Feasibility of commercial rail freight between Asia and Europe – One Belt One Road

Abstract

The purpose of this thesis is to examine the feasibility of rail freight in the transport of goods between China and Europe. Global trade has been growing strongly in the past decades and China has emerged as the factory of the world. China’s economic growth has been rapid and especially in the coastal metropolitan areas. The growth has been so fast, that despite substantial investments in infrastructure, congestion is still an issue. China launched an ambitious infrastructure plan in 2013 called “The One Belt, One Road Initiative, OBOR”. It’s been characterised as China’s most important foreign policy strategy. One of the core areas of the Initiative is improving rail networks connecting China to its trade partners. Investments in Eurasian rail routes have led to an explosion in trade activity along the corridors connecting China and Europe. Rail freight positions itself between time-consuming sea freight and costly air freight. Both qualitative and quantitative approach are utilised to obtain extensive understanding of the subject. Constraints of rail freight operations and their future development along the established routes are evaluated and cost calculations carried out to draw comparisons between the transport modes. PESTEL analysis is used to examine the business environment and find out the major risk factors of each mode. The findings of the thesis confirm that rail freight is a commercially viable alternative to air and sea in the context of trans-Eurasian freight trade from the shipper’s perspective when the right preconditions are met. Geographical location and type of cargo are found to have significant importance to rail freight’s economic feasibility. The main constraints of rail operations are economic and technological in nature. Trade imbalance and dependency on Chinese subsidies are the main economic inhibitors. Gauge mismatch and capacity issues at the main entry point to EU are perceived as the main technological challenges.