Logistics in China

Introduction

China is a sprawling nation covering some 9.5 million sq km. Getting resources across this vast area to reach the country’s 1.3 billion people is no easy task. For that reason, China’s logistics industry is one of the most vibrant and potentially rewarding industries in the country. Over the last few years, China’s logistics industry has attracted a large amount of attention – be it from manufacturers, wholesalers, logistics service providers, educational organizations, or research institutions.

As the most populous nation in the world, China’s logistics industry has taken on a life of its own. In order to understand the logistics industry as a whole and tap into the potential wealth that the country holds in this area, it is necessary to have an overview of the various segments of the industry.

The development of an integrated, nationwide logistics industry is hampered by three sets of problems.  The first, and most obvious, is China’s unfriendly geography and its extreme size. Secondly, transportation networks are heavily fragmented, with regulatory barriers that prevent consolidation.  As a result, third-party logistics providers (3PLs) have emerged as a popular choice for multinational companies seeking to move product across the country. Thirdly, logistics capabilities are limited and continue to lag behind more developed nations.  Key problems include inferior equipment and poorly trained workers.  China’s history of state ownership in this sector has left a legacy of poor management and an infrastructure geared toward the movement of bulk commodities.  As a result, the system is poorly equipped to handle perishable or sensitive goods, track shipments or handle containerized shipments over land.

In short, China’s logistics industry faces major operational obstacles.  Government planners are now playing ‘catch-up,’ and the government has given logistics a high priority in its current investment plan (the ‘Five-Year Plan’).  Increased...