China Logistics
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- 2 Infrastructure
- 2.1 Roads and Trucking
1.2 DemographicsTwenty years ago, the newly ascendant Deng Xiaoping changed the course of China’s economy with a pair of simple observations. To get rich was glorious, he said, but not everyone in China would manage to do it at once. Some people, and some regions, would have to be allowed to get rich first. And some did. By virtue of their geographic advantages and some beneficial government policies, China’s eastern provinces have enjoyed unparalleled economic development that has left the populous rural areas in the west far behind. As a result, the distribution of wealth in modern China is imbalanced (Figure 3 & Figure 4). Now, even as it commemorates the anniversary of Deng’s reform and celebrates its successes, China’s government is struggling to mitigate these disparities. China is the world’s most populous nation with 1.3 billion people in 2001.15 This number is still growing at a rate of 0.8%.16 About 0.8 billion or roughly 62% of the population lives in rural areas mostly in the west and north of China. However, the country’s demand is mainly concentrated in the south, along the coastal provinces in the east and in the major cities like Beijing, Shanghai and Guangzhou. Not surprisingly, these regions contain China’s major logistics facilities including ports, highways, and hubs. They also have the nation’s highest per capita income. Initiatives to establish logistics networks in China’s less developed north and west have faced great challenges. Low per capita income, local protectionism, poor access and a lack of infrastructure make doing business difficult. Most foreign companies have given these regions low priority for the short term. The main population centers have always been in the wheat-growing plains of northern China and the rice paddies along the Yangtze River. However, corporations with household brands and a base capability in eastern China are looking more closely at setting up operations in the western part of the country. China’s Ninth Five-Year Plan aimed to address the widening disparities in wealth and income between the coast and the interior by concentrating investment, both domestic and foreign, in the interior provinces, and the Tenth Plan, which began in 2001, is continuing these efforts. Figure 3 Population Distribution 
Figure 4 Consumer-Product Expenditures by Region (hundreds million) 
Sustained high growth will require strong demand, yet the incomes of most rural residents (who account for 65%17 of the population) have been stagnant for the past four years. China will benefit from continued inflows of foreign investment and a increased exports as the global economy recovers. But given the country's size, the economy still relies primarily on domestic engines of growth, which are sputtering. Migration to urbanization centers has increased over the past five years. This may help resolve the peasant problem, but has been the source of many intractable problems in other developing economies around the world and has been rather closely controlled in China. China is in the throes of a twofold industrial revolution. On the one hand, as with industrial revolutions in other countries, there is a movement of people from the countryside to the towns. On the other hand, to avoid the urban slums of other developing countries, an industrial revolution is also being encouraged in the countryside. While the majority of the labor force is still classified as rural (499m out of a labor force of 711.5m in 200018), as many as 150m19, according to some estimates, have moved to cities in search of employment or higher wages. Millions more who live in the countryside are not employed on the land. An agricultural survey conducted in 1996 found that nearly one-quarter of the rural labor force had taken employment in rural industry or services. Including dependants, the true peasantry now numbers between 480m and 530m.20 The "non-agricultural village population" included in 1999 about 127m employed in township and village enterprises (TVEs).21 In the next section, we will look at the current state and expected development of the infrastructure in China and what it means to MNCs.
Acknowledging these problems, China is accelerating the construction of highways and roads. The principal mission is to connect China’s main economic zones with four leading state and trunk roads along the coast, the Yangtze River, and from Lanzhou to Lianyungang, and Beijng to Guangzhou. At the end of 2000, China had a road transportation network of 1.68 million kilometers, 804,00023 kilometers longer than reported in the first national highway survey in 1979. At the end of 2001, the figure had climbed to some 1.7 million kilometers; the second largest road network in the world.24 In limited areas, highway construction has improved road conditions, and major projects are underway. Princeton-educated Hong Kong developer Gordon Wu built China’s first superhighway, a toll road reportedly modeled after the New Jersey Turnpike. It connects Hong Kong and Guangzhou, with planned further links to Zhuhai, adjacent to Macau. In addition, motorways have been opened between Shanghai and Nanjing and between Tianjin, Tangshan and Beijing. The road transport industry in China is extremely fragmented, with 5.4 million trucks registered to more than 2 million separate trucking providers (an average of 2.7 trucks per company)25. Among all providers, Sinotrans has the largest fleet (3000 trucks). Nevertheless, there is no true national trucking network: Regional, provincial and local fleets - managed by an eclectic mix of local entrepreneurs and local government-affiliated providers – dominate the market, primarily with inefficient, aging or inappropriate vehicles. The overloading, poor service, insufficient preventative maintenance, widespread inefficiencies, minimal quality control, excessive damage caused by bad road conditions and poor equipments are common in this industry. Empty miles average about 50 percent, with resulting annual losses of US$8 billion. Comparatively little financing is available for upgrading equipment and investing in technology. Only 187,000 trucks are registered heavy – duty vehicles and a mere 20 percent of them are containerized26. The containerized volume, 2.4 million TEUs in 1993,27 remains a small fraction of the total. The impact of the low containerization is that goods are frequently damaged in open-back vehicles. Foreign and domestic providers have begun to use container-capable line-haul trucks, which also facilitate inter-modal operations. Road bandits, unauthorized "tolls" and increasing traffic congestion have become pervasive. Some provinces levy extra tolls on out-of-province trucks. Local authorities have even been known to detain and fine out-of-town trucks. The power of local logistics authorities in China should not be underestimated. For example, many cities will not allow trucks to enter without licensing, which can take hours to obtain. Some provinces make it so onerous for outside trucking to secure licenses that shipments must be interlined to the next jurisdiction’s trucks. Other provinces regulate operating hours for visiting trucks. In some cases, trucks are restricted to one-way haulage, or are simply refused a license. Road tolls represent 15-20% of trucking cost, proportionately 9 times higher than in Europe. Because of these inefficiencies, electronics and food products cost 40-50% more to ship in China than in the US.28 Although costs are generally higher than rail and water, road transport is still the preferred option for moving packaged finished goods in China. Download 207.51 Kb. Share with your friends:
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