China Industry overview: Focus on Logistics & transport infrastructure
China is the second largest economy in terms of nominal GDP and the world’s largest economy in terms of purchasing power parity, with a very robust infrastructure system in terms of its roads, sub way and railway networks. China has a very heavy focus on manufacturing and is the largest exporter of goods in the world. Industry contributes around 40% of GDP with around 30% of the labour pool employed in industry. The Service sector contributes around 50% of GDP and the remaining contribution is by agriculture. With a population of around 1.36 billion, China has the world’s fastest growing consumer market.
Among the various industries, machine building and metallurgical industries have been given the highest priority and together they contribute around 30% of the gross industrial output in China. The Chinese focus has been on increasing production capacity or utilization and thus, innovation has suffered greatly, particularly quality and sophistication of its manufacturing systems. For example, China produces a lot of commodity steel products, but imports a significant quantity of specialized steel products. In the consumer goods segment, there is a high focus on textile and apparel industry: Shanghai is an important textile center.
China’s logistics market is fragmented, with the top 20 transportation companies accounting for less than 2% market share. The majority of the logistics companies are small and medium sized enterprises, and they mostly operate in the nearby cities. There are a few foreign-owned enterprises such as DHL, FedEx & UPS in China, as well as other state owned and private logistics companies. In 2013, Alibaba group launched “China Smart Logistics Network (CSN)”, a platform to be implemented in the next few years. CSN aims to support seamless information transfers between vendors, online operators and logistics providers.
Overseas companies are not able to dominate the logistics segments in the heavily regulated rail transportation, pharmaceuticals and the emerging e-commerce businesses. The state owned logistics companies operate smoothly in the regulated industries, whereas the private players operate more efficiently and are able to offer better prices for the price sensitive customers. Thus, the private logistics firms dominate the e-commerce market in China. The annual growth rate of online shoppers in some provinces, such as Henan, Shanxi and Xinjiang, is more than 100% and this fuels the rapidly increasing logistics industry in China.
Our first destination for our GAP project is Shanghai, a transportation hub with the world’s busiest port, located on the east coast of China.
Our team visited a local logistics company in Shanghai for a meeting regarding logistics and warehousing solutions for our project. The executives welcomed us warmly and were very enthusiastic about our project. They even involved someone from their office who could understand English which made things much easier for us. The company specializes in warehousing, inbound and outbound logistics operations. Currently, their major business partners are from the F&B (Food & Beverage) and cosmetics industry. The meeting went very smoothly, and we accomplished our set agenda in less than 30 minutes. Unlike popular perception that business meetings in China are slow and you cannot expect much out of your first meeting, I had a completely different experience. Things moved way faster than I expected!
Your email address will not be published. Required fields are marked *
1 Comments
This is a great blog. Thank you for sharing your experiences in the Chinese economy with us.
I am sure you will be great resource person to speak to for future Buckeye's who are planning a visit to China for business, academic of leisure purposes.
Thank you again.
Go Bucks!
Rajat.