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6 White Paper on the Business Environment in China
coordination between government departments.13 officials prefer large-scale projects, it’s like they are ashamed to
“China’s State Council has given first priority to more build a small airport”14.
than 20 cities in nine regions for an infrastructure upgrade in By 2013 it was reported that profits remain elusive. “Of Chi-
the next two years... [which upgrades] have already improved na’s 183 airports, 143 are loss making, [a fact which suggests]
operational efficiencies in China’s transportation and logistics,” that more than 60 of the 80 new airports envisioned in China’s
observed the above-cited A. T. Kearney report, which continued economic master plan for 2011-2015 will end up in the red.”15
that “Other recent infrastructure improvements that have
helped the industry include a wave of new regional logistics “Developing an aviation hub is more than simply building
distribution centers, logistics parks, modern warehouses and an airport,” says one consultant. “It first of all requires minimum
improved distribution facilities”10. annual passenger flows of 10 million and cargo volume of
200,000 tons” she said, “Only Beijing, Shanghai, Guangzhou,
Improvement efforts continue; the PRC government is Chengdu, Shenzhen and Kunming met that criteria at the end
expected to invest in excess of 1.5 trillion yuan in the aviation of 2012.”15
sector alone during the 12th Five-year Plan period, increasing
the number of airports from 175 to 220 and the number of More broadly, KPMG observed in 2011 that improvements
aircraft from 2,600 to 4,500 8. in the domestic industry’s IT infrastructure, in better manage-
ment practices and more sophisticated, integrated solutions
Following up on investment funding earmarked for aviation, would help to eliminate some of the existing inefficiencies in ad-
China Daily reported in November 2012 that several months dition to—or perhaps instead of—direct government action.8
prior the State Council “issued a document to encourage the
development of China’s civil aviation industry” and that “In the A trend toward consolidation of discrete services within
same month, the Civil Aviation Administration of China said the transport and logistics industry has also been observed,
that the country plans to build 82 new airports and expand 101 but as a result of more segments of the supply chain, including
existing ones across the country from 2011 to 2015”14—the transportation, warehousing, logistics and management of
same period covered by the 12th Five-year Plan. the supply chain itself, being outsourced to specialized service
providers rather than as part of consolidation efforts by the
Central authorities are furthermore putting their money PRC’s Government16 (which, it was reported, had required
where their mouth is, with the NDRC having “approved 24 Air China, China Eastern and China Southern to strengthen
projects to build new airports and expand existing airports, with their cooperation in the cargo industry in order to “in order to
an estimated investment of around 100 billion yuan ($15.9 bil- gain the upper hand in the domestic cargo market from foreign
lion),” over the course of 2012.14 carriers”).17
Provincial authorities, the article continues, have wasted no Another interesting development among local players is do-
time in jumping aboard the initiative: mestic giant SF Express reportedly negotiating with Siemens
over green mobility products.18
[In October], Hunan province said it planned to build
21 general aviation airports* in the next 18 years. In the United States, trade with China—and the logistical
requirements that accompany it—have been hugely beneficial
Earlier, neighboring Hubei province also said it would for west coast port communities such as Los Angeles. As report-
build seven commercial airports and two general avia- ed in the New York Times in 2007, “Processing and distributing
tion airports in the next 18 years.14 millions of freight-laden containers through the region and out
to the rest of the United States have become the largest source
Although government officials seem keen to expand of jobs in the region.”19
the nation’s network of airports—currently fewer than
300, including general aviation airports14—others are more Fuel costs, however, remain a persistent concern for the
cautious about expansion for expansion’s sake. Civil Aviation industry as a whole. It was reported in September 2008 that as a
Management Institute of China professor Zou Jianjun warns, result of the 18 percent increase in diesel and gasoline prices in
“Airport design projects do need certain forward-looking August of that year, fuel spending accounted for 40 percent of
characteristics. But local governments should also be realistic total transportation costs. Domestic Chinese courier companies,
about the airports’ prospects […] unfortunately, most local already operating on extremely thin margins due to competition
with “tens of thousands of local competitors offering increasingly
lower charges” have reportedly suffered greatly20.
