Shanghai Cooperation Organisation (SCO) and Global South strategic cooperation

AndrewS said:

Major ports in Asia are almost completely automated these days.
That is the future for all ports.

A ship at anchor consumes almost no energy.

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the ships weren't anchored. They were just hanging outside the port for weeks. That requires a lot higher cost of operation and rental cost.

AndrewS said:

Ports don't have enough workers or space because there hasn't been the investment in capacity.
Railways face the same issue of lack of capacity, because the tracks can only physically accommodate a certain number of trains.

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That's why they are building more rail. The more rail freight capacity you have, the more you would be able to accommodate.

AndrewS said:

These transport cost comparisons are not representative, as we have to look at the costs pre-pandemic.

The cost of rail is pretty much stuck where it is. In 2017, Rail was about 3x more expensive than Sea and that is what we can expect once the port bottlenecks work themselves out, which we're already seeing below. More frequent train services from China to Europe won't really reduce the cost much, but it will decrease delivery times so that rail can be justified against air/sea.
View attachment 98613

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Aside from what I will discuss below, it's clear that shipping rates can vary quite a bit due to demand and capacity. Right now, the rates are down because we have a demand issue.

Part of the reason the rail rates are higher because there is just not as much capacity and people are willing to pay more for rail service. Let's say we have enough rail capacity for 40% of traffic from China to EU. The market will probably sort itself out on what the rail service premium is.

This chart above doesn't tell me the cost of shipping. It tells me what people are willing to pay. similarly, if the rates for rail was 3x shipping back in 2017. That could just mean there weren't enough rail capacity, so only the people that are willing to pay 3x get the more convenient rail service. Rail operators will gladly charge more for their service regardless of what the variable operating costs are. the transit countries will glad collect more transit fees if people are willing to pay that.

AndrewS said:

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Your typical commute does not start at Shanghai and end in Rotterdam. For example, a BYD Atto 3 built in Xi'an for a dealership in Frankfurt would first need to be carried by rail to Shanghai, queue up waiting for a container ship, get on a ship to Rotterdam and then wait to get unloaded and carried by trucks to Frankfurt. Going by rail, it can just get loaded to rail freight in Xi'an across Europe into Germany and a very short truck ride to Frankfurt. You don't have the extra transit to Shanghai and you don't have the long truck ride from Rotterdam to Frankfurt. All that adds to the shipping cost.

If we have more rail lines/capacity, transit time will be shorter (due to fewer delays) and the rates will be lower (due to more supply).

Going back to the original point, it makes sense for China to improve BRI for both rail and shipping services. Unfortunately, there is a huge blowback right now in Western countries to China operating ports. As such, China cannot improve port services in Western countries. That's both a good and a bad. It is bad, because China cannot make its shipping service even more efficient. It is good, because there is no investment into port/shipping between America and Europe. As such, improvements along China-EU railway should make Chinese supply chain and industrial production more appealing to European consumer/business vs American production/supply chain.

beautiful, this is a good tweet of the current state of Kunming to ASEAN train connections and which future projects are needed to fully connect everything.

Keep in mind that China is also building major ports in Guangxi that will connect to many of these same countries + Indonesia

@tphuang
rail shipping to Europe is subsidized by the government

tphuang said:

If you look at the map, Chabahar is not that far from Gwadar, so they compete against each other. There is not enough traffic to support both. Going through Iran will also reduce the need for that Middle East to Pakistani ports. I don't see Dubai by rail through Iran to China being faster than shipping to Gwadar/Karachi to China. It's not in China's interest to support major infrastructure projects in Iran. CKU -> Afghanistan -> Pakistan works pretty well. China directly to Pakistan is operational. It is in China's interest to continue investing in Pakistan.

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I wouldn't use Chabahar port. But the rail infrastructure across the middle East to Turkey and Pakistan is already there. Building the tracks across the Himalayas will be much harder and Pakistan sadly doesn't have a very effective state apparatus. It's in China's interest to continue investing into Pakistan, but it's not in China's interest to bet everything on Pakistan. There needs to be an alternative to get some competition. Betting on a trans Afghanistan railway is even riskier. Yes, it would be wonderful if it worked, but is it realistic?

