For the last 15 years, China's rapid economic development has largely taken place within the provinces and cities located along the east coast of mainland China.  While Beijing, Shanghai, and Guangzhou were initially the gateway cities for many enterprises and multinationals entering China, the metropolises of Chengdu, Chongqing, and Xi'an were largely overlooked due to the logistics issues related to exports produced by these cities.  The result was a lopsided economy that created a large gap in wealth between the coastal and inland provinces.

However, under the leadership of President Hu Jintao, there's been a concerted effort to address this gross disparity of wealth between China's east coast and interior regions.  Special policies and Initiatives, such as "Go West" and "Revitalize the Northeast", have been widely promoted as a means of attracting foreign investment to cities such as Chengdu, Chongqing and Harbin.  At the same time, companies have increasingly looked inland as transportation infrastructure and distribution networks improved. Increased labor costs on the east coast and the growth of healthy provincial consumer markets has also contributed to this redirection of funds.

Perhaps the greatest incentive for foreign companies to increase their commitment to the logistics was the WTO requirement in 2005 that China open its road transportation and warehousing to 100% foreign ownership. Prior to December 2005, only freight forwarding and courier services were available under such ownership terms. In early 2005, international firms eagerly positioned themselves for this enormous opportunity and visits to China by senior executives increased dramatically. More and more multinational companies publicly stated the growing importance of China as a key market in the development of their business.

When Yellow Roadway Corp established an equal partnership with Shanghai Jin Jiang International Industrial Investment Company in a Shanghai-based freight-forwarding company, other multinationals soon followed suit. UPS and FedEx were quick to announce the construction of air hubs in Shanghai and the expansion of warehouse networks into China's central region.

Improved Access for International Providers:
Until now, multinational firms have been compromised in their ability to offer a full range of services, mainly due to the fact that they've been forced into unproductive joint ventures with domestic partners. The only option for trucking services was to outsource to domestic service providers whose unreliability and inefficiency fell short of client needs.

This situation changed in December 2004 however, when WTO restrictions were lifted and international firms were permitted to develop and operate their own trucking fleets. UPS promptly purchased 1,500 trucks. More recently, Exel Logistics and UPS established long-haul "milk runs" that crisscross the Chinese mainland. This represents a huge step towards establishing a nationwide logistics network and increasing the control foreign companies have over the transportation of goods throughout China.

Perhaps the greatest milestone was the WTO regulation that allowed foreign companies to finally invest directly in domestic firms, only six months ago in December 2005. Soon after, Yellow Roadway Corp announced a joint-venture with JHJ international, while UPS announced the opening of their airhub in Shanghai, and FedEx announced the opening of their airhub in Guangzhou/ Shenzhen. 

Most recently a number of companies, including UPS, announced they would launch a domestic express service. This represents another important milestone, as it was only 3 years ago that China Post would confiscate any express pack they considered to be in violation of their monopoly on express package delivery in China.

Local Competition:
One of the most surprising developments in the logistics industry in China is the rapid evolution of domestic companies. In terms of service provision, some Chinese companies have managed to make quantum leaps from their origins as state owned enterprises. Companies such as Shanghai Beijing, Shenzhen Anda, and JHJ (which now operates a JV with Yellow Trucks), have begun to establish strong multimodal domestic networks that operate alongside multinational competitors. In addition to strong service platforms, these local companies offer a reduced cost advantage that most foreign firms simply cannot match.

Another advantage for local companies have been the restrictions placed on foreign providers, which have essentially prevented them from establishing the kind of long-term relationships with multinational clients that local companies enjoy. One of the greatest benefits that domestic companies have capitalized on is the ability to establish relations with multinational clients early in the games, which their foreign competitors were restricted from doing. While there've been problems, for the most part many of the multinational manufacturers and retailers are happy with the service quality of the local firms – and this will be another hurdle for international firms.

  Favorites this article Favorites Total：0

Select Categories: 
Default Category  Add a new classification Submit  Return

RECOMMEND THIS STORY

Recommend It :

Average ( 0 votes )