Pages: 8

The introduction begins by explaining the nuances and historical context around the book’s subtitle From Laggard to Innovator. It then sets out the multiple factors that ensure that the upgrading of China’s logistics is of central importance to the Chinese government and to the nation’s economic, social, and political development. It systematically maps out the main themes to be addressed. It poses the key questions to be answered and hints at some of the possible answers.

Pages: 66

No chapter abstract available.

Pages: 10

This chapter explores various meanings of logistics and seeks to find a standard approach or working definition for the term. The distinction is made between broader supply chain management and narrower logistics. The difference is explained between stand-alone transportation and warehousing, on the one hand, and modern integrated logistics, on the other hand. Central to the definition is the degree to which logistics are outsourced to third-party logistics providers. The key attributes of modern logistics are delved into, with an examination not only of the drive toward efficiency and the saving of time and costs but also the trends toward specialization and customized solutions. The newly enhanced strategic role that logistics play in corporate decision-making is highlighted.

Pages: 16

To fully understand China logistics today, it is essential to learn where they have come from, to understand the historical legacies that have molded this sector. After briefly exploring the period of the Republic of China (1912–1949), the focus falls heavily on the People’s Republic of China (PRC) after 1949. This chapter lays bare the dysfunctional nature of the Soviet-inspired centrally planned economy and how it thwarted the rational development of the Chinese economy including the logistics sector. It includes a working level example of this harmful legacy as it still manifested itself in China’s northeastern city of Dalian around 1988. It provides an explanation of how China’s ruling Communist Party embarked on radical market-oriented economic reforms as the surest way to maintain its political hold on the nation. This includes a close-up example of how a traditional state-owned freight forwarding firm rode this tide of change and was able to transform itself into a provider of modern integrated logistics at home and abroad.

Pages: 22

Geography and transportation have an enormous impact since they serve as the foundation over which logistics run. This chapter discusses how geography has shaped economies in China and around the world, presenting both benefits and obstacles for the development of rational logistics. It then explains the extent to which the transportation infrastructure shapes the pattern of logistics. With regard to China’s historical and current transportation mix, the analysis includes the backwardness of China’s freight railways and the recent growth in long-haul trucking on the back of the creation of China’s superhighway network that is larger than the US interstate system. It highlights the push to expand China’s intermodal (containerized rail freight) capability as a way to reduce the reliance on road freight and bring down greenhouse gas emissions. Also examined is the recent rapid growth in domestic air cargo related to e-commerce and how the government is trying to replace that with high-speed rail (HSR) freight, also due to environmental concerns. This chapter then describes how, after the initial period of the reforms during which much of the development was located in the coastal cities, development surged into the interior regions to the West. With that surge has come a rapid growth in the demand for the complex logistics needed to facilitate these extended supply chains. To illustrate this shift from the East into the interior and out West, and with the changing logistics patterns, we examine the track record of the US technology firm Corning Incorporated which has invested heavily in China over many decades.

Pages: 16

China’s logistics are intimately connected with China’s drive to increase the integration of the economy and with that foster enhanced national unity. Having examined China’s ancient dynastic history that includes periods of national fragmentation, this chapter then highlights the modern history during which China has been subjected to invasion and civil war. It explains how the so-called centrally planned economy of the early People’s Republic of China (PRC) left China’s economy relatively fragmented and highlights the central role that China’s modern transportation and logistics are playing in bringing all parts of China, including remote and poorer regions, more fully into the national economy. A central theme of the book is that the role that the Chinese government plays in shaping China’s modern logistics greatly exceeds what is seen in other nations. A key milestone in this role was China’s first five-year plan for logistics which was published in December 2022. Given its significance, this chapter spends considerable time outlining and dissecting the plan, explaining the part the government at a central and local level plays not only in investing in the basic infrastructure role but also in shaping the state-owned logistics firms and in “guiding” those in the private sector. Perspectives are provided on how China’s logistics fit into the government’s recent stronger focus on the domestic economy and on stimulating consumer consumption. To illustrate the way the Chinese government intervenes to foster the growth and upgrading of China’s logistics industry, it looks closely at the Greater Bay Area (linking Hong Kong with South China) and the Hainan Freeport. Before discussing the practical ways in which the Chinese government intervenes to shape China’s logistics, we first examine how this is motivated by a deep-seated urge for national unity.

