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f+h Intralogistics 5/2015

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f+h Intralogistics 5/2015

ECONOMY & MARKET THE

ECONOMY & MARKET THE FUTURE of CHINA’S logistics market

ECONOMY & MARKET The logistics market in China has seen rapid development within the last 15 years, and is expected to continue double-digit growth in the next 5 to 10 years. With annual expenditures of almost USD 1,500 billion, China’s logistics market is the world’s largest. On the World Bank Logistics Performance Index, China ranked 28th in 2014, which is one of the leading positions among the developing states. To enter the world’s top twenty, China has to improve the sub-indices “customs performance” and “competence and quality of logistics services”. Existing shortcomings push the demand for regulatory change. In this respect, Shanghai Free Trade Area and the Guangzhou Nansha Free Trade Port are aimed at reducing regulation complexities. In terms of multiplying access routes, new development initiatives include the Silk Road Economic Belt, the Maritime Silk Road, and the Yangtze River Economic Belt. In March 2015, the National Development and Reform Commission published its vision and framework for action to support the Belt and Road Initiative. The core of it is to build a wide infrastructure network that will link the economies of Europe, Africa and Asia. Therefore, it is aimed beyond the construction of roads, ports and railways to include sustainable energy and telecommunications networks. Expanding beyond traditional logistics will require the knowledge from abroad. Logistics industry in China is influenced by the three trends: the growth of third-party logistics (3PL) providers, the rise of eCommerce logistics, and the new opportunities of intermodal logistics. First, the level of outsourcing is predicted to grow, triggering rapid development of 3PL. Second, booming eCommerce demands more warehousing capacities, making the need for eCcommerce logistics services straightforward. Third, taken into account China’s latest regulatory reforms and adopted practices, supply chain operations have much to gain from intermodal logistics in China, especially that involving railroads. In the process of economic transformation, China seeks sustainable development. A particular focus is on logistics industry, which brings rich opportunities, but also challenges to foreign companies. Staying informed about the latest tendencies, coupled with good partnerships is crucial for succeeding in China. The modern track: database and warehouses Focus: eCommerce industry Of the two factors that affect logistics the most – customer expectations and community networks – both are tightly connected with eCommerce growth in China. By 2020, China’s eCommerce market can surpass USD 1 trillion, which provides unprecedented opportunities for the logistics sector. The world’s largest internet-connected population is increasingly shopping online. According to A.T. Kearney, the growth of China’s eCommerce will continue growing at a steady 25 %. This pace of growth requires distribution space for eCommerce firms, which turn to logistics companies to satisfy the increasing demand for warehouses. ECommerce logistics has both opportunities and challenges. The opportunities include low entry costs and few regulations. The challenges, on the other hand, are high competition and specific requirements posed by the tenants. On top of that, eCommerce logistics suffers from the difficulty of obtaining licenses and permits, which are issued by different government ministries and bureaus, and the lack of upto-date legal information about the sector’s development. However, on the bright side are the government policies that favor logistics development. Following these policies and incentive schemes is the key to success. Such supporting measures usually come out as guidelines of the State Council. The most recent ones (published in 2014) offer fiscal and administrative benefits: e. g. lower taxes, favorable land policies, etc. Benefitting from the accommodative government policies needs strong local knowledge and deep local relationships. At that, non-Chinese companies have their chances to leverage improvements in China’s logistics industry. The country clearly recognizes its potential, and wants a world-class infrastructure to support its progress. The initiative of further technology modernization is reflected in China’s “Internet Plus” action plan. Released in March 2015, it is aimed at integrating mobile internet and cloud computing with manufacturing, bolstering the development of eCommerce, logistics and express delivery services. In a word, with its advantageous position in between the two industries, ecommerce logistics has at its disposal the government’s stimulation of logistics development and the natural, market-driven growth of eCommerce. The rise of outsourcing – future of logistics? Focus: third-party logistics The latest developments in China’s online sector call for outsourcing and spur the development of third-party logistics (3PL). 3PL companies provide multiple integrated logistics services, such as transportation, warehousing, inventory management, packaging and freight forwarding. Analysts report that 3PL is indispensable to maintain efficiency as markets (and trade flows) grow. Nevertheless, is outsourcing trend in China as prominent as elsewhere? When compared to the developed countries, China’s 3PL market is still small. Only one fourth of companies prefer to outsource their logistics requirements. About DCW The German-Chinese Business Association (DCW), established in 1987, aims to promote economic relations between China and Germany as a non-partisan and non-profit organization. Members and partners of DCW work together to enhance bilateral investment and trade relations between China and Germany. To its over 400 members enterprises and partners, DCW serves as a platform to exchange experiences and establish new contacts. DCW hosts the next ChinaLogistics event on 30th May 2016 in Hamburg. f+h Intralogistics 5/2015 9

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