important railway projects around the world.
by Pamela Luica
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