Pages: 104

No chapter abstract available.

Pages: 18

China’s logistics face a host of strategic challenges. This chapter highlights the reluctance of China’s shippers to outsource their logistics and the reasons for that. The Chinese providers of logistics are in the main small and fragmented, asset intensive, and lacking the appropriate skills and talent. China’s inconsistent implementation of standards and regulations constrains the development of logistics. Explanation is provided on why the China logistics market remains largely bifurcated with Chinese firms using Chinese 3PL and foreign firms using foreign providers. To illustrate how the room for China’s manufacturers to upgrade their logistics capability, there is an examination of the situation at Tsingtao Brewery. When it comes to addressing the opportunities in the China logistics market, this chapter stresses that for a logistics provider, whether Chinese or foreign, the path to success and sustained profitability typically relies heavily on carving out a market niche using a clearly differentiated and defendable value proposition. Heavy emphasis is put not just on the sheer size of the market but also on its growth potential and the demand for high-quality and sophisticated services, coupled with a trend toward higher value goods. It calls out the positive role that government intervention and support are playing in driving demand for modern logistics. Emphasis is placed on the single biggest factor currently driving demand for China’s logistics which is the explosive growth of China’s e-commerce logistics. This has been primarily a story of China’s domestic e-commerce. But it also notes the astonishing arrival of e-commerce firms such as Shein and TEMU, which ship goods from Chinese factories to Western consumers.

Pages: 8

This chapter explains that China’s logistics is becoming increasingly sophisticated and has closely followed the global trend toward Third Party Logistics Provider (3PL) specialization. It notes that cold-chain logistics, whether for food or for pharma, has been an area where China has seriously lagged the rest of the world. It is shown that the Chinese government is playing a prominent part in raising the nation’s level in this critical area. The focus is also on Chinese firms, such as SF, that have led the way in cold-chain capabilities. It also highlights the progress China has made over many decades in creating an efficient and complete logistics network for the flow of auto components and finished vehicles. It is shown that while foreign players brought their expertise to China in this area, Chinese firms quickly ramped up their capability to serve this demanding market segment. This chapter explores how, although initially much of the components flow was through imports, quite swiftly pressure from both car makers and the Chinese government led to auto components being largely localized, creating ever more complex logistics needs. Now that China is preparing to export its EVs, Chinese logistics providers are investing heavily in specialized vessels to carry them.

Pages: 20

We cannot underestimate the transformative impact that technology is having on China’s logistics industry. This transformation is strongly supported and invested in by the Chinese government. This chapter sets out the array of digital technology being deployed in this sector, based on the internet and the IoT, blockchain, and AI. It explains how this technology is deployed through overarching IT platforms that seamlessly link all parties upstream and downstream – shippers, subcontractors, fulfillment firms, customers, and financial institutions. It shows how technology is used to match truckers with return-trip loads, to promote autonomous truck driving, and to monitor truck’s loads and speeds. It delves into how smart warehousing in China is reaching a high level of automation, how e-commerce distribution centers deplore multiple types or robot for handling and sorting. Beyond the digital world, this chapter also examines how other forms of technology such as heavy trucks and railway locomotives are being upgraded, and how new devices such as drones are being deployed for last-mile delivery.

Pages: 13

For China, the efficiency of modern logistics not only provides an uplift in GDP performance but also delivers a very powerful green dividend through reducing greenhouse gas (GHG) emissions. This chapter explains the extent to which China’s government planners are intervening strongly to achieve these green goals in logistics. It throws light on the paramount importance and achievability in the medium term of decarbonization of ground transport. The analysis focuses on reducing pollution from trucks, including through using new forms of fuels including green hydrogen produced from wind and solar power. It highlights China’s role in global agencies and through its shipping lines to address the egregious role of container ships and other vessels in GHG emissions. It documents new forms of propulsion that are being phased in (green methanol) or are to be introduced (such as onboard Thorium molten salt reactors). This chapter explains how the massive growth in China’s domestic air cargo business in response to the surge in e-commerce has prompted the government to urge shippers to shift to more reliance on high-speed rail freight which is now beginning to be used on the formerly exclusive high-speed passenger lines.

