Rerouting the New Silk Road
China is developing new rail routes to Europe that bypass Russia, with construction beginning on a multi-billion-dollar railway through Kyrgyzstan and Uzbekistan. This strategic shift comes as Russia's invasion of Ukraine has disrupted traditional northern rail routes and as Houthi attacks in the Red Sea have highlighted maritime vulnerabilities. The new "Middle Corridor" represents China's attempt to secure and diversify its export channels to Europe—especially important as President Trump's escalating trade war threatens Chinese access to American markets.
Though currently 35% more expensive than Russian routes, the Middle Corridor has seen freight volume more than double to 55,000 TEUs (twenty-foot-equivalent units, the standard measure of container size) between 2021-2024, with journey times reduced from 38-53 days to 18-23 days. Both China and the EU are investing heavily in this infrastructure despite their political differences.
Forecast
Base Case (Moderate Confidence): Continued steady growth of Middle Corridor traffic reaching 100,000 TEUs by 2026, particularly if tensions with Russia remain high and American trade restrictions intensify. Transport costs likely to decrease by 10-15% as infrastructure improves.
Upside Scenario (Low Confidence): Accelerated development through coordinated EU-China investment could reduce journey times to 14-16 days by 2027, making rail competitive with sea for high-value goods. European investment in Central Asian resources could generate more balanced east-west flows.
Downside Scenario (Moderate Confidence): Persistent bottlenecks and political complications could limit Middle Corridor growth, particularly if China-Russia relations require China to maintain significant investment in northern routes or if Turkey-China relations deteriorate over Uyghur issues.
Monday, April 7, 2025
