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Zhengzhou and Luxembourg: An Improbable Partnership

 
 

At a meeting at Zhengzhou University in Henan Province in October 2017, a senior official told his foreign and Chinese guests, “Find a solution for Henan’s problems, and you will have found the solution for China’s problems.”

A native of Henan Province, the Chinese Communist Party (CCP) official knew personally of Henan’s struggles with economic development. The bullet train ride from Beijing south to Zhengzhou highlights the stark differences between the rural development of the province and its counterparts just to the east. For a seasoned traveler, who knows the China of the 1980s, there seems to be little difference between then and now, with the exception being high-speed rail stations and tracks that look oddly out of place in a landscape that seems stuck in the past.

But Zhengzhou, Henan’s capital, may have found one of those solutions that the university administrator hoped for.

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In a study of contrasts, Zhengzhou sits at one end of a major Belt and Road Initiative (BRI) air link with a country more than 16 times smaller than itself: Luxembourg, the seventh smallest country in Europe.  Luxembourg, with a population of just over 600,000, is dwarfed by Zhengzhou’s 10 million people, and then disappears into statistical insignificance compared to Henan province’s overall population of 106 million. The Chinese economic development story is filled with unlikely, seemingly improbable partnerships; the cooperation between Zhengzhou and Luxembourg is yet another.

Luxembourg, with a per capita PPP GDP of over US$110,000, the third highest in the world, would not seem to need to be at the receiving end of cargo from a relatively poor region of China, whose provincial per capita PPP GDP is just under US$7,000. However, the tiny European nation has commonalities with the developing Chinese province, and in particular with Zhengzhou, that belie their differences in economic status.

Both are historically at the strategic hearts of their respective regions. Henan is the ancient cradle of Chinese civilization, home to former capitals of China. In modern times, Henan, and Zhengzhou in particular, have become transportation and distribution hubs. Major national highways and railways traverse the province.  As Dawn Cheng writes in her research report for the Hong Kong Trade Development Council (HKTDC),  “more than 90% of China’s population, as well as the regions…that produce 95%-plus of its GDP…can be reached by air [from Zhengzhou] in just two hours.”

Luxembourg, meanwhile, “at the other end of the Air Silk Road, lies at the heart of Europe, next to Germany, France, and Belgium. Like Zhengzhou, it enjoys natural geographical advantages, with four major financial centers (London, Paris, Frankfurt and Zurich) in close proximity. Luxembourg Airport [is] the sixth largest air cargo terminal in Europe.”

The groundwork for what authorities on both sides of the air link call a “Dual Hub” strategy was already laid by early 2014 to leverage these two seemingly dissimilar areas. According to the HKTDC report:

In 2014, Henan Civil Aviation and Investment Co purchased a 35% stake in Cargolux Airlines International, which operates the biggest all-cargo airline at Luxembourg Airport. Cargolux is the world’s sixth largest air freighter, and the biggest in Europe, with routes covering all parts of the world. Zhengzhou and Luxembourg airports are working together…to build an international air cargo network, with Zhengzhou as the Asia-Pacific logistics center and Luxembourg as the logistics center for Europe and America.

Cargolux is the story behind the story of the Zhengzhou-Luxembourg BRI air link.  The acquisition of more than a third of Cargolux’s shares by a Chinese company in one of the country’s lesser-performing provinces is an example of the degree to which previously less-experienced state-owned and controlled Chinese enterprises have been able in recent years to move into positions of strategic relevance, and compete with their more sophisticated international rivals.

The 35 percent of Cargolux that Henan Civil Aviation (HNCA) bought had formerly been owned by Qatar Airlines, though not for very long. After owning the stake for only a little more than a year, conflicts arose among the major shareholders, and Qatar Air announced its plans to sell. By the end of 2012, Qatar Air had sold the stake to the Luxembourg government, which then went looking for another buyer. In December of 2013, HNCA announced that it was purchasing the Cargolux shares. Chinese President Xi Jinping had outlined the strategic vision for One Belt, One Road three months earlier, in Kazakhstan. Was there foresight involved on Henan’s part?

The relationship between the partners deepened by 2017. In June of that year, it was announced that HNCA and Cargolux would also become partners in a joint venture cargo airline based in Zhengzhou.  Originally, as reported in Cargo Facts, the JV was to be called Cargolux China; it is instead called Henan Cargo Airlines. Cargolux has only a 25 percent share.

Finally, in July of this year, another BRI link is being tested between Zhengzhou and Luxembourg.  As reported by RTL Luxembourg, a Memorandum of Understanding was signed to lead to the establishment of a direct rail link between Zhengzhou and Bettembourg in southern Luxembourg.

To be sure, Zhengzhou has also found other solutions for its position as capital of a landlocked, largely rural provincial economy. It has built a number of significant economic zones, and is host to a wide range of major foreign companies, including Dupont, FedEx, DHL, Foxconn, and Zara. According to HKTDC, its Airport Experimental Zone “produced over 300 million smartphones in 2017, over one-seventh of the global output. It is also the world’s largest Apple iPhone production base.”

Henan is a province much-maligned in general Chinese society, and sometimes in the media.  As reported in the New York Times in 2016, a science journalist in Henan sued a well-known Chinese TV celebrity for defamation, after the TV host called a woman “shameless, like a Henanese.” Pejorative remarks about Henanese people are often heard in Beijing, and elsewhere in China.

Henan, however, has stood its ground, is finding solutions, and is moving forward with creative partnerships. It remains to be seen, however, if Henan’s solutions are China’s as a whole.

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