China has launched new freight train services to Vietnam from the cities of Chengdu and Chongqing, enabling Vietnam and ASEAN exporters to establish new trade opportunities with Western China.

The freight routes reduce the transportation time from an average of 20 days to between five and seven days. The increasing costs for air and sea cargo shipping have renewed interest in freight rail, which has helped stabilize global supply chains amid the COVID-19 pandemic and offered a lifeline for the distribution of goods, and anti-virus materials amid nationwide lockdowns.

China has launched several new freight train routes from its western cities of Chongqing (Guoyuan Port) and Chengdu to Vietnam’s capital Hanoi. Although there are regular freight trains from China to Vietnam, these are the first from China’s western regions.

On March 23, 2022, a freight train left the city of Chongqing for Hanoi – containing 43 containers of tires, printing papers, and engines, among other items, and worth US$3.9 million. On April 15, the first freight train from the city of Chengdu, also bound for Hanoi, began operations, transporting some 40 containers of aluminum profiles worth US$4.9 million.

Skyrocketing shipping rates and delays for cargo ships

The skyrocketing shipping rates and delays for cargo ships have companies scrambling for shipping alternatives. For exporters in Europe and China, the land links have spurred renewed interest in rail freight and present direct opportunities to enhance trade between China’s western regions with not only Vietnam but also ASEAN.

The Chongqing-Hanoi freight train route is part of the New International Land-Sea Trade Corridor (ILSTC), a trade and logistics passage developed by the western Chinese provinces of Chongqing, Guangxi, Guizhou, Gansu, Qinghai, Xinjiang, Yunnan, and Ningxia and Singapore.

With Chongqing as the transport hub, the ILSTC integrates rail, maritime, and road transportation – which connects southwestern China with the rest of the world via the Qinzhou Port in Guangxi. There, goods are shipped to ports across the world. Previously, goods from Chongqing to Vietnam took an average of 20 days to travel using water transport to Shanghai. With the new rail route, the transport time has been cut to between four and five days.

A freight train leaving Chengdu takes approximately seven days to reach Hanoi. The train crosses the Pingxiang Railway Port in Guangxi province before crossing the Vietnamese border.

A new rail network has opened to facilitate trade between Chengdu, China, and ASEAN. Under the Belt and Road Initiative (BRI), the city of Chengdu has gained prominence as an economic, logistics, and commercial hub in western China. The city also has China’s fourth-largest airport, the Chengdu Shuangliu International Airport, and the combined air-rail transportation channels provide advantages for businesses in terms of costs and time efficiency compared to the sea, air, and road transport.

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This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].

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ASEAN Briefing features business news, regulatory updates and extensive data on ASEAN free trade, double tax agreements and foreign direct investment laws in the region. Covering all ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)

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