One-way traffic the big hurdle to rural services

PUBLISHED : Monday, 03 July, 2006, 12:00am
UPDATED : Monday, 03 July, 2006, 12:00am

Many of China's backward and poorer western regions remain isolated, without roads or efficient transport networks.

The central government plans to invest billions of yuan in infrastructure that will better connect the countryside to the cities, but until that starts to take effect rural logistics is largely 'one-way flow' with goods transported to villages but with little or nothing for operators to move on the return leg. The key to overcoming this problem lies in improving the quality and value of agricultural produce.

China may be the world's biggest factory but it is, in fact, a largely agrarian society.

Yet, agricultural or primary industry accounted for a mere 7.4 per cent of the nation's first-quarter GDP of 4.33 trillion yuan.

Raising agricultural efficiency has been a complicated issue. Much newfound wealth is in the coastal areas which have attracted much-need foreign capital.

In return investors have been rewarded with substantial returns.

The same cannot be said for the rural areas, often ruled over by corrupt chieftains who siphon off national financial allocations. However, that could change dramatically in the new five-year development programme under a Beijing pledge to create a new 'socialist countryside'.

Bank regulators are also reforming a rural framework that could better meet the financial needs of farmers who may, in turn, produce agricultural goods of marketable value.

'At present, costs are very high for rural logistics,' said Ding Junfa, vice-chairman of the China Federation of Logistics and Purchasing.

'Agricultural goods are worth less, compared with industrial goods... they aren't worth the costs,' he said.

Nevertheless, some operators, such as China Post Logistics, claim to have achieved early success.

Since it started operations in 2003, China Post Logistics has delivered products worth 9.3 billion yuan in the countryside. Of that, agricultural products have accounted for 5.6 billion yuan.

The operator has been able to tap into the postal system's massive network, even though at the moment, much of the company's business centres on four pilot provinces - Jiangxi, Shandong, Hubei and Henan.

The company said that apart from delivery services, it had introduced value-added products in the form of package deals that included delivery of agricultural goods, making available agriculture information and delivery of rail tickets.

It cited the case of Jiangxi province. Because of economies of scale, China Post Logistics could offer and deliver fertilisers and seeds at a 40 per cent discount.

To expand business further, China Post Logistics said it planned to work more closely with the Ministry of Agriculture to extend pilot schemes to more places in the country. Mr Ding applauded China Post Logistics' early success, pointing out that 'they aren't losing money'.

Rural logistics, he concluded, was a tough system to put in place because it was controlled by the fact that products are mainly perishables.

'How to keep the products fresh while transporting them to market at reasonable costs is the question,' Mr Ding said. 'Everyone is working on coming up with a solution.'