The Chongqing-Xinjiang-Europe International Railway

February 20, 2012 Posted by China Briefing Reading Time: 4 minutes

By Julia Gu

Feb. 20 – Since separating from Southwest China’s Sichuan Province in 1997, the municipality of Chongqing has emerged as one of China’s fastest developing regions and is regarded by Beijing as the epicenter of the country’s “Go West” campaign.

Last year, the province-sized city with a population of 28.85 million attracted US$11 billion in foreign direct investment and its GDP grew 16.5 percent year-on-year to RMB920 billion (US$145 billion). According to the Chongqing municipal government, the city expects 13.5 percent GDP growth this year.

Chongqing’s officials attribute this tremendous economic growth largely to the city’s continually improving infrastructure, particularly its transport system.

Even just a few years ago, if trading companies in Chongqing wanted to send goods to Europe, they would have to first go through a coastal port city such as Shanghai or Guangzhou to then be shipped through the Straits of Malacca – which was both time-consuming and expensive. In addition, some sections of the shipping route warranted serious safety concerns.

Inspired by the “New Silk Road” (also known as the New Eurasian Land Bridge or the Second Eurasian Continental Bridge) that connects Lianyungang Port in Jiangsu Province with Rotterdam in the Netherlands and Antwerp in Belgium, Chongqing’s government leaders in July 2008 brought about a plan to make use of the continental railway network to open up a trade channel for the city.

This ambitious plan manifested itself in the form of the Chongqing-Xinjiang-Europe international railway, which officially came online on July 1, 2011. The new route starts from Chongqing and arrives in Duisburg, Germany – covering 11,179 kilometers in 16 days. The domestic section of the railway passes the inland cities of Xi’an, Lanzhou and Urumqi, and enters Kazakhstan in Central Asia from the Alataw Pass (Alashan Kou) in the Börtala Mongol Autonomous Prefecture of the Xinjiang Uyghur Autonomous Region. The international section of the railway travels through Kazakhstan, Russia, Belarus and Poland before reaching Germany.

Currently, the train leaves Chongqing for Duisburg once a month, but train services may be increased to once per day in the future as the city’s exports to Europe increase, according to Chongqing’s Mayor Huang Qifan.

The route will be used to link Europe to South China’s manufacturing hub and Southwest China’s industrial belt, according to municipal authorities. In June 2011, a rail route connecting Chongqing and Yantian Port in Shenzhen began operations.

The transcontinental railway will also boost trade between Southeast Asia and Europe, as rail links presently exits connecting Chongqing with Yunnan Province and the Guangxi Zhuang Autonomous Region in the country’s southwest, said Cai Jin, vice president of the China Logistics and Purchasing Association.

The municipal government has said that the Chongqing-Xinjiang-Europe railway will make the city an international logistics junction by connecting the Yangtze River Delta to Europe. Meanwhile, to the southwest, Chongqing is trying to open up another trade route which passes such inland cities as Guiyang, Kunming, Dali and Ruili before crossing the border to Mandalay in Myanmar and then on towards both the Indian Ocean and the Middle East via the port of Sittwe on the Bay of Bengal.

Experts say that the new Chongqing-Xinjiang-Europe rail route will function as an international trade passage that may benefit as many as 40 countries across the Asian and European continents in the coming years, helping to further amalgamate the emerging markets of the East and the developed markets of the West. With these improvements in Chongqing’s transport system, manufacturing businesses have become more and more attracted to the city.

In 2010, Taiwanese computer giant Acer announced that in the coming years, the firm will invest US$150 million in the city to build its largest global IT manufacturing center. Last year, Acer made another announcement that the company also has invested US$4 million to set up a new global R&D center there, Acer Intellectual (Chongqing) Co. Ltd.

Already housing leading IT businesses including Hewlett-Packard, Foxconn and Acer, Chongqing welcomed Asus, another Taiwanese computer firm, in April last year with its US$150 million investment aimed at building a computer manufacturing base.

Aside from IT firms, automobile manufacturers are also excited by the attractive logistic options and economic potential on offer in Chongqing. In September last year, CEO of Ford China Joe Hinrichs announced that the U.S.-based auto giant plans to build seven factories across the Asia-Pacific region and Africa, including four in China. Hinrichs has confirmed that Ford has chosen to invest in three factories in Chongqing, all of which will start operations by the end of 2013.

Last year, three international companies, ThyssenKrupp, Kautex Textron and Magna Cosma, revealed plans to establish production facilities in Chongqing. ThyssenKrupp is Germany’s largest steelmaker and one of the world’s top elevator manufacturers. It is establishing an assembly shop, painting workshop and quality-control laboratory, while Kautex Textron plans to build a factory that produces auto engine fuel supply systems and other key auto parts. In 2011, Magna Cosma, a subsidiary of North America’s largest automobile parts manufacturer (Canada’s Magna Group) established a manufacturing facility that focuses on the production of auto parts and electromechanical industrial products. According to a city government report, the three multinational firms will mainly provide auto parts for Volkswagen, Chang’an Ford Auto, Chang’an Auto and Volvo Chengdu.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information on establishing or conducting business in Chongqing, please visit the firm’s web site or contact them at china@dezshira.com.

Related Reading
Doing Business in China
The successor to our “China Business Bible,” this new, completely updated 156-page book covers all aspects of business in China, from the different types of legal structure, the full tax implications, human resources and labor issues, including cost analysis, intellectual property matters, a complete overview of China’s free trade and development zones, and on-going compliance issues such as tax filings and license renewals, audit and closure issues.

Business Guide to West China
172 pages. This book is a detailed overview of West China, including the provinces of Gansu, Guizhou, Ningxia, Shaanxi, Sichuan, Tibet, Xinjiang and Yunnan, and includes detailed introductions to the key cities of Chengu, Chongqing, Kashgar, Kunming, Lanzhou, Lhasa, Guiyang, Urumqi, Xining and Yinchuan.