Page 254 - 2017 White Paper
P. 254
7 White Paper on the Business Environment in China
2.5 Transportation and Logistics
Transportation andlogistics decrease administrative burdens on companies serving
have been both the domestic and international markets (Yang 2010).
intimately related to the export-oriented manufacturing
that has served as a major driver of China’s economic Nevertheless, a 2010 report by Price Waterhouse
growth since 1978. Since the official opening of the Coopers is more optimistic, stating that the transportation
sector to foreign investment in 2005 as a part of China’s and logistics “market will continue to increase in the
WTO-entry obligations, foreign, in addition to domestic, future and consider on-going growth rates of more than
companies have also held a stake in the sector’s growth 20% as realistic. The rapid development of electronic
and have benefited from the gradual improvement of commerce has laid a solid foundation for the industry.
related infrastructure. Approximately 10% of China’s 420 million internet
users have already purchased products through the
In 2010, Xinhua reported that the industry’s value-add internet and thus created demand for CEP services”
component had seen a net increase of 700 billion yuan (Pricewaterhouse Coopers, EBS Business School, and
from 2008 levels (Xinhua 2011a). Supply Chain Management Institute 2010).
In slightly different terms, a 2012 statement from the Foreign players such as DHL, FedEx, TNT or UPS all
China Federation of Logistics and Purchasing indicated have significant presence in the Chinese logistics market,
that the total value of goods carried by the industry in experiencing 20 to 40% growth annually. Despite such
China “grew by 9.6 percent year-on-year to reach 146.4 growth rates, it is still the small private domestic courier
trillion yuan ($23.27 trillion) in the first 10 months [of companies that dominate the majority of the Chinese CEP
that year]”. At the same time, however, the Federation market (Pricewaterhouse Coopers, EBS Business School,
warned that “Logistics expenses in the first 10 months and Supply Chain Management Institute 2010). This may
surged 11.5 percent year-on-year to 7.2 trillion yuan, change in future. The same report adds that according to
up 0.2 percentage point from September and 1.9 the China International Freight Forwarders Association,
percentage points from a year earlier” — underscoring as the Chinese middle class continue to gain in affluence,
the lingering inefficiencies which have been targeted by “labor cost advantages of small courier companies will
the government’s modernization efforts for several years decline over the next five to ten years. Future customers
already (Xinhua 2012b). will place a much stronger emphasis on reliable delivery
rather than price, an area where multinational logistics
Nonetheless, a 2011 KPMG report identifies several services have a strong advantage over small domestic
ongoing issues with the sector, including inefficient courier companies” (Ibid.).
operations and inadequate transportation capacity
(Wong 2011). Other concerns about the industry have In March 2009, State Council released the “logistics
included a lack of broad competencies by domestic reconstruction and revitalization plan”, of which
firms, a shortage of professional talent and generally efforts were designed to encourage reconstruction
disorganized macro-level planning (Cai 2009). and acceleration of M&A activity in order to (roughly)
“cultivate a number of agglomerative and modernized
A 2010 report by consulting firm A.T. Kearney had logistics enterprises able to provide a high level of service
previously singled out fragmentation and competition for and compete in the international market” (Xinhua 2009).
homogenous and non-diversified services as indicators
of the sector’s need for development, in addition to the This plan, however, was said to lag behind the
issues above (A. T. Kearney 2010b), and even China Daily industry’s actual needs and as a result hindered long-
joined in the criticism, calling for the PRC government to term development rather than helping it, according to
254
2.5 Transportation and Logistics
Transportation andlogistics decrease administrative burdens on companies serving
have been both the domestic and international markets (Yang 2010).
intimately related to the export-oriented manufacturing
that has served as a major driver of China’s economic Nevertheless, a 2010 report by Price Waterhouse
growth since 1978. Since the official opening of the Coopers is more optimistic, stating that the transportation
sector to foreign investment in 2005 as a part of China’s and logistics “market will continue to increase in the
WTO-entry obligations, foreign, in addition to domestic, future and consider on-going growth rates of more than
companies have also held a stake in the sector’s growth 20% as realistic. The rapid development of electronic
and have benefited from the gradual improvement of commerce has laid a solid foundation for the industry.
related infrastructure. Approximately 10% of China’s 420 million internet
users have already purchased products through the
In 2010, Xinhua reported that the industry’s value-add internet and thus created demand for CEP services”
component had seen a net increase of 700 billion yuan (Pricewaterhouse Coopers, EBS Business School, and
from 2008 levels (Xinhua 2011a). Supply Chain Management Institute 2010).
In slightly different terms, a 2012 statement from the Foreign players such as DHL, FedEx, TNT or UPS all
China Federation of Logistics and Purchasing indicated have significant presence in the Chinese logistics market,
that the total value of goods carried by the industry in experiencing 20 to 40% growth annually. Despite such
China “grew by 9.6 percent year-on-year to reach 146.4 growth rates, it is still the small private domestic courier
trillion yuan ($23.27 trillion) in the first 10 months [of companies that dominate the majority of the Chinese CEP
that year]”. At the same time, however, the Federation market (Pricewaterhouse Coopers, EBS Business School,
warned that “Logistics expenses in the first 10 months and Supply Chain Management Institute 2010). This may
surged 11.5 percent year-on-year to 7.2 trillion yuan, change in future. The same report adds that according to
up 0.2 percentage point from September and 1.9 the China International Freight Forwarders Association,
percentage points from a year earlier” — underscoring as the Chinese middle class continue to gain in affluence,
the lingering inefficiencies which have been targeted by “labor cost advantages of small courier companies will
the government’s modernization efforts for several years decline over the next five to ten years. Future customers
already (Xinhua 2012b). will place a much stronger emphasis on reliable delivery
rather than price, an area where multinational logistics
Nonetheless, a 2011 KPMG report identifies several services have a strong advantage over small domestic
ongoing issues with the sector, including inefficient courier companies” (Ibid.).
operations and inadequate transportation capacity
(Wong 2011). Other concerns about the industry have In March 2009, State Council released the “logistics
included a lack of broad competencies by domestic reconstruction and revitalization plan”, of which
firms, a shortage of professional talent and generally efforts were designed to encourage reconstruction
disorganized macro-level planning (Cai 2009). and acceleration of M&A activity in order to (roughly)
“cultivate a number of agglomerative and modernized
A 2010 report by consulting firm A.T. Kearney had logistics enterprises able to provide a high level of service
previously singled out fragmentation and competition for and compete in the international market” (Xinhua 2009).
homogenous and non-diversified services as indicators
of the sector’s need for development, in addition to the This plan, however, was said to lag behind the
issues above (A. T. Kearney 2010b), and even China Daily industry’s actual needs and as a result hindered long-
joined in the criticism, calling for the PRC government to term development rather than helping it, according to
254