Pages: 7

China’s government planning goes at length into how logistics are a critical element in addressing natural disasters such as pandemic disease, earthquakes, forest and grassland fires, floods, and droughts. This is a part of the social purpose that China sees for modern logistics. In this chapter, it is shown how during the COVID-19 crisis, China’s exemplary handling of logistics plays a useful role in stabilizing international logistics and maintaining global trade and supply chains. Chinese ports avoided the kind of chronic congestion seen for instance in Los Angeles/Long Beach. With regard to airfreight which was vital for the shipment of protective equipment from factories in China, it is explained how the continuity of supply was assured despite acute shortages of air cargo capacity, brought on by the shutting down of passenger air routes and the belly cargo they typically could carry. Beyond successful handling of the logistics around the COVID-19 pandemic, this chapter also looks at China’s strong logistics response to the 2008 earthquake in Wenchuan, Sichuan.

Pages: 15

This chapter throws light on the much-debated subject of the Belt and Road Initiative (BRI) emphasizing its core nature as a commercial proposition, albeit with some geopolitical underpinnings or implications. It is shown that, at heart, the BRI about logistics, the flow of goods and materials. The land bridge of the BRI between China and Europe is often dismissed as unimportant. It is shown that, even though ocean shipping will continue to carry the lion’s share of China-Europe trade, the burgeoning China-Europe rail links will play an important role for certain types of goods and also have strategic risk mitigation significance for China (in the event, sea lanes were closed). This chapter documents how local Chinese governments, for instance in interior cities such as Xi’an, Chengdu, and Chongqing, are creating transportation and storage hubs to service the rail lines that cross central Asia. It shows how Chinese and foreign logistics firms are active in booking and selling capacity on these new links. Another key element of the BRI has been China’s investment in ports along the BRI’s sea route. It is explained how China has invested in Piraeus (in Greece) and other ports. It highlights the extent to which China is using automation to drive efficiency in its ports at home and abroad. It sheds light on another feature of China’s international logistics reach, which is the recent rapid growth in its airfreight capability, an area that had been historically an area of weakness.

Pages: 9

This chapter bluntly lays out the new uncertainties around world trade and in particular US-China relations. But in sounding the warning about the growing geopolitical tensions fueled by a wide range of concerns ranging from national security to unfair trading practices, it stresses the likely resistance of the globalized world order to political pressures. While it is acknowledged that some degree of decoupling or de-risking is inevitable and is already happening, the vested interests of large firms and the inertia around the supply chains they have constructed over decades will likely make this process more partial than complete. Also, the analysis shows that much of the shift away from China is toward SE Asia and not back to the US. This chapter also notes that nations such as Japan and particularly South Korea have very deep-rooted trade and direct investment relations with China so that activity and the logistics that come with it will likely be even more resilient. Moreover, as some deglobalization or modest decoupling unfolds, it is noted that this process will affect different products in different ways or degrees. It is a complicated picture that defies broad generalizations.

Pages: 12

It is no exaggeration to state that the issues related to Taiwan present a very serious risk not just to world peace but also to the global economy and with that the logistics that make it function. In this chapter, put the Taiwan situation in its historical context. It is argued that while all-out war between the US and China over Taiwan may be relatively low probability, the likelihood of something short of that – accidental incident, blockade, military stand-off – is much more probable and would have a massive impact of trade flows. The tensions in the South China Sea over China’s territorial claims (the Nine-Dash Line) further place the region at risk of military conflict or short of that severe trade disruption. This chapter highlights the critical role that Taiwan’s semiconductors play in the global economy and the complex network of suppliers that feed into the wafer fabs of Taiwan Semiconductor Manufacturing Company (TSMC) and others. Two analogies are provided in order to illustrate how a Taiwan crisis might unfold: First, how the actions of the Houthis in the Red Sea have forced shipping to travel around Africa and, second, how the Ukraine-Russia war has forced airfreight to be re-routed.

