Chinese Economy Turns to Rail Corridors Amid Global Shipping Shocks

As the US-Israel war on Iran stretches past its 80th day and continues to upend global naval shipping, a growing number of Chinese investors in Iran are turning to railway and overland transport routes to keep their businesses afloat.

While disruptions to ship traffic in the Strait of Hormuz show little sign of abating, many are hoping that transcontinental freight links across Eurasia could become a more reliable option.

Chinese trader Han Yun has spent recent weeks travelling long distances between the province of Xinjiang and cities of Xian and Yiwua journey spanning thousands of kilometres across China’s vast interior. He has been racing to secure transport capacity in the hope of shipping goods back to Tehran once conditionsimprove.

To do that, Han has been comparing the costs of trucking routes and the China-Europe Railway Express.

“Rail slots for May are already fully booked, so we’re checking different places to see if we can get space in June,” he said. “If not, we may just send the goods out by truck.” Han has been selling small household appliances in Iran since 2023. But after returning to China in January, his business income has effectively dried up.

According to Han, only Iran Air cargo services remain partially operational for maritime-linked transport, while demand among Chinese traders for railway freight has surged.

“Price isn’t even the main issue any more,” he said. “We just want to secure space and move the goods out as quickly as possible.”

The conflict, which began in late February, has stalled vessel flows in the Strait of Hormuz, stranding hundreds of ships, disrupting the global oil trade and driving up freight and insurance costs, even as talks continue for a permanent ceasefire.

Against that backdrop, the China-Europe Railway Expresslaunched under Beijing’s Belt and Road Initiative in 2013 – is increasingly being viewed as an alternative to vulnerable maritime routes.

“My business is close to collapsing,” Han said. “Even before the war, the Iranian currency had already depreciated sharply, which was hurting operators like us.” However, “most Chinese traders I know believe there will be huge opportunities once the war ends because Iran is still a rare seller’s market,” he added.

“We all hope we can recover some of the losses we’ve taken.” The railway network has expanded rapidly this year. Freight trips in the first quarter rose 29 per cent year on year to 5,460, while cargo volumes climbed 22 per cent to 546,000 20-foot equivalent units (TEUs), according to data released by China State Railway Group Co last month.

The network now links 235 cities across 26 European countries, as businesses seek alternatives amid growing supply-chain disruption.

Han is far from alone in looking to the railway.

Abbas Shi, a Chinese investor who has stayed in Iran since 2024, said he had also been exploring different overland shipping options from China as maritime transport became increasingly unreliable.

“Sea freight has basically stopped and overland transport capacity is also extremely tight,” he said. Shi mainly helps connect the Tehran Chamber of Commerce with Chinese businesses and assists Iranian companies sourcing products from China.

“In fact, I’ve discussed this with advisers to the chamber’s secretary general, and we all believe the strait will eventually reopen,” he said. Shi said overland transport was entering a “fast-growth stage” because maritime shipping carried too much uncertainty, while the China-Central Asia railway routes could fundamentally solve many transport problems.

“Globalisation and international division of labour are weakening, while protectionism and self-reliance are becoming stronger trends,” he added. “But if transport routes remain unstable, businesses still won’t feel secure.” Cost, however, remains a concern. According to Shi, shipping a 40-foot container by railway currently costs about US$6,600 and takes roughly 22 days – an expensive option that is pushing traders to explore additional land routes.

Throughout the interview, Shi’s internet connection repeatedly cut out.

“The internet is very unstable right now,” he said. “Most of my communication with clients in China has shifted to text messages.” The Transported Asset Protection Association also noted in a March report that the China-Europe Railway Express is playing an increasingly important complementary role along Eurasian trade routes.

“Rail transport is not intended to replace maritime shipping entirely, but rather to safeguard shipments of high-value or time-sensitive goods such as new product launches or critical components,” the Singapore-basedassociation said.

At the same time, it warned that railway capacity remained relatively constrained, transport costs were higher and routes passing through Russia and Belarus may still pose compliance or acceptance challenges for some Europeancustomers.