Liaoning counts the US as its fourth largest export market. A range of US imports flows through Dalian, the province’s largest port, including agricultural products, car and car parts, and technology products such as LED screens and integrated circuits, some of which are subject to trade tariffs.

To improve its business fortunes, Dalian is focused on capitalising on its position as one of the major Chinese ports closest to Japan and South Korea, to connect their shipments with Russia, Eastern Europe and Central Asia through its sea-to-rail freight services.

A typical route starts from Japan or South Korea, with the ships stopping over in Dalian where the goods are offloaded and transferred onto the wagons of the China-European trains bound for markets in Manzhouli, Irkutsk, New Siberia or Moscow.

The sea-to-rail service could reduce delivery time from Dalian port to Moscow to just 12 days, a quarter of the 50 days needed for goods to be shipped by sea to northern European ports, according to Xia Ting, a manager with Liaoning Port Dalian Container Development.

On paper, this makes the belt and road proposal seem like a winner for Liaoning’s ports to expand their business and reduce reliance on US trade, but it has not worked out that way so far. Japanese and South Korean companies, the major suppliers of electronic goods, equipment, cars and car parts to Europe and China, have been lukewarm about using the sea-to-rail freight service.

What is more, the service has required heavy subsidies from local governments in the region, many of which are already burdened by falling revenues and high debt.

Almost all of the services to Europe were subsidised by local government coffers, according to a December research report by the Institute of Geographical Sciences and Natural Resources, a unit of Beijing sponsored think tank Chinese Academy of Social Sciences.

It said the subsidies varied from US$2,000 to US$3,000 for every two 20ft equivalent unit (TEU) containers, with some going to as high as US$7,500 if the goods were locally made.

“As of now … promoting the development of China-European trains through subsidies at the initial stage as a policy guide or to cultivate a market is permissible. However, it is ultimately unsustainable,” the report said.

The difficulty in sustaining these operations is already showing in Dalian. Without a consistent supply of goods moving through the port on the sea-to-rail freight system, traffic had slowed substantially from the estimated 35,000 TEU of goods shipped at its peak in 2016 and 2017, Xia said, without giving comparative numbers.

According to the Ministry of Commerce, there were a total of 6,300 freight trains going between China’s ports and Europe in 2018, estimated to equate to around 600,000 TEU of goods shipped. But these figures paled in comparison to the total 42 million TEU of goods that came through China’s biggest port in Shanghai last year.

Since 2018, the mature coastal ports of Shanghai and Xiamen and inland heavyweights like Chongqing in the southwest and Xian in the west are also fighting for pieces of the same pie.

“The overall volume has gone up, but everyone is in on it,” said Xia.

The belt and road strategy, the cornerstone of President Xi Jinping’s foreign policy, seeks to build infrastructure projects to connect Asia with Africa and Europe, and in doing so boost trade.

However, the strategy has attracted a barrage of criticisms from China’s biggest trading partners, complaining that the country’s state firms have an unfair advantage over foreign players.

And Liaoning, the region’s biggest economy, has yet to see a strong resurgence of investment from Japan and South Korea, which has gradually declined since 2014.

According to government statistics, foreign direct investment into Liaoning plunged more than 80 per cent from US$27.42 billion in 2014 to US$4.9 billion in 2018, due in large part to cuts from Japanese and South Korean firms. There are signs that foreign investment is stabilising at a low level, while the provincial government has stepped up its efforts to improve relations with Japan and South Korea to promote the belt and road plan.

“It’s not yet reached the point [where Japanese and South Korea firms are thinking that] the routes are efficient and the prices are reasonable when it comes to foreign companies investing and building facilities here,” said Yuan Zhenhe, deputy general manager of Liaoning Shenha Hongyun Logistics Company, the sea-rail business platform for Yingkou Port, the second port controlled by Liaoning Port Group.

“Right now the competition is fierce and, as far as I understand it, there are 29 cities all over China [offering sea to freight services]. So foreign companies will carefully consider local policies and costs to start with [before deciding where to invest their money].”

Exports of Dalian’s car and car-related manufacturing industries, which produce local branded Cherry cars and Nissans through the a joint venture with Dongfeng Motor, have slumped due to political uncertainties in the emerging markets they are shipped to.

He said the car terminal handled more than 2,000 used cars in 2006 using the sea-to-rail services from Japan and South Korea to Kazakhstan. However, this business has not been consistent due to a lack of goods to trade.

“Back in 2006 [without the belt and road concept] … It was purely based on market [needs],” Ding said.

“Now we are seeing companies starting to look into it. We are preparing for [the business to develop]. We are engaging with Japanese and Korean companies.”