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Chinese Logistic Industry: Strategy for Its Mid- and Long-Term Development
2015-08-18
By Wei Jigang, Research Department of Industrial Economy of DRC
Research Report No 47, 2013(Total 4296)
I. General Introduction of Chinese Logistic Industry Development
1. China has established itself as a major economy in logistic industry, but not yet a powerful country in terms of logistic industry
Logistic industry has become a pillar industry of the national economy and an important modern service industry after over thirty year's development. In 2012, the total value of social logistics goods reached 177.3 trillion yuan with 3.5 trillion yuan of added value in logistic industry, which took 6.8% in GDP and 15.3% in service industries.
In 2012, national railway freight volume was 3.892 billion tons, highway freight volume 32.21 billion tons, waterway freight volume 4.56 billion tons while civil aviation freight volume 5.416 million tons. National railway goods turnover volume was 2.88919 trillion ton-kilometer, highway goods turnover volume 5.9992 trillion ton-kilometer, waterway goods turnover volume 8.0655 trillion ton-kilometer while civil aviation goods turnover volume 60.816 billion ton-kilometer. Cargo handling capacity at ports above designated size was 9.74 billion tons while container handling capacity at port above designated size was 176.51 million TEU (standard container of twenty foot equivalent unit). Business volume of express service companies above designated size is 5.69 billion pieces and daily business volume was more than 15 million pieces, among which railway goods delivery volume, railway goods turnover volume, port handling capacity and container handling capacity all ranked the first place in the world, while express volume ranked third in the world.
With the rapid expansion of sizes, logistic capacity has been improved significantly. By the end of 2012, the total mileage of national highways was 4.193 million kilometer, among which expressway was 96,000 kilometer; the operational mileage of national railways was 98,000 kilometer; inner high-grade waterway was 130,000 kilometer and the mileage open to traffic was 125,000 kilometer with 1,819 berths above 10,000 tons and 1,980 deepwater berths at costal ports; the number of airports with regular flights were 182. In China the area of commercial warehouses took around 1.3 billion sqm with various logistic parks emerging constantly. Major development of logistic infrastructure has laid a sound basis for the promotion of logistic capacity. According to Logistic Performance Index (LPI) of the World Bank, China runs ahead of other BRICS countries or other Asian countries with similar resources in the respect of logistic capacities. However, Chinese logistic industry still lags behind major developed industrial countries. In 2012, China logistic expenses took 18% in GDP, more than one time higher than that of developed countries.
2. Highly opening logistic market
At the beginning of reform and open-up, international logistic enterprises began to enter China's market. In the 1980s to 1990s of 20th century, international logistic enterprises including FedEx, DHL, TNT, UPS and MSK established joint-ventures in China. After China's accession to the WTO, logistic industry became further opened to the outside world. In 2006, foreign companies can establish their own distribution network in China to conduct logistic business independently. With the advantages in their sizes, capital, technologies and managements, international logistic enterprises have been transferring from JVs to wholly foreign-owned companies, from a single business to comprehensive logistic businesses, from focusing on central urban logistic business to establishing national logistic network. For example, FedEx set up an Asian Pacific transit hub at Baiyun Airport in Guangzhou; UPS set up air transit hub in Hong Kong, Shanghai and Shenzhen; TNT set up mini trans-shipment hub in Shanghai, Beijing and Hong Kong; and DHL set up Hong Kong transit hub and north-Asia transit hub in Shanghai. An opening Chinese logistic market has become an important part of global logistic market and the focus of competition for international enterprises.
3. Distinct unbalanced logistic development
Influenced by the factors of economy, productivity, infrastructure, marketization, level of information and demands, logistic industry develops fast in the eastern region but slowly in the central and western regions, with sound development in urban areas but poor performance in rural areas. In 2012, the percentages of express business income in the eastern, central and western regions were 82.3%, 9.3% and 8.4% respectively and those of business volume were 81.9%, 10.5% and 7.6%. Logistic companies, facilities and activities mostly centralized in large and medium-sized cities with modern traffic and information facilities.
In the aspect of absolute value of total social logistic amount, the percentage of total logistic amount of industrial products to total social logistic amount increased from 82.83% in 2001 to 91.37% in 2012. Industry logistics Holding a dominated position in national economic development, industry logistics constitute the major force for the growth of total social logistic goods. Industries closely connected with consumer markets with keen competition and high demands on technologies such as home appliance, daily chemical industry, tobacco, medicine, automobile, chain retail and e-commerce have a strong demand on logistics while capital-intensive agricultural products on the upstream of industry chain and bulk commodities including agriculture capital, steel, coal and minerals lag behind in the development of logistic.
4. Extensive growth pattern of logistic industry
First, logistic system and network are underdeveloped, most of them are scattered and develop separately with weak supporting and compatible infrastructure. Without a complete comprehensive transportation system and a comprehensive transportation hub construction, different transportation methods cannot cooperate or connect with each reasonably and efficiently; costal and inland traffic systems have not been coordinated with each other, and information between various transportation methods are not shared, thus leading to a low overall utilization efficiency of transportation resources. The percentage of sea-railway combined transportation is lower than 2% (while that in developed countries has been up to 20%). Logistic parks and logistic hubs have been built in some cities blindly and some are left in idle; Warehousing facilities are scattered in different industries and departments without an efficient resource reassignment; pallet standards are not unified, impeding the consistent performance; strong regional protection and department segmentation as well as issues related to industry and commerce, tax, land and transportations departments hinder and restrict the establishment and operation of branch offices.
Second, a standard and orderly logistic market with fair completion has not been established. Some local governments granted international logistic enterprises with super national treatments such as numerous favorable treatments in land use and tax. The operation of many small and medium-sized logistic companies is not in compliance with relevant regulations and they lack service consciousness, legal awareness and adequate credibility.
Third, the overall logistic industry is weak in innovation. Logistic companies do not have a strong motivation for innovation, resulting in low investment in research and development. The innovation of business model, organization, technology and management are all lagging behind. The industry has still not entered the innovation-oriented stage of development.
Fourth, the industry has a problem with sustainability. Transportation methods of highway, aviation, railway and waterway all face prominent problems such as consumption of resources, energy and land as well as large scale emissions. Problems such as ineffective traffic, irrational traffic, and excessive package are severe; major personal safety and goods damage incidents due to overload or overspeed occur frequently, causing great losses to companies and the country.
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