The Chongqing Connectivity Initiative: From Transition to Take-off?
By Tai Wei Lim

The Chongqing Connectivity Initiative: From Transition to Take-off?

Sep. 25, 2018  |     |  0 comments

In April 2018, it was revealed through the government-linked media that Singapore has invested SGD 27 billion into the Chongqing Connectivity Initiative (CCI) since the project broke ground in 2015. There is a long-term orientation for the project. Like the Deng Xiaoping-era Special Economic Zones (SEZs) at the start of the Chinese economic reform period from the late 1970s and early 1980s, the CCI is also meant to be a demonstrative showcase project that can be emulated by other inland cities in western China.

The four priority sectors for the CCI are financial services, aviation, transportation and logistics, as well as information and communications technology (ICT). The grand idea of the CCI is to link Southeast Asia with China and vice versa. The CCI’s Financial Services Pillar’s overseas cross-boundary financing agreements of up to RMB 25.3 billion (approximately SGD 5.2 billion) are in place giving Chongqing’s companies funding options and international exposure.

Then Minister in the Prime Minister’s Office Chan Chun Sing (now promoted to the Minister of Trade and Industry) visited China from April 12-14, 2018. He met with Communist Party Secretary of Chongqing Chen Min Er and the Mayor of Chongqing Tang Liangzhi to strengthen bilateral economic relations. Chen is a senior member of the leadership in China and is basically in charge of human resources and personnel matters in the Chinese Communist Party. Chan led a delegation of 30 Singapore-based representatives from various sectors to the meetings. They were keen to learn more about developments on the CCI so that they could position their companies for joint projects, especially in the context of incremental economic growth in the interior of western China. While the first wave of enterprises involved in the CCI that had received high profile press coverage were mainly Singaporean government-linked companies (GLCs) like Capitaland, the subsequent waves may consist of Small and Medium Sized Enterprises (SMEs). SMEs are keen to find their niche areas in Chongqing, including small firms like Maxicash that can provide micro-financing possibilities.

Chan is also especially keen to have the Singapore-based SMEs penetrate western China, a region with comparatively underdeveloped infrastructure and business environment. Here, Singaporean SMEs would face less pre-existing competition when compared to the eastern coastal economic regions which have been crowded out by Hong Kong and Taiwanese enterprises. Moreover, the southeastern coastal cities developed from the era of Deng Xiaoping’s market economic reforms starting from the late 1970s. They are therefore comparatively more developed than western China. The underdeveloped western Chinese region affords more opportunities for Singaporean companies eager to offer their products and services.

Meanwhile, connectivity between Chongqing and Singapore has been enhanced. Flights between Singapore and Chongqing was increased from five to 14 flight-frequency weekly. For example, Singapore Airlines has increased the frequency of its flights to Chongqing. But more importantly, the CCI-Southern Transport Corridor (CCI-STC) inked in 2017 will connect Chongqing to Qinzhou (Beibu Gulf in Guangxi province) in the south by rail and from Qinzhou to Singapore through the maritime route. This effectively mean that the maritime and overland routes of the Belt and Road Initiative will be fully connected. There can be unity of two routes and the potential of interoperability of land-based and maritime transportation and logistics. Even in terms of internal waterways, the CCI-STC is faster than pre-existing routes. The CCI-STC will cut down the logistics delivery time between Chongqing and Singapore to approximately 7 days or 33.3 percent of existing route, which will save money for manufacturers. Other neighboring provinces such as Guangxi and Gansu may join in to take advantage of the CCI-STC.

The very fact that Singaporean agricultural enterprises are providing high tech advisory and services indicate the value-addedness of these industries since Singapore itself has a negligible farming industry or agricultural sector.

The Beibu-Gulf-PSA International Container Terminal is a lodestone in Chongqing-Southeast Asia maritime connectivity. Bulky items such as vehicle accessories, heavy machinery and petrochemical items manufactured in western China and in cities like Chengdu and Chongqing can go through such terminals to be sent to Singapore and Southeast Asia via the CCI-STC and Qinzhou port. Bulky items are still easier to transport via the maritime route than overland. Ships can carry heavier loads more effectively than trains. The CCI-STC also allows for much faster transportation than conventional routes through the Yangtze River to Shanghai port, reducing goods’ transit duration in China from more than 14 days to just two days.

The CCI-STC has more than 10 western and southern provinces in participation. A joint venture established in 2015 by the Chinese Beibu Gulf Port Group, the Singaporean port operator PSA International, and the Singaporean shipping company Pacific International Lines (PIL) manages 4 of the 6 berths at the port and handled 430,000 twenty-foot equivalent units (TEUs) of cargo in 2017. Its yearly handling capacity is three million TEUs.

Agricultural products from Guangxi and Guizhou and industrial products from Chengdu and Chongqing are moved to Qinzhou for export overseas. A rail freight system started in September 2017 runs three weekly train services to and from Chengdu to Qinzhou alongside four southbound trains and two northbound ones linking Chongqing and Qinzhou. More train services are planned in the pipeline with experimental routes from Lanzhou (Gansu) and Kunming (Yunnan). As of December 2017, three train services ply the Chongqing-Guangxi route weekly and this will be regularized into a daily service.

PSA and PIL shipping firm are targeting overland-maritime connectivity, improving Singapore’s transhipment hub in the process, improving commercial exchanges between western interior China and Southeast Asia. The CCI-STC plan to build a mega trading platform in western China is supported by the authorities in Guangxi, Guizhou and Gansu provinces. It is also supported by China’s Ministry of Commerce (MOFCOM), the Chongqing local authorities and the Singapore government. In other words, the CCI-STC enjoys support from all echelons of the governing structures — something crucial since there are both centripetal and centrifugal forces working away and with the central government, something common in all large states.

Enhanced connectivity leads to transboundary trade which can create demand for services. Moneymax Financial Services and AP Oil International have entered into Chongqing offering financial services. WiseNet Asia is in Chongqing providing HR recruitment services. The Singaporean high-tech agricultural start-up SmartAHC is providing agricultural solutions in Chongqing. The involvement of SMEs is crucial, since they are Singapore’s largest group of employers and provide value-added to the local business scene. The very fact that Singaporean agricultural enterprises are providing high tech advisory and services indicate the value-addedness of these industries since Singapore itself has a negligible farming industry or agricultural sector. SMEs are also nimbler and can fill in the small economic niches of the Chongqing and greater Chongqing economies when more areas are integrated into the CCI-STC.

International Enterprise Singapore, the Singapore Business Federation, and the Singapore Chinese Chamber of Commerce & Industry are working with Singaporean companies (MNCs and SMEs) to have some platforms in Chongqing to help the Singaporean businesses there. These are pro-business organizations that represent the interests of Singaporean businesses and engage in pro-business advocacy with the Singaporean authorities. Service industries such as healthcare, tourism, elder care, and F&B may be potential industries for Singaporean investments. As Chinese labor costs escalate and as Singapore draws more experience from its service industries, having transitioned from a manufacturing to a service-based economy, China can tap into the Singaporean service industry’s experiences to absorb more technological and management knowhow from the latter.

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