“China's economic growth has made a major impact on the global logistics and transportation industries,” Yansheng Zhang, director of the Chinese Mainland's Institute of International Economic Research, told a meeting of the Chartered Institute of Logistics and Transport (CILT). Of the top 30 ports in the world in 2007, 10 were on the Chinese Mainland, he added.
Anthony Lau, president of the CILT in Hong Kong, noted that the Chinese mainland's rapid growth has increased Hong Kong's importance as a gateway between East and West. Stanley Hui, CEO of the Hong Kong Airport Authority added that half the world's population is within five hours' flying time of Hong Kong, making it an ideal transshipment point. Supporting his statement, Hui noted cargo throughput at Hong Kong's airport was 3.74 million tonnes in 2007, up 4.5% over 2006.
Speaking of mergers and acquisitions, Nick Gowlland, head of transport and logistics with NM Rothschilds & Sons (Hong Kong), noted that while Europe accounted for 40% of the global logistics market and the US 37%, Asia outside China only accounts for 14% and China 9%. This suggests tremendous pent up demand, he said.
Vincent Wong, former joint managing director with Kerry Logistics Network Limited (Hong Kong), noted that China's logistics industry is worth US$ 500 billion a year and is growing at about 25%. Third-party logistics providers have only been able to penetrate about 3% of the market, according to Wong. This share could increase to US$ 32 billion by 2010, but on low margins of 5% to 10%.
Principal services provided by logistics services companies include transport, warehousing, customs clearance and forwarding.
The challenges of doing business in China are formidable, said Wong. Mainland firms prefer to keep their logistics operations in-house and regard logistics as a way of reducing direct costs rather than improving supply chain efficiencies, he pointed out. Competition is ferocious, with over one million registered logistics services providers in the People's Republic of China of which 90% are small- and medium-sized companies.
There are 850,000 trucking companies on the Mainland with an average of 1.4 vehicles per company, continued Wong. The international express deliveries sector is dominated by a few providers: DHL and Sinotrans (38% of the market), EMS (30%), FedEx and Datian (16%) and TNT-Marchplus (6%).
“The market remains extremely fragmented with no real pan-China player yet,” said Wong. Firms are still competing on price rather than quality of service.
Road transport accounts for 76% of total transport and since 75% of all main highways in China are toll roads, tolls account for 30% to 40% of costs. In addition, 70% of all accidents and 50% of all road injuries and deaths are related to overloaded trucks.