Access to the World’s “Obstructed” Inland Region
China-Singapore (Chongqing) strategic pilot interconnection project has been officially implemented for one year, during which the two countries have cooperated in the four major fields of finance, aviation, transport logistics, and ICT. The project also promotes formulation of the innovative “11+7” policies, facilitates access from the “obstructed” inland region of Chongqing to other parts of the world for financing, logistics, and information, and minimizes the previously high costs having restrict local development.
47 innovative policies ranking first among the inland regions of China
In this May, Vibrant Group Limited (formerly known as Freight Links Express Holdings Limited) of Singapore signed an agreement with China International Capital Corporation Limited, and came to Chongqing for joint issuing the Panda bond worth of RMB one billion, the first foreign enterprise having issued its bond in China’s inland regions, which marked the official access of the city to the transnational financing channel.
The China-Singapore (Chongqing) project has created more than this No. 1 ranking, including the first Eurasian combined modes of transport via railway, air, highway, and river route, as well as the first access to the international land-route passageway from China’s inlands to ASEAN countries.
These excellent rankings are attributed to the innovative “11+7” policies formulated for the four major sectors of finance, aviation, transport logistics, and ICT, aimed at the inland development. At present, specifically, relevant ministerial administrations have promulgated some 40 of such policies, to smooth the financing, logistic interconnection, and information exchange.
For instance, the People's Bank of China, China Banking Regulatory Commission and other competent authorities support trial cross-border RMB business; both sides decide to set up respective financial businesses; Chinese enterprises are listed in Singapore; joint exploration of international, inter-modal transport; Chongqing airport’s grant to Singaporean partners to enjoy “The Fifth Freedom of the Air”; and joint submarine high-speed communication optical cabling.
According to Han Baochang, director of China-Singapore (Chongqing) Project Management Bureau, adds that, the project sets no geographical boundary and pioneers the model of “Chongqing + home and abroad” and “tangible + intangible”. The strategic consideration is to not only foster Chongqing’s development, but expand it, enhance the replicable system and mechanism, and boost the national Belt and Road” Initiative.
Multiply combined transport minimizes logistic costs
“The excessive logistic and financing costs are the most critical barrier in the inland region of China,” once remarked Chan Chun Sing, director of Singaporean Prime Minister's Office, and whether we could manage to minimize both of the costs would leverage fundamentally the possibility of bilateral cooperation.
Now at Tuanjie Village, Chongqing, the starting station of “Chongqing-Xinjiang-Europe” International Railway is a special map for the route traversing the Eurasian continent to link up the European transport hub Duisburg in Germany. The has its center labeled a circle, where Chongqing is located, and include other major Asian cities as well, such as Singapore, Hong Kong, Tokyo, and Seoul.
This is the new goal of Chongqing, upgraded to the “Asia-Xinjiang-Europe” International Railway, depending on the China-Singapore cooperative project, from the previous “Chongqing-Xinjiang-Europe” International Railway, thus combing multiple modes of transport ranging from railway, airway, highway to waterway between Europe and Asia.
“The logistic cost in the inland regions takes up 16% of local GDP, 8% higher than the coastal territory, and 4% higher than the developed countries,” admitted Li Muyuan, secretary-general of the Integrated Transport Federation of China Communications and Transportation Association. Multiple modes of transport must be developed to minimize the costs as a singular mode is not accessible enough and most likely to result in continuously high logistic costs.
Last month a batch of high-end consumer goods was loaded to the Chongqing-Xinjiang-Europe International Railway from Duisburg of Germany, arrived in Chongqing after 12 days, and was directly transited by air freight from the bonded zone to Singapore within 5 hours. That was the first attempt of the railway-airway integral goods delivery, which indicates that the railway mode cost, though it takes 12 days more than the airway, only amounts to 1/5 of the air freight.
According to Yang Liqiong, deputy director of the Chongqing Economy and Informatization Commission, and director of the Logistics Office, in the future it will be possible to transport European goods to Chongqing via the Chongqing-Xinjiang-Europe International Railway and then, via an airway transit, send them to any Asian cities within a flight radius of four hours. As a result, a “4-hour economic circle” will be shaped with Chongqing placed in the center, for significant reduction of logistic costs.
The Chongqing-Europe railway-highway combination is also open for transport. Goods are delivered from Chongqing to Pingxiang port of Guangxi Province, China via highway transport and then are shipped to Hanoi, Vietnam. Thanks to such an inter-mode, the freight time frame is some 20 days shorter than the average sea route shipping, at just 1/5 of the air freight costs.
In the future, the two partners will also open up two fastest passageways to Southeast Asian countries: the middle Chongqing-Mohan (Yunnan)-Singapore route, and the western Chongqing-Ruili (Yunnan)-Yangon (Myanmar) route.
Diversified financing channels free from cost constraints
Recently, via the China (Chongqing)-Singapore project, Chongqing Logistic City has issued a 500m-USD bond of Lion City in Singapore, and thus a new logistic warehouse has been designed and constructed.
Manager of Chongqing Logistic City recalls, “In the past, a bond issue outside China required an entity establishment in a foreign country. After the capital flow-back, setup of a separate entity in inland is still needed, with complicated procedures. Nowadays, Chinese enterprises are entitled to issue credit bonds in Singapore and the capital such raised is allowed to flow back to China directly. The time frame is shortened from previous one year to present three months and the interest rate is lower than the domestic financing and traditional overseas issued bonds.”
“Excessive enterprise financing costs were caused by the singular financing channel”, explains SGX president Lawrence Wong. In order to reduce the financing cost, an enterprise’s financing channel must be broadened and the sources of capital diversified.
Bilateral transnational financing channels have been gradually established. Chinese enterprises may issue their bonds or apply loans up to USD 3.22 billion; the two partners have also jointly set up an equity investment fund broadening “Belt and Road” Initiative; CITIC Bank has an international business center in Chongqing, which will bring some hundreds of billion RMB as a financial settlement volume annually.
The two sides will also jointly set up a financial service network for small and medium-sized enterprises, such as 11 village and town level joint banking outlets between Bank of China and Singapore Fullerton, for diverse products and services to SMEs.
Statistics shows that the average cost of financing projects in place is 0.6% less than Chongqing’s 1-3 year average loan interest rate, from which the enterprises involved can save up to around RMB 130 million. In the future, alongside the sustained preferential policy of dividend allocation, the financing cost will be continuously reduced.