Pages: 52

No chapter abstract available.

Pages: 32

This chapter provides in-depth profiles of a series of representative China logistics firms both state-owned and private enterprises. It is shown how these firms have emerged from varied backgrounds – freight forwarding, liner shipping, warehousing, and e-commerce – each with their own specific DNA, capabilities, and cultures. The first group is state-owned firms that have emerged from the pre-reform planned economy. It is explained that while Sinotrans stands out as one that is best at making the business and cultural shift into the modern economy, COSCO Shipping has also proved to be a strong player, though still overshadowed by its shipping background. It is noted that the jury is still out about China Logistics Group, recently cobbled together from a number of warehousing and rail logistics firms. Among the private firms in this sector, this chapter focuses on two e-commerce logistics firms Alibaba’s Cainiao and JD Logistics, plus four smaller but important firms that concentrate on delivery. In examining Cainiao and JD, light is shed on their contrasting strategies when it comes to asset-intensity and owning the downstream transportation. This chapter also profiles SF (Shunfeng) which has consciously modeled itself as China’s FedEx and, on top of its strong domestic footprint, is now building out internationally through acquisitions. This chapter also provides insights into fast-growing international e-commerce players Shein and TEMU and related logistics, as well as into some Chinese manufacturers which have chosen to keep their logistics in-house, rather than outsource.

Pages: 18

This chapter begins by explaining why China, as it opened up to foreign investment, was slow to embrace modern logistics. The analysis tracks the painful early efforts of foreign players to gain market access. It highlights the continued barriers that they face in operating in China’s domestic logistics industry. There is no perfect or simple way for a foreign firm to enter China’s logistics market. Some chose to go along. But in this chapter, it is also demonstrated how partnerships with Chinese firms can be long-standing and profitable. To illustrate the successes and failures of foreign players in China, we have used three contrasting case examples. The case of DHL shows three different businesses and three different stories. The analysis explains how DHL’s express business, working in partnership with Sinotrans, is a long-standing success story while its freight forwarding business in China remains subscale and has underperformed, while its supply chain logistics business has been forced to sell out to a Chinese competitor. This chapter also includes the story of how the US firm Ryder System resisted the temptation to partner with a Chinese firm and went it alone, demonstrating that skills (such as auto logistics) honed in the US can be transferred to China. Finally, this chapter profiles Havi Foods which built its strong position in China serving primarily one large client – McDonald’s. It pioneered cold-chain logistics in China and successfully created the supply chain that sustains thousands of their restaurants across China.

Pages: 22

No chapter abstract available.

Pages: 20

This chapter begins by assessing the broad scenarios – mainly geopolitical – that could disrupt or sustain China’s logistics at home and abroad. It examines their probability and potential impact. It then moves on to look at the broad economic factors that will be drivers of China’s logistics. It sums up the enormous impact China’s new transportation infrastructure is having on China’s logistics as they seek to catch up with the rest of the world. There is analysis of the extraordinary turn of events in China whereby, despite remaining weaknesses in much of its logistics, in some areas, there is a shift from being a laggard to leapfrogging its international peers. Strong emphasis is placed on the vital and exemplary role of the Chinese government in shaping China’s logistics, at the central and local levels, through planning, regulations, and investment. It is stressed that this intervention by the government is driven by a variety of goals including economic efficiency, the green dividend, national economic integration, and the desire to stimulate consumption, especially in the poorer, remote areas. The conclusions around the emergence of major players in modern logistics provide significant praise for the way state-owned giants have transformed themselves. But the analysis points to the fact the breakout players are the private firms, especially those active in e-commerce. While there is acknowledgment of the difficulty foreign logistics firms have had and still face in operating in China, it is also noted that if a foreign player can differentiate itself through finding a specialized niche capability, and maybe in partnership with a China firm, there is potential to carve out a reasonable and profitable market space in China. This chapter makes the assessment that China’s international logistics face much more uncertainty than does the domestic market. