China's domestic logistics industry is facing a raft of challenges, including high costs, poor infrastructure, a lack of human resources, varying government regulations and uncertainties created by a slowdown in the mainland economy.
These issues have been highlighted in a report published this month by the Li & Fung Research Centre, an offshoot of the global sourcing company, which said total logistics costs were 17.8 per cent of gross domestic product last year. While this was unchanged from 2010 and down from the 18.4 per cent in 2007, it was still double that of developed economies.
The report noted that total logistics costs rose 18.5 per cent last year to 8.4 trillion yuan (HK$10.29 trillion), with transportation accounting for 53 per cent of the total, down from 54.4 per cent in 2007.
By comparison, China's total logistics market was worth 158.4 trillion yuan last year, up 12.3 per cent year on year. The biggest share - 90.2 per cent of the total - involved the movement of industrial products, according to the China Federation of Logistics & Purchasing.
Sng Peng Koon, chief operating officer for domestic integrated logistics in Greater China for Agility Logistics, said logistics costs had risen for a variety of reasons, including higher land, labour and trucking charges.
He said truck operators had to contend with high fuel costs and multiple toll charges on top of to protect their vehicles from attack, particularly in remote areas.
The logistics industry remained highly fragmented, with no company offering comprehensive national coverage. There was also a lack of modern logistics facilities and warehousing in secondary and tertiary cities, Sng said, which had become exacerbated as manufacturing moved inland.