How do you envision middle Eastern states like the UAE to use gwadar? Their major exports are oil, which they'll send to Shanghai as there's no gwadar to China oil pipeline. Their imports from China won't come via Pakistan because no matter what the capacity of gwadar is, there's not enough rail and road infrastructure from Tibet to gwadar.

It would be great if Pakistan was Bangladesh, but they're not

tphuang said:

the ships weren't anchored. They were just hanging outside the port for weeks. That requires a lot higher cost of operation and rental cost.

Click to expand...

We were referring to energy costs. Yes, there are rental/lease costs and operating costs.
But the energy cost is overwhelmingly accounted for by the ship's engines.

tphuang said:

That's why they are building more rail. The more rail freight capacity you have, the more you would be able to accommodate.

Aside from what I will discuss below, it's clear that shipping rates can vary quite a bit due to demand and capacity. Right now, the rates are down because we have a demand issue.

Part of the reason the rail rates are higher because there is just not as much capacity and people are willing to pay more for rail service. Let's say we have enough rail capacity for 40% of traffic from China to EU. The market will probably sort itself out on what the rail service premium is.

This chart above doesn't tell me the cost of shipping. It tells me what people are willing to pay. similarly, if the rates for rail was 3x shipping back in 2017. That could just mean there weren't enough rail capacity, so only the people that are willing to pay 3x get the more convenient rail service. Rail operators will gladly charge more for their service regardless of what the variable operating costs are. the transit countries will glad collect more transit fees if people are willing to pay that.

Click to expand...

The bottom chart is actually the cost of each mode of transport (rail, ship, air) because back in 2017 there was ample capacity in all 3 modes and therefore a "reasonable" profit level applied for all modes.

If you look at the 2006->2017 difference for rail, we had a massive increase in the number of trains running from China-Europe. This resulted in some cost decreases to approx $5000 per container. But we can also see a huge decrease in rail shipment time, which made rail an acceptable alternative. However, the decrease in shipping time has plateaued.

And in terms of actual cost, look at the Chinese domestic freight rate for a container, which I last saw as 1.98 RMB/km. This is about as efficient as you can get.

Even if you used this lower rate for the entire Xi'An-Poland route - it still comes to a minimum of $3000 per container. So the pre-pandemic $5000 for a container looks like the lowest realistic cost.

In comparison, the cost of a seaborne container was stable at $2000 pre-pandemic. So you've still got a minimum of another $2000 for costs at the endpoints for shipping. Also bear in mind that the vast majority of consumer demand and trade comes from Western Europe, not Eastern Europe.

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I do think there is a case for a new dedicated China-Europe freight line, but ideally it would be standard gauge. But my guess is that costs might fall to $4000 for a container and a few more days shaved off the journey time. This is still more expensive than using a ship however.

tphuang said:

Your typical commute does not start at Shanghai and end in Rotterdam. For example, a BYD Atto 3 built in Xi'an for a dealership in Frankfurt would first need to be carried by rail to Shanghai, queue up waiting for a container ship, get on a ship to Rotterdam and then wait to get unloaded and carried by trucks to Frankfurt. Going by rail, it can just get loaded to rail freight in Xi'an across Europe into Germany and a very short truck ride to Frankfurt. You don't have the extra transit to Shanghai and you don't have the long truck ride from Rotterdam to Frankfurt. All that adds to the shipping cost.

If we have more rail lines/capacity, transit time will be shorter (due to fewer delays) and the rates will be lower (due to more supply).

Going back to the original point, it makes sense for China to improve BRI for both rail and shipping services. Unfortunately, there is a huge blowback right now in Western countries to China operating ports. As such, China cannot improve port services in Western countries. That's both a good and a bad. It is bad, because China cannot make its shipping service even more efficient. It is good, because there is no investment into port/shipping between America and Europe. As such, improvements along China-EU railway should make Chinese supply chain and industrial production more appealing to European consumer/business vs American production/supply chain.