* General aviation airports, as China Daily helpfully explains, “are designed to handle four to 10-seat aircraft, as well as planes used for agricultural, industrial and
rescue purposes.”14
166
coordination between government departments.13 officials prefer large-scale projects, it’s like they are ashamed to
“China’s State Council has given first priority to more build a small airport”14.
than 20 cities in nine regions for an infrastructure upgrade in By 2013 it was reported that profits remain elusive. “Of Chi-
the next two years... [which upgrades] have already improved na’s 183 airports, 143 are loss making, [a fact which suggests]
operational efficiencies in China’s transportation and logistics,” that more than 60 of the 80 new airports envisioned in China’s
observed the above-cited A. T. Kearney report, which continued economic master plan for 2011-2015 will end up in the red.”15
that “Other recent infrastructure improvements that have
helped the industry include a wave of new regional logistics “Developing an aviation hub is more than simply building
distribution centers, logistics parks, modern warehouses and an airport,” says one consultant. “It first of all requires minimum
improved distribution facilities”10. annual passenger flows of 10 million and cargo volume of
200,000 tons” she said, “Only Beijing, Shanghai, Guangzhou,
Improvement efforts continue; the PRC government is Chengdu, Shenzhen and Kunming met that criteria at the end
expected to invest in excess of 1.5 trillion yuan in the aviation of 2012.”15
sector alone during the 12th Five-year Plan period, increasing
the number of airports from 175 to 220 and the number of More broadly, KPMG observed in 2011 that improvements
aircraft from 2,600 to 4,500 8. in the domestic industry’s IT infrastructure, in better manage-
ment practices and more sophisticated, integrated solutions
Following up on investment funding earmarked for aviation, would help to eliminate some of the existing inefficiencies in ad-
China Daily reported in November 2012 that several months dition to—or perhaps instead of—direct government action.8
prior the State Council “issued a document to encourage the
development of China’s civil aviation industry” and that “In the A trend toward consolidation of discrete services within
same month, the Civil Aviation Administration of China said the transport and logistics industry has also been observed,
that the country plans to build 82 new airports and expand 101 but as a result of more segments of the supply chain, including
existing ones across the country from 2011 to 2015”14—the transportation, warehousing, logistics and management of
same period covered by the 12th Five-year Plan. the supply chain itself, being outsourced to specialized service
providers rather than as part of consolidation efforts by the
Central authorities are furthermore putting their money PRC’s Government16 (which, it was reported, had required
where their mouth is, with the NDRC having “approved 24 Air China, China Eastern and China Southern to strengthen
projects to build new airports and expand existing airports, with their cooperation in the cargo industry in order to “in order to
an estimated investment of around 100 billion yuan ($15.9 bil- gain the upper hand in the domestic cargo market from foreign
lion),” over the course of 2012.14 carriers”).17
Provincial authorities, the article continues, have wasted no Another interesting development among local players is do-
time in jumping aboard the initiative: mestic giant SF Express reportedly negotiating with Siemens
over green mobility products.18
[In October], Hunan province said it planned to build
21 general aviation airports* in the next 18 years. In the United States, trade with China—and the logistical
requirements that accompany it—have been hugely beneficial
Earlier, neighboring Hubei province also said it would for west coast port communities such as Los Angeles. As report-
build seven commercial airports and two general avia- ed in the New York Times in 2007, “Processing and distributing
tion airports in the next 18 years.14 millions of freight-laden containers through the region and out
to the rest of the United States have become the largest source
Although government officials seem keen to expand of jobs in the region.”19
the nation’s network of airports—currently fewer than
300, including general aviation airports14—others are more Fuel costs, however, remain a persistent concern for the
cautious about expansion for expansion’s sake. Civil Aviation industry as a whole. It was reported in September 2008 that as a
Management Institute of China professor Zou Jianjun warns, result of the 18 percent increase in diesel and gasoline prices in
“Airport design projects do need certain forward-looking August of that year, fuel spending accounted for 40 percent of
characteristics. But local governments should also be realistic total transportation costs. Domestic Chinese courier companies,
about the airports’ prospects […] unfortunately, most local already operating on extremely thin margins due to competition
with “tens of thousands of local competitors offering increasingly
lower charges” have reportedly suffered greatly20.
* General aviation airports, as China Daily helpfully explains, “are designed to handle four to 10-seat aircraft, as well as planes used for agricultural, industrial and
rescue purposes.”14
166
