Choosing a Path in China

Jan. 19, 2007
The tools of diplomacy vary with time and the parties involved. In the case of China, logistics can play a major role in the development of the nation

The tools of diplomacy vary with time and the parties involved. In the case of China, logistics can play a major role in the development of the nation and its economy. The United States is in a unique position to aid that process.

China's rapid growth carries a measure of problems along with the opportunities. Journalists are reporting dissent among classes of the population that feel they aren't participating in the economic revolution. There's rising crime and other problems in some of the boom towns. That's not unexpected when you see a sleepy fishing village like Shenzhen, population 30,000, become a megalopolis of roughly 10 million souls in just over a decade.

Logistics is not just important to the growth and success of China's new economy, it is absolutely critical. For a Twentieth Century example of what happens when logistics systems aren't built or are not built and maintained adequately, just look at the dissolution of the Soviet Union. What prosperity there was often couldn't reach the majority of the population. Examples abound of farm crops that spoiled before they could reach markets due to inadequate or inefficient transport and logistics networks. This created artificial shortages that were, nonetheless, discouraging and disruptive to major portions of society. Repeated failures contributed to intolerance and a decline in confidence that helped undermine the government.

It's simplistic to say that poor logistics brought down the Soviet Union or that the rise of logistics is the sole hope for China, but when the United States harnessed the power of efficient, market-driven logistics, it was able to drive relative prosperity to most of the nation and become the world's dominant economic force.

The U.S. experience building and funding the needed infrastructure, regulating safety issues (and deregulating economically) provide a wealth of positive and negative examples to help China with its own logistics evolution. The U.S. also has resources in the executive suite and the halls of academe who can advise Chinese leaders.

European leaders recognized the importance of the free flow of people, capital and goods when they signed the Treaty of Rome in 1957, establishing the foundation for the European Union. Like the United States, the E.U. has had a contentious history in funding, building and operating its infrastructure. Cabotage rules designed to protect local transportation markets had to be eliminated in accordance with the Treaty of Rome. The United States had preceded the Europeans by nearly 200 years, granting Congress the power to limit states' rights to regulate the economy— to avoid state actions limiting interstate commerce—but it was still dismantling intrastate transportation rules as late as the mid 1980s.

At 20% of China's gross domestic product, logistics costs reflect an inherent inefficiency which can be fixed (the United States spends about 10% of its GDP on logistics). The Western economies have the experience that helps them understand the issues and the solutions. China is openly seeking help in accelerating its logistics development. We have the opportunity and ability to help. Even if it's only naked self interest, the logistics community has to ask if we will help, and how much?