Click to expand...

Minm said:

I wouldn't use Chabahar port. But the rail infrastructure across the middle East to Turkey and Pakistan is already there. Building the tracks across the Himalayas will be much harder and Pakistan sadly doesn't have a very effective state apparatus. It's in China's interest to continue investing into Pakistan, but it's not in China's interest to bet everything on Pakistan. There needs to be an alternative to get some competition. Betting on a trans Afghanistan railway is even riskier. Yes, it would be wonderful if it worked, but is it realistic?

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Well, they already have a trial run railway into Afghanistan. Any further railway through Afghanistan is something being worked on between Afghanistan and it's neighbors.

Minm said:

How do you envision middle Eastern states like the UAE to use gwadar? Their major exports are oil, which they'll send to Shanghai as there's no gwadar to China oil pipeline. Their imports from China won't come via Pakistan because no matter what the capacity of gwadar is, there's not enough rail and road infrastructure from Tibet to gwadar.

It would be great if Pakistan was Bangladesh, but they're not

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There are petroleum products that are not oil/NG. You can actually transport oil by rail. That is something they can do during a conflict if Malacca strait gets choked. There is a lot of export to middle east that they can send through rail. Gwadar itself cannot solely depend on China traffic, so it would be a good thing if it's thriving with both china traffic and other traffic. CPEC itself needs a lot of patience to get more of the projects finished.

AndrewS said:

We were referring to energy costs. Yes, there are rental/lease costs and operating costs.
But the energy cost is overwhelmingly accounted for by the ship's engines.

The bottom chart is actually the cost of each mode of transport (rail, ship, air) because back in 2017 there was ample capacity in all 3 modes and therefore a "reasonable" profit level applied for all modes.

If you look at the 2006->2017 difference for rail, we had a massive increase in the number of trains running from China-Europe. This resulted in some cost decreases to approx $5000 per container. But we can also see a huge decrease in rail shipment time, which made rail an acceptable alternative. However, the decrease in shipping time has plateaued.

And in terms of actual cost, look at the Chinese domestic freight rate for a container, which I last saw as 1.98 RMB/km. This is about as efficient as you can get.

Even if you used this lower rate for the entire Xi'An-Poland route - it still comes to a minimum of $3000 per container. So the pre-pandemic $5000 for a container looks like the lowest realistic cost.

In comparison, the cost of a seaborne container was stable at $2000 pre-pandemic. So you've still got a minimum of another $2000 for costs at the endpoints for shipping. Also bear in mind that the vast majority of consumer demand and trade comes from Western Europe, not Eastern Europe.

I do think there is a case for a new dedicated China-Europe freight line, but ideally it would be standard gauge. But my guess is that costs might fall to $4000 for a container and a few more days shaved off the journey time. This is still more expensive than using a ship however.

Click to expand...

hmm, without further evidence, I don't see how I can judge that chart is accurate or assess "cost" means cost for the railway operator vs the people that use it. Cost can mean both.

The railway operation between Europe-China has continued to improve in infrastructure over the past few years. There will be further reduction in time once some of these new projects get finished. I don't expect rail to get as cheap as shipping, but I do expect it to get closer to shipping with these projects. For example, countries won't be able to charge as high transit fees if they have to compete with other lines. The operations in the middle line through Caspian Sea can get a lot more efficient. The operation through Caucasus has improved a lot in the past few years and has room for more improvement. There are still some wins to be had along the way as long as there are more rail lines are built along the way.

The other thing is that as countries move toward reducing emissions, there could possibly be increased push for these container ships to use more clean and more expensive fuel.

More about the usage of e-currency for cross border transactions. The important point here is that non-Western countries are nervous about getting cut off by Western financial system, so have an incentive to explore a more efficient system that is not controlled by the West. Also, it needs to be mentioned that Alipay/Wechat pay should be more efficient and easy to use than this. So, I see e-Yuan as transactions between large businesses and governments, whereas Alipay as your regular people driven e-commerce traffic.

Interesting point there about other countries like Singapore also looking to participate in this since they can experience efficiency and savings from going through digital channel.

I find that more promising than something like this which seems to be just driven by the Russians.

getready said:

Geopolitics is always a complex game. And there's probably abit of jostling for influence in CA between China and Russia. I doubt however China will invest alot of time and effort to go against Russia in this region. They know who the real enemy, they know where the ultimate great power game is at and do not want to get distracted.

Heck China has first hand experience to see how US were trying to Feck up China from early 2000s but later lose focus and got distracted in a disaster campaign elsewhere.. The Hainan spy plane incident could have blew up and accelerated US move to contain China. But fortuitously for China 9/11 happened. US war machine got distracted and pulled away from China containment to instead a long useless expensive war on terror in another part of the globe.

then that valuable window allowed China to develop rapidly so that it became much harder for US to contain China now and in future that window most likely will even totally shut close.

So imo, China know this, and do not wish to get distracted with influence jostle in CA especially at sensitive time now for the Russia, China and US triangle relationship. China not gonna lose the big pie for some food scraps.

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As I see it, while Russia (more specifically, the currently majority faction) is broadly an ally, there are dangerous elements within Russian society that believe in westernism. They think that Russians naturally belong with the Europeans, that they will be accepted if only they kowtow deep enough.

And they advocate for self sabotaging ties to China under the guise of "Russian nationalism". But in reality, it is western/white nationalism.

It is absolutely not a mistake of China to devote resources into stamping out these people, because they, the likes of Gorbachev, are the ones holding Russia back from reaching its potential, the ones that sold out Russians to the west to begin with.

Jostling the Kremlin around a bit, making them reorganise stuff and severing ties to the west, it is all helping Russia later.

In a way, the de-westernization plan for Russia has already been accepted and begun it's execution. There is no stepping back to the west now for Russia.

China's end goal is to spread the worker revolution further. So the SCO must be gradually tightened ideologically. If a socialist leadership can gradually come into power in Russia, communism will revive like in the cold war days, but this time with an economic model and industry base superior to the west.

A successfully modernized socialist Russia creates a domino effect, because it shows that what China did was no fluke. If even a huge stagnating country like Russia can do it, anyone can achieve it just by adopting the same principles.

Until that day, Russia must be ideologically prepared by the ablation of all western friendly elements while becoming more and more tightly intertwined with China's military network and economic systems.

Biscuits said:

As I see it, while Russia (more specifically, the currently majority faction) is broadly an ally, there are dangerous elements within Russian society that believe in westernism. They think that Russians naturally belong with the Europeans, that they will be accepted if only they kowtow deep enough.

And they advocate for self sabotaging ties to China under the guise of "Russian nationalism". But in reality, it is western/white nationalism.

It is absolutely not a mistake of China to devote resources into stamping out these people, because they, the likes of Gorbachev, are the ones holding Russia back from reaching its potential, the ones that sold out Russians to the west to begin with.

Jostling the Kremlin around a bit, making them reorganise stuff and severing ties to the west, it is all helping Russia later.

In a way, the de-westernization plan for Russia has already been accepted and begun it's execution. There is no stepping back to the west now for Russia.

China's end goal is to spread the worker revolution further. So the SCO must be gradually tightened ideologically. If a socialist leadership can gradually come into power in Russia, communism will revive like in the cold war days, but this time with an economic model and industry base superior to the west.

A successfully modernized socialist Russia creates a domino effect, because it shows that what China did was no fluke. If even a huge stagnating country like Russia can do it, anyone can achieve it just by adopting the same principles.

Until that day, Russia must be ideologically prepared by the ablation of all western friendly elements while becoming more and more tightly intertwined with China's military network and economic systems.

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Ooh man a rebirth of a socialist block with a Russia that does socialism with Russian characteristics. Be still my beating heart.

This is Chinese soft power, friendship with global south and SCO in action.
From what I can see here, more no than yes in holding a debate over Xinjiang, including no votes from Kazakhstan and Uzbekistan. I'm a little surprised by the yes vote from Somalia. Not sure what happened there.