Logistics in China remains crucial challenge

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All Roads Lead to China recently emphasized the importance of logistical frameworks in facilitating trade and investment in China, citing as citing as further proof a World Bank report of early November (based on a world survey of international freight forwarders and express carriers) stating that trade logistics (the capacity to connect to international markets to ship goods) is critical for developing countries to improve their competitiveness in 'an increasingly integrated world'. In China, the posting concluded,

the logistics industry that has been set up for the export market is in many ways the most efficient system in place... Domestically though, China is still in a mess in many ways... but is improving.  

DHL Worldwide Express Inc. announced plans last week to invest $175 million on a new North Asia cargo hub at Shanghai's Pudong International Airport, and the CEO of DHL for Asia-Pacific was quoted as saying 'China remains the most important player in the global logistics chain in North Asia.' News reports last week (see China Daily's) also had China joining the 'world elite' in shipping, with the number of container units handled by mainland ports this year hitting the 100 million mark. Yet the China Daily article also quoted comments by Song Dexing, Director of the Chinese government's Water Transport Department, who claimed that China

is still a long way from meeting the growing demand of its rapidly expanding economy. The container industry must move away from traditional transportation and toward comprehensive logistics and service industries.

In fact, Logistics Management magazine identified China's underdeveloped transport infrastructure and immature logistics industry as a crucial challenge to the government's pursuit of a 'harmonious society.' Fragmented distribution systems, limited use of technology in the distribution and logistics sector, dearth of logistics talent, regulatory restrictions and local protectionism are all factors inhibiting the efficient distribution of domestic and imported products. Despite China's reputation as a low-cost country for business, selling in China remains expensive. Logistical costs are 40-50% higher in China than in the U.S., and by 2010 China will need an estimated 400,000 logistics professionals, while local universities struggle to produce even 10,000 logistics graduates a year. The logistics industry has at least begun to consolidate, which is gradually stiffening competition and lifting service standards. There are still over 18,000 registered logistics providers in China, however, and no single company commands more than 2% of the market. 

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