Shippers run into high cost road block

Reform the inefficient logistics sector on mainland to improve growth, say firms

PUBLISHED : Monday, 12 November, 2012, 12:00am
UPDATED : Monday, 12 November, 2012, 4:27am

The mainland's huge and fast-growing logistics market is plagued by high costs, said industry players at the recent Asian Logistics and Maritime Conference.

"We hope after the 18th party congress, there will be reforms to resolve problems in the sector," said He Liming, president of the China Federation of Logistics and Purchasing.

The federation has raised its concerns with various mainland government bodies including the Ministry of Commerce, He said.

"They have been working on improving it, but the improvement is not perfect, because many government departments are involved."

Mainland China's logistics cost is double that of developed countries, said Liu Wu, the founding chairman of P.G. Logistics Group, headquartered in Guangzhou. "The feedback from our clients is China's logistics sector must be reformed."

Though the sector had grown rapidly, efficiencies had failed to keep pace, said He. From 2001 to 2010, the value added by the mainland's logistics industry enjoyed 14.8 per cent average annual growth, but what was now needed was high-efficiency growth.

During the first three quarters this year, the mainland's logistics revenue grew 9.6 per cent to 130.7 trillion yuan (HK$161.01 trillion), but its logistics costs rose 11.3 per cent to 6.4 trillion yuan, accounting for 18.1 per cent of the economy's GDP, according to the China Federation of Logistics and Purchasing.

It is cheaper to transport a container from the west coast to the east coast of the United States than from Xinjiang Uygur Autonomous Region to Shanghai.

This is because the container is transported by rail in the US while it is transported by truck in China, said Allan Wong, chief executive of OOCL Logistics, a subsidiary of OOCL, the shipping company controlled by the family of former Hong Kong chief executive Tung Chee-hwa.

"Why are our logistics costs higher than developed countries? China's serious logistic problem is the many high fees charged," said He.

The mainland has 90,000 kilometres of toll highways, with some highways charging tolls after 30 years in operation - long after they had covered their construction costs, he said.

The mainland's logistics costs should be lower than those of developed nations but are driven up by waste, poor planning, and management problems, said Liu.

Another reason is the under-developed infrastructure in remote regions, which makes delivery to those areas expensive, said Chen Nian, chief executive of VANCL, a Chinese e-commerce firm that sells garments online.

"The problems in China's logistics sector are not for the government to resolve. They must be solved by market forces," he said.