CR Express Program: Opportunities for Integrated Collaboration between China and EU

Since the first train departed from Chongqing, a city in southwestern China, and arrived in Duisburg in 2011, the market has witnessed significant development. In 2013, Chinese President Xi Jinping proposed the Belt and Road Initiative for the first time. In 2016, China Railway introduced new service and built it into a brand: China Railway Express (CR Express). Up to the end of 2018, China launched over 12,000 CR Express container trains, both westbound (WB) and eastbound (EB), most of which were actually launched in the recent three years, when the Belt and Road Initiative becomes more accepted by other countries.

According to China Railway and China Customs, in 2018 alone, there were more than 6,300 trains launched, 2,690 of which were EB trains, from Europe and Russia back to China. These trains connected 56 Chinese cities and 49 cities in 15 European countries, including Russia and Belarus. Among those 56 Chinese cities, the five top-ranking cities (namely, Chongqing, Chengdu, Xi’an, Zhengzhou and Wuhan) are all located in western and central China, contributing almost 80 percent of the total volume. The CR Express program is becoming one of the key measures for local governments to further reform and opening up.

The most popular destinations in Europe are Duisburg, Hamburg, Mala and Lodz, accounting for about 55 percent of the total volume that has headed to EU. If Nuremberg, Tilburg in the Netherlands and Gent in Belgium are taken into account, more than 60-65 percent of the total volume has headed to northwestern Europe and Poland.

As one of the important prophase projects within the framework of the Belt and Road Initiative, this program represents China’s idea of connectivity. The railway is physically connecting all the countries along the Belt and Road. It is a public product initiated by China to provide logistics service to all the countries that are interested, therefore it also represents China’s philosophy on inclusiveness and openness. And more importantly, it has triggered the business opportunities for all the countries along the routes.

From the European side, the CR Express program has also caught more and more attention. The local communities started to calculate the potential profit and other business opportunities these trains might bring. They also care about the following aspects: How this program can contribute more to European society? How can European companies benefit from the CR Express program?  They are not only related to railway companies (like DB Cargo and PKP Cargo) or depots from Europe (like DIT in Duisburg) that are already engaged in the railway transportation, but also manufacturers or other business partners who can use CR Express trains to develop more business opportunities with China and other neighboring Asian countries, by re-shaping their supply chains and improving the cash flows.

Some European companies already started using CR Express trains to send goods – many of which are of high value – such as laptops, electronic devices, finished vehicles, automotive and industrial parts, fashion products like HM clothes, and automotive brands like BMW and Volvo. There are also some South Korean and Japanese clients starting to use CR Express trains to send their goods from their factories in South Korea and China to Europe. But in a big picture, foreign clients are just a minor contributor.

Also CR Express’ contribution to the trade between China and EU is still very limited.

According to the Statistical Office of the European Communities (EUROSTAT), the trade volume between EU-27 and China reached US$522 billion during the first nine months of 2018, including US$340 billion imported from China and US$182 billion exported to China. But the value of goods that was carried by CR Express trains during the same period was merely around US$12 billion, equal to 2-3 percent of the total trade volume between China and EU-27. The CR Express program still has big potential to grow, considering the size of the market.

And key markets of CR Express trains should be in Europe, not in China. And the CR Express program is not a service available only to Chinese companies, but also for European companies.

For example, Slovakia exported about US$1.17 billion of goods to China and imported about US$2.5 billion of goods from China in the first three quarters of 2018. The majority of these exports and imports are transportation equipment and mechanical and electrical products. Meanwhile, Slovakia is one of the key areas of automotive manufacturing. These kinds of products are ideal goods for CR Express trains. Not further mentioning the potential market in the whole Central and Eastern Europe, Slovakia has been an ideal distribution center in the region.

Europe and China shall work together to develop high-end customers, who are willing to pay more freight charges to receive higher-standard services. An excellent logistics product, CR Express can cut delivery time and inventory as well as increase the efficiency of cash flow for the customers, especially for those time-to-market clients. So, European companies can use CR Express trains to develop more business opportunities with China, South Korea and Japan.

To make this happen, it requires more collaboration among all the countries, not only China, but also Europe, Russia and all the other countries along the Belt and Road. It also requires more collaboration among involved companies, business organizations, academic institutions and think tanks, because it is not only an issue for governments. Therefore, a more integrated collaboration approach between China and Europe shall be expected on the CR Express program, in terms of both product design and market exploration.

The author is a consultant for JSC Russian Railway Logistics and an executive for international affairs at China Communication and Transportation Association.