Market forces to boost freight trains' economic importance

China-Europe Railway Express freight service providers should leverage more market forces to further enhance industrial ecology in order to make the most out of rapidly growing China-Europe railway freight capacity and contribute more to the Chinese economy and global economic recovery and growth, according to a senior business executive.

Li Guanpeng, chairman of Sinotrans Ltd, a second-tier subsidiary and logistics platform for China Merchants Group, said the freight service has already been playing a very important role in the logistics and transportation operations in China's international trade, but the potential remains vast and needs more joint efforts from all stakeholders to fully tap it.

The company is a Beijing-based logistics giant with more than 1,100 domestic subsidiaries and 77 overseas facilities.

Inland logistics hubs for gathering and distribution, which are expected to help increase two-way China-Europe freight train trips, are essential for the healthy ecology of freight train services. But whether to build a logistics hub in a certain place should be fully based on market-oriented considerations, Li said.

Such considerations include the level of economic development and the industrial capability of a region, he said, adding successful operations of such hubs also rely on joint efforts of various stakeholders.

Sinotrans has established a fully self-operated China-Europe Railway Express freight service platform, with a national freight network running through all the key regions of the nation to extend to neighboring markets such as Japan, South Korea and the Association of Southeast Asian Nation, offering integrated multimodal logistics solutions.

The company is able to provide a better customer experience offering timely Customs clearance at Horgos/Alashankou in the Xinjiang Uygur autonomous region, Manzhouli/Ereenhot in the Inner Mongolia autonomous region and Suifen River in Heilongjiang province.

Most importantly, the company has forayed deep into construction and operations of domestic and overseas logistics assembly centers in order to balance cargo loading rates between westbound and eastbound journeys of China-Europe freight trains.

"The core of logistics is rooted in warehouse management and transport. Two-way freight train trips can largely reduce stocking pressure and improve supply chain efficiency, while also bringing down overall transport costs," Li said, adding that eastbound train trips now carry increasingly more imports to meet Chinese people's demand for a better life.

He said that although the freight train service has cost advantages compared with airfreight, it usually is more expensive than sea transport.

That means a region that can successfully become a logistics hub needs to be developed enough to group together medium-to-high-end product manufacturers and traders, he said.

Besides, although some provinces provide subsidies for freight train service operators, such subsidies are being scaled down and are expected to be abolished in the near future, he added.

Constant operational enhancement, precise understanding of customer needs and the ability to identify and select the most suitable customers will be crucial for freight train service providers to achieve healthy growth, Li said, adding that digitalization, big data-empowered operations and innovation in management of bills of lading are also important approaches to enhance efficiency, cut costs and improve customer experience.

China State Railway Group Co Ltd said goods transported by the freight trains also have become extensively diversified, from initially mainly notebook computers and electronics to more than 50,000 items such as auto parts and vehicles, chemicals, construction machinery, e-commerce parcels and medical devices.

The value of the goods increased from $8 billion in 2016 to some $56 billion in 2020.