Page 164 - 2016_WhitePaper_web
P. 164
6 White Paper on the Business Environment in China
2.4 Transportation and Logistics
Transportation and logistics have been ing issues with the sector, including inefficient operations and
intimately related to the export-oriented manufacturing inadequate transportation capacity.8 Other concerns about the
that has served as a major driver of China’s economic growth industry have included a lack of broad competencies by domes-
since 1978. Since the official opening of the sector to foreign in- tic firms, a shortage of professional talent and generally disorga-
vestment in 2005 as a part of China’s WTO-entry obligations, nized macro-level planning.9
foreign, in addition to domestic, companies have also held a
stake in the sector’s growth and have benefited from the gradual A 2010 report by consulting firm A.T. Kearney had previously
improvement of related infrastructure. singled out fragmentation and competition for homogenous
and non-diversified services as indicators of the sector’s need for
In February 2007 it was estimated by the China International development, in addition to the issues above10, and even China
Freight Forwarders Association that there were 20,000 freight Daily joined in the criticism, calling for the PRC government to
forwarding companies operating in China1. decrease administrative burdens on companies serving both the
domestic and international markets.11
According to government figures, the total output and added
value of the logistics industry in 2008 reached 89.9 and 2 trillion Nevertheless, a 2010 report by PriceWaterhouse Coopers
yuan—an annual increase of 23 and 1.9 percent, contributed 16.5 is more optimistic, stating that the transportation and logistics
percent of the aggregate added value throughout the service sec- “market will continue to increasein the future and consider
tor and 6.6 percent of the nation’s GDP.2 on-going growth rates of more than 20% as realistic. The rapid
development of electronic commerce has laid a solid founda-
It was reported in December of 2009 that the logistics tion for the industry. Approximately 10% of China’s 420 mil-
sector’s “combined output value rose 4 percent year-on-year lion internet users have already purchased products through the
to 1.47 trillion yuan” in the three quarters of 2009,3 with Ma internet and thus created demand for CEP services.” 42
Zeng Rong, Vice-Chief of the exhibition division of the China
Federation of Logistics and Purchasing having told reporters Foreign players such as DHL, FedEx, TNT or UPS all
that “China’s logistics industry has weathered the financial have significant presence in the Chinese logistics market,
crisis” approximately two months earlier4. experiencing 20 to 40% growth annually. Despite such growth
rates, it is still the small private domestic courier companies
In 2010, Xinhua reported that the industry’s value-add that dominate the majority of the Chinese CEP market42. This
component had seen a net increase of 700 billion yuan from may change in future. The same report adds that according to
2008 levels5. the China International Freight Forwarders Association, as the
Chinese middle class continue to gain in affluence, “labour cost
In slightly different terms, a 2012 statement from the China advantages of small courier companies will decline over the next
Federation of Logistics and Purchasing indicated that the total five to ten years. Future customers will place a much stronger
value of goods carried by the industry in China “grew by 9.6 per- emphasis on reliable delivery rather than price, an area where
cent year-on-year to reach 146.4 trillion yuan ($23.27 trillion) multinational logistics services have a strong advantage over
in the first 10 months [of that year].” At the same time, however, small domestic courier companies.42”
the Federation warned that “Logistics expenses in the first 10
months surged 11.5 percent year-on-year to 7.2 trillion yuan, up In March 2009, State Council released the “logistics recon-
0.2 percentage point from September and 1.9 percentage points struction and revitalization plan”, of which efforts were designed
from a year earlier”— underscoring the lingering inefficiencies to encourage reconstruction and acceleration of M&A activity in
which have been targeted by the government’s modernization order to (roughly) “cultivate a number of agglomerative and mod-
efforts for several years already.6 ernized logistics enterprises able to provide a high level of service
and compete in the international market.”12
These modernization efforts, in fact, were explicitly singled
out in the 11th Five-year Plan (viz. the “vigorous development of This plan, however, was said to lag behind the industry’s
[a] modern logistics industry”2). Since that time, the government actual needs and as a result hindered long-term development
invested an estimated 4.7 trillion yuan in the sector7. rather than helping it, according to China Federation of Logis-
tics and Purchasing Chairman He Liming.13
In addition to this government investment, in recent years
local logistics firms are said to have also benefitted from mea- Additional regulatory guidelines were released in August
sures such as the adoption of modern management methods, 2011 (Guobanfa [2011] No.38). In addition to adjusting tax
“process reengineering”, service outsourcing and diversification burdens, the guidelines also allow for more favorable land-use
in the market.2 policies, the integration of resources and the strengthening of
Nonetheless, a 2011 KPMG report identifies several ongo-
164
2.4 Transportation and Logistics
Transportation and logistics have been ing issues with the sector, including inefficient operations and
intimately related to the export-oriented manufacturing inadequate transportation capacity.8 Other concerns about the
that has served as a major driver of China’s economic growth industry have included a lack of broad competencies by domes-
since 1978. Since the official opening of the sector to foreign in- tic firms, a shortage of professional talent and generally disorga-
vestment in 2005 as a part of China’s WTO-entry obligations, nized macro-level planning.9
foreign, in addition to domestic, companies have also held a
stake in the sector’s growth and have benefited from the gradual A 2010 report by consulting firm A.T. Kearney had previously
improvement of related infrastructure. singled out fragmentation and competition for homogenous
and non-diversified services as indicators of the sector’s need for
In February 2007 it was estimated by the China International development, in addition to the issues above10, and even China
Freight Forwarders Association that there were 20,000 freight Daily joined in the criticism, calling for the PRC government to
forwarding companies operating in China1. decrease administrative burdens on companies serving both the
domestic and international markets.11
According to government figures, the total output and added
value of the logistics industry in 2008 reached 89.9 and 2 trillion Nevertheless, a 2010 report by PriceWaterhouse Coopers
yuan—an annual increase of 23 and 1.9 percent, contributed 16.5 is more optimistic, stating that the transportation and logistics
percent of the aggregate added value throughout the service sec- “market will continue to increasein the future and consider
tor and 6.6 percent of the nation’s GDP.2 on-going growth rates of more than 20% as realistic. The rapid
development of electronic commerce has laid a solid founda-
It was reported in December of 2009 that the logistics tion for the industry. Approximately 10% of China’s 420 mil-
sector’s “combined output value rose 4 percent year-on-year lion internet users have already purchased products through the
to 1.47 trillion yuan” in the three quarters of 2009,3 with Ma internet and thus created demand for CEP services.” 42
Zeng Rong, Vice-Chief of the exhibition division of the China
Federation of Logistics and Purchasing having told reporters Foreign players such as DHL, FedEx, TNT or UPS all
that “China’s logistics industry has weathered the financial have significant presence in the Chinese logistics market,
crisis” approximately two months earlier4. experiencing 20 to 40% growth annually. Despite such growth
rates, it is still the small private domestic courier companies
In 2010, Xinhua reported that the industry’s value-add that dominate the majority of the Chinese CEP market42. This
component had seen a net increase of 700 billion yuan from may change in future. The same report adds that according to
2008 levels5. the China International Freight Forwarders Association, as the
Chinese middle class continue to gain in affluence, “labour cost
In slightly different terms, a 2012 statement from the China advantages of small courier companies will decline over the next
Federation of Logistics and Purchasing indicated that the total five to ten years. Future customers will place a much stronger
value of goods carried by the industry in China “grew by 9.6 per- emphasis on reliable delivery rather than price, an area where
cent year-on-year to reach 146.4 trillion yuan ($23.27 trillion) multinational logistics services have a strong advantage over
in the first 10 months [of that year].” At the same time, however, small domestic courier companies.42”
the Federation warned that “Logistics expenses in the first 10
months surged 11.5 percent year-on-year to 7.2 trillion yuan, up In March 2009, State Council released the “logistics recon-
0.2 percentage point from September and 1.9 percentage points struction and revitalization plan”, of which efforts were designed
from a year earlier”— underscoring the lingering inefficiencies to encourage reconstruction and acceleration of M&A activity in
which have been targeted by the government’s modernization order to (roughly) “cultivate a number of agglomerative and mod-
efforts for several years already.6 ernized logistics enterprises able to provide a high level of service
and compete in the international market.”12
These modernization efforts, in fact, were explicitly singled
out in the 11th Five-year Plan (viz. the “vigorous development of This plan, however, was said to lag behind the industry’s
[a] modern logistics industry”2). Since that time, the government actual needs and as a result hindered long-term development
invested an estimated 4.7 trillion yuan in the sector7. rather than helping it, according to China Federation of Logis-
tics and Purchasing Chairman He Liming.13
In addition to this government investment, in recent years
local logistics firms are said to have also benefitted from mea- Additional regulatory guidelines were released in August
sures such as the adoption of modern management methods, 2011 (Guobanfa [2011] No.38). In addition to adjusting tax
“process reengineering”, service outsourcing and diversification burdens, the guidelines also allow for more favorable land-use
in the market.2 policies, the integration of resources and the strengthening of
Nonetheless, a 2011 KPMG report identifies several ongo-
164
