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Chinese logistics industry sees rapid development

(China Daily)
Updated: 2008-10-27 10:40

Famous global brands for logistics technology and equipment will get front row seats to see how China has developed the industry at the CeMAT ASIA 2008 exhibition at the end of the month in Shanghai.

The four-day exhibition allows Chinese logistics equipment and manufacturers one of the biggest opportunities to showcase their new technology and products while scouting areas for potential business cooperation among foreign counterparts. Some 380 exhibitors from 25 countries and regions are expected to attend the event at Shanghai New International Expo Centre.

As the leading event in the logistics field, CeMAT ASIA will showcase the industry's latest products and technologies. Though the logistics industry as a concept was almost unknown to the Chinese 30 years ago, it is an area of business that China has been developing on an impressive scale.

Statistics from China Federation of Logistics and Purchasing (CFLP) show the nation's output value for logistics equipment increased almost seven times, reaching 200 billion yuan ($29.28 billion) last year, up from 30 billion yuan in 2002.

With an annual growth rate of 30 percent, China's logistics equipment sector is now able to cater to a wide range of logistics services, from transportation equipment including cranes and forklifts, to port and airport facilities.

CFLP Executive Vice-Chairman He Liming has noticed the industry's tremendous development over the years. He used to lament the gap between China and the West regarding logistics hardware. But, the last decade has seen big changes. The country's rapid economic growth has stimulated a greater need for logistics services - creating demand for related equipment.

He said such was the case with Shanghai Tobacco Group's logistics center. Its facilities today are equal to, if not better than, those in developed countries. After investing over 600 million yuan into logistics, the company has reached an annual distribution capacity of 950,000 boxes of tobacco and 30 million boxes of general merchandise.

Zhou Yun, secretary-general of the logistics branch under the Chinese Mechanical Engineering Society, agrees China has come a long way in the industry. He notes the country today boasts logistics equipment giant Zhenghua Port Machinery Co Ltd, which holds a market share of up to 70 percent in the world's port machinery sector.

The industry has also become a lot more competitive for products being produced in China as major international manufacturers within the sector have set up joint ventures or wholly owned plants in the country. Industry experts welcome the move because it encourages knowledge sharing between China and the West while bringing in increased foreign capital and advanced production facilities.

Experts are confident about the sector's future given the strong momentum of the logistics industry. But, like many other Chinese industries that have developed too quickly, the logistics industry has become an over-heated market, where many small and medium-sized companies have expanded too fast without adequate capacities.

"As a result, the profit margin of the traditional logistics sector like transportation has been squeezed to less than 5 percent," Zhou said.

The situation is further compounded by high logistical costs in China compared to the United States and Japan, which means the country still lags behind in logistics efficiency. In order to compete, Chinese companies need to step up on technological innovation and develop a niche market, said Zhou.

"Given the relative small scale of Chinese companies, the number of one-stop logistics service providers in China is still very limited," he said. "But, it's not necessary for all of them to be big and versatile."

Zhou added government support through investments in technological developments and talent cultivation as well as policy intervention for setting standards on market entries will also help ensure the industry's strong international presence.