1 A booming logistics industry
According to the CFLP, demand for logistics services will continue to rise, resulting from China’s rapid economic growth. The total logistics value is forecasted to increase by no less than 20% in 2006, logistics valueadded to increase by at least 15%; and logistics cost to GDP ratio to drop gradually. The logistics demand from the following segments will witness tremendous growth: automobile, electrical appliances, books, pharmaceuticals and fast moving consumer goods; while the logistics services for up-stream products such as steel, food, cotton, energy, etc. will gain more attention. Moreover, agricultural logistics, particularly the construction of logistics infrastructure is expected to be the focal point of attention in the coming year.
Moreover, China’s status as the world’s leading manufacturing powerhouse has provided huge
development prospect for the logistics industry – as “Made in China” is driven primarily by “Source in China”, leading to an increasing demand for logistics services.
2 Rapid expansion of foreign logistics enterprises in China
In the post-WTO period, foreign enterprises have experienced unprecedented progress in China’s logistics industry, particularly in the following areas:
(1) Setting up wholly-owned subsidiaries instead of joint-venture companies. More international thirdparty logistics companies have started their operation in China. Meanwhile, they have started to penetrate into different areas across China.
(2) Investing in China’s lucrative port sector, including
container berth, shipping and freight forwarding
business; setting up business in bonded logistics
parks.
(3) Establishing major logistics infrastructure and expanding their presence in various parts of China. For instance, the four largest global logistics companies, including UPS, TNT, DHL and Fedex have set up express forwarding centres in major cities such as Beijing, Shanghai, Hong Kong and Guangzhou.
(4) Expanding industrial portfolio in China. The most typical example is ProLogis, which has recently signed several agreements to build new distribution parks at a variety of strategic locations across the country, including Beijing, Shanghai, Guangzhou, as well as the new markets of Qingdao, Hangzhou and Ningbo.
(5) Participating in the training of logistics expertise.
(6) Providing supply chain management skills, and supplying the software for purchasing and supply chain.
(7) Entering the logistics exhibition industry. The most typical example is the Germany-based trade fair organizer Deutsche Messe AG. It has organized a number of logistics trade fairs and exhibitions in Shanghai.
3 Regional logistics development gaining momentum
Consolidation of the logistics sectors has been taking place progressively in various regional economies such as the Yangtze River Delta (YRD), the Pearl River Delta (PRD), the Bo-hai Rim region, and the central region. A number of regional logistics centres and international
logistics centres have been built in these regions. For instance, in the YRD, Shanghai is the logistics hub while the port region in Zhejiang plays an important supporting role in developing the region into an international logistics centre; the PRD, on the other hand, has vowed to build a Pan-PRD logistics network serving as the logistics platform for South East Asia and the rest of the world; in the Bohai-rim region, Tianjin will become the logistics hub in the Northern region; and the central region will make use of the geographical advantages of Wuhan and Zhengzhou to build a major logistics centre linking east-west and north-south.
4 A more competitive logistics environment
As mentioned, foreign enterprises have experienced unprecedented progress in China’s logistics industry in recent years. Competition is thus heating up quite intensely. On the other hand, more and more domestic logistics enterprises are beginning to go global and participate in the international market. These “Bringing in” and “Going global” initiatives have led to a more competitive logistics environment, i.e. China’s logistics industry is facing fiercer competition from foreign players. In the face of competition, logistics enterprises will undergo series of restructuring and transformation and ultimately expand their business scope. Meanwhile, they will focus more on building theirreputation by providing high quality services.
5 A better regulated and well developed logistics industry
As stipulated in China’s 11th Five-year Program, the country will speed up the development of logistics industry. Indeed, the Central and provincial governments have been putting huge efforts in accelerating the development of the industry in recent years. A typical example is the “Notice on promoting the development of China’s modern logistics” jointly released by nine ministries and commissions1 in August 2004 clearly outlined the policy measures for supporting the development of modern logistics industry. I t covered various areas including administration, management, taxation, financing and market opening, etc. On the other hand, the rapid development of standardization, statistical and technology has made significant contribution to the development of modern logistics.
6 Bonded logistics parks offering better logistics services
Bonded logistics parks (BLPs) were a recent addition to the plethora of bonded zones (or referred to as free trade zones) options available to both local and foreign enterprises. Today, there are eight BLPs in China – the first BLP was established in Shanghai’s Waigaoqiao Free Trade Zone in 2004. Additional locations include Dalian, Zhangjiagang, Xiamen, Ningbo, Qingdao, Tianjian and Shenzhen.
The new BLPs connect the bonded zones with nearby ports. The BLPs aim to integrate export processing, international trade, logistics, and port operations. The 4 proposed uses of the BLPs include: 1) importation of processed goods; 2) international transfer and consolidation; 3) international procurement; and 4) bonded distribution centre for domestic distribution.
The objective of building the BLPs is twofold, namely 1) to attract international goods flows so as to build China’s own international ocean freight hubs; and 2) to improve logistics service for all the enterprises in these regions. With the formation of the BLPs, enterprises may now conduct true international entrepot trade and procurement. These BLPs are particularly attractive to enterprises performing bulk purchases in the Asian region who want to optimize their inventory velocity by using China as an international transfer, consolidation and procurement hub.
7 More emphasis is being placed on logistics industry – the launching of China’s first modern logistics forum
Approved by the State Council, China’s first modern logistics forum (the Forum) was held in 22-23 September 2005 in Shandong. The Forum has the blessings from the Central government – various government departments, including the National Development and Reform Commission, Ministry of Commerce, Ministry of Communications, Ministry of Railway, General Administration of Civil Aviation, General Administration of Customs, General Administrations of Quality Supervision, Inspection and Quarantine, etc. attended the Forum. The Forum provided an opportunity for the logistics enterprises and the governments to exchange views and make recommendations for future development of the logistics industry. The launching of the forum denoted that the country will continue to place huge emphasis on the logistics industry.
