New Route from China to Russia

Anna Palluch 8.08.2018

Opening territories to international road transport

On May 29, during the solemn closure of the world-famous road experiment, the Russians announced a new agreement with China. Indeed, the agreement was signed as early as during the annual Summit of the Shanghai Cooperation Organization, on June 7th in Qingdao (China). The ministries of transport of both countries have signed an agreement on the abolition of barriers (currently carriers of both countries can carry out transport only within border areas) and open their territories for the international road transport.

‘The new agreement will be the driving force for Russian-Chinese road transport. Carriers from both countries will be able to freely deliver goods to any city in China and Russia. They will be able to carry out transports in accordance with the most important asset of road transport – door-to-door,’ said Alexei Dwojnych, general director of the Road Transport Agency, responsible for coordinating the Dalian-Novosibirsk project.

The new corridor will allow shortening the time of transport, saving costs and developing the door-to-door delivery service in road transport. In addition, the newest corridor is also a step forward in the development of the New Silk Road. Currently, the TIR system is valid in China at six road border crossings: two points on the border with Russia, one at the crossings connecting China with Kyrgyzstan, one for Kazakhstan and Mongolia, as well as for the internal customs office in the city of Dalian.

The accession of the People’s Republic of China to the TIR Convention gave foreign carriers the opportunity to deliver goods within China and the chance to implement transit. Until now, goods were delivered to border warehouses and then transported by Chinese carriers. Thereby, Chinese transport companies also gained access to foreign markets,‘ says Andrzej Iwanow-Kołakowski.

What are the consequences?

The functioning of the Russia-China transport corridor will give both parties a number of benefits. The initiative will primarily affect the economic development of the Siberian regions. Along the route with such a large cargo flow, the service sector, infrastructure, new transport hubs and logistics centres will be developed. And although this route has nothing to do with the sanctions and the crisis in Russia, one might be tempted to say that in this way the Russians also found a new direction for the supply of goods that the Federation is in dire need of. The new corridor will, therefore, allow for a minimum degree of independence from the European Union, but also weaken the impact of the sanctions.

‘This is a strategically brilliant move by Russia in response to the European embargos. The biggest winners will be China, making a great deal with its neighbour, and Russia, which will become independent from supplies, including food from Poland,’ claims Karolina Torenc, expert at Go Logis, a Polish forwarding company specializing in servicing Eastern markets.

For China, in turn, one of the most absorbing markets in the world has opened up. The Federation, which suffers from the lack of many food and industrial products, may close to the European production and open up to Chinese goods. For China, this is the American dream coming true. The new route for trucks can also affect the European transport sector. As Andrzej Iwanow-Kołakowski claims, for the Polish and European transport sector, it is first and foremost the possibility of delivering to and from China by road transport. This creates an alternative to other modes of transport and the opportunity to optimize logistics costs. 

‘Food products from China were delivered to Russia before May this year. Currently, the transport process has been optimized. As for the Polish products, they have always been largely demanded on the Russian market due to their quality. The coming months will allow us to see what effects the new route for trucks from China to Russia will bring to the Polish food producers,’ concludes the AsstrA-Associated Traffic AG expert.

Fully opening the borders for carriers of both countries will increase the turnover of Russia and China’s goods to the level of 100 billion dollars. During the best period, both countries managed to reach the number of 92 billion dollars. During the crisis – barely 68 billion. So far, it was feared that the growing PRC economy would destroy Russia, which is why Russia has delayed the creation of a free trade zone and the opening of new transport routes for such a long time. Now, however, the economic realities are slightly different and hence the need for new agreements.

The new truck route from China to Russia is an alternative to rail transport. According to experts from AsstrA-Associated Traffic AG, European companies have a good chance to use the new route.

We have been closely following the processes taking place in China and are prepared to take advantage of the new opportunities in transporting goods between China, CIS countries (including Russia) and other Asian countries. Currently, we want to extend the scope of our services to include road transport of certain types of cargo, which are prohibited in rail transport,’ says Andrzej Iwanow-Kołakowski.