The dominant role of agents on the New Silk Road: helpful or not?

Agents are active players in organising rail transport between China and Europe. They assist the Chinese platform companies in coordinating overseas operation, container storage, customs documentation, pre-carriage, on-carriage and even forwarding. However, what started as a competitive business is now a market dominated by a few powerful agents, taking over almost all operations outside China. This is the view from an anonymous blogger on RailFreight.cn. Below is a translated excerpt of this blog.

The agents popped up as in the first period of development of the China Europe Express, the stated-owned Chinese platform companies were unfamiliar with the laws, mode of rail operation, and suppliers in foreign countries. They played the role of coordinator, whose job was to organise and integrate rail transport, terminals and customs in the CIS and EU regions.

However, after a while the less competitive agents gradually disappeared, and only a few dominant players survived. With increasing operational capacity, higher service standards and more needs from multiple train platform companies, these agents achieved a stronger bargaining power and greater voice in Europe and the CIS than any of the Chinese platform companies.

Regressing knowledge

Although the agents did your jobs well, the negative effect was that platform companies in China became more and more disattached with the market. They became reluctant to approach the final suppliers directly and became incapable of dealing with the market on their own. The platform companies started relying more and more on the agent, and their knowledge of operations in the EU and CIS regions regressed. This left them with fewer options and less bargaining power.

Likely, final suppliers are reluctant or afraid to get in touch with the train platform companies directly for fear of losing the cooperation with the agent. Although connected by the agents, train platforms companies rarely cooperate.

Higher cost and loss of time

For train platform companies, dealing with European final suppliers directly could give them a concrete grasp of the resources in the EU. With the resources of the final supplier, the platform companies are able to more proactively and flexibly coordinate rail transport, terminals and customs, avoid congested ports and terminals, and ensure time-efficiency. In the long run, entering and maintaining a fully competitive market is more conducive for platform companies to control cost.

However, this is all easier said than done. Given the enormous advantage held by the agents, it may be difficult for platform companies to get an attractive price when they operate independently. Direct cooperation with the final suppliers also takes time. Platform companies may face increases in cost and workload, loss of time-efficiency and other unforeseen problems, just as the agents initially encountered. However, we should be confident that the platform companies will be able to overcome these difficulties, just as the agents once did.

It’s the first step

Becoming independent is only the first step that train platform companies should take, but lies at the basis of other business. Currently, there is not much space for expansion in international railway transportation itself. Rather, the last mile service and bonded warehousing are promising businesses and levers of revenue growth in the future.

Autonomous operation of terminals can expand the business from international railway transportation services to bonded warehouses, loading and unloading LCL services, trucking services and so on. Autonomous operation of customs can provide clients a simpler and more economical transit service, reducing two transits (from port to terminal and from terminal to the final destination) to a single transit (from the port to the final destination).

Autonomous operation of rail transport gives more possibilities to the platform companies. In order to gain stronger bargaining power, interoperability and more efficient use of the EU’s capacity, why don’t the various platform companies join forces and reclaim the name China-Europe Express that should belong to them?

Authored by an anonymous blogger from China

Author: Jialu Zhang

Jialu Zhang heads the China Desk of RailFreight.com

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