China Railway Express Subsidy Model Based on Game Theory under “the Belt and Road” Initiative

Abstract

China Railway Express (CR Express) is an emerging freight transport mode between China and Europe, which provides a new option in addition to air transport and ocean shipping. At the initial stage of development, due to the higher freight costs compared to ocean shipping, the government subsidy provided for the China Railway Express operator plays an important role in the process of market cultivation. The original intention of the government subsidy was to promote the rapid and sustainable development of China Railway Express and the further subsidy scheme should encourage China Railway Express operators to act towards the expected goal of the local government. This research is devoted to modeling and solving the problem of optimal subsidy amount in the operation of China Railway Express. Firstly, a subsidy model is established with the consideration of different objectives of local government and China Railway Express operator, which are affected by the operational effort level of the China Railway Express operator, actual freight rate and the highest freight rate that the shipper is willing to pay. Then, the validity of the proposed model is analyzed in the case study of the China Railway Express line (Wuhan-Hamburg). The effects of different subsidy amounts on the social benefits of local government and profits of the China Railway Express operator are analyzed and the sensitivity analysis is carried on the operational effort level of China Railway Express operator and the highest freight rate that shipper is willing to pay. The analysis results show that the optimal subsidy amount is between 2000 and 2500 USD per Forty-Foot Equivalent Unit (FEU). Finally, suggestions are proposed according to the analysis results. These findings can provide useful references for promoting the sustainable development of China Railway Express.

Formation of Coordinated Alliance for China Railway Express Platforms Considering Logistics Cost Sharing

“…China Railway Express has advantages over shipping by sea, especially in delivery time. It takes about 35 days on average to ship cargo by sea from China to Europe, while transport by land using China Railway Express takes one-third less time ( 10 , 11 ). Nevertheless, there are many problems with China Railway Express: lines and cargoes are not integrated ( 4 ); some trains operate with low cargo, while others are challenged by insufficient capacity ( 12 ); and non-uniform subsidy policies result in undercutting and disorderly competition ( 13 ).…”

“…In addition, Seo et al ( 21 ) analyzed seven alternative routes for the export of laptop computers to Rotterdam, offering a method to select the route with the best transportation time and cost. Feng et al ( 11 ) found that China Railway Express can have larger benefits when transporting high-value cargoes. On the contrary, for low-value cargoes, government subsidies are necessitated for 30% of the transport costs ( 22 ).…”

Assessing the market niche of Eurasian rail freight in the belt and road era

“…To promote rail freight on the Belt and maintain normalised operation, operations of CR express under BRI are heavily subsidised (Bresharati et al , 2017; Qiwen and Xianliang, 2017; Jiang et al , 2018; Bucsky, 2019; Kundu and Sheu, 2019; Feng et al , 2020), varying from $US1,000 to 7,000 per FEU (Wang, 2015; Jiang et al , 2018).…”

“…In response to the emergence of Eurasian rail freight, most research studies on Eurasian rail freight and the BRI are policy studies or consultancy work (Davydenko et al , 2012; UNECE, 2012, 2017; Rastogi and Arvis, 2014; Ardunio, 2016; Galushko, 2016; UIC and Roland Berger, 2017; Jakóbowski et al , 2018; Vinokurov et al , 2018). In addition to this, a rapidly increasing number of scholarly contributions deal with the competitiveness of container block train operations between China and Europe like Rodemann and Templar (2014), Besharati et al (2017), Chen et al (2017), Seo et al (2017), Yang et al (2018a, b), Wiegmans and Janic (2019), Jiang et al (2018, 2019), Wen et al (2019), Bucsky (2019), Dunmore et al (2019), Lu et al (2019), Kundu and Shen (2019) or Feng et al (2020) as well as some more in the Chinese language as discussed in Liu et al (2018) and Lee et al (2018). Other less related works are Song et al (2011), Song and Na (2012), Tsuji (2013) or Kim et al (2020) focusing on multimodal freight transports via Trans-Siberian Railway (TSR) with a short sea leg from China, South Korea and/or Japan to Russian Far East.…”

Analyzing the Railway Network of the Belt and Road Initiative

“…Physical barriers occur due to technical reasons such as varied railway systems (NIIAT, 2017), varied gauges (He, 2016), or scarce rolling stocks (Zhang & Schramm, 2018); inadequate or complete lack of infrastructure at a given link or node; and inability of handling a certain capacity or certain objects. Nonphysical obstacles negatively affect the quality of services, e.g., improper handling of cargo, transparency level of procedures, and policies (NIIAT, 2017); inefficient BCP Procedure (ESCAP, 2018) (CAREC, 2018); inconsistent custom regulations (Yan & Filimonov, 2018) (Jakóbowski,et al,218); border security (Haiquan, 2017) (Islam, et al, 2013); and shipment disparity (Leijen, 2019) (Feng et al, 2020). Apart from that, sustainability aspects, e.g., discussed in Sayyadi & Awasthi, 2018, Sayyadi & Awasthi, 2020, or Dubey et al, 2015 are not considered in this study, although they are relevant to the BRI discussion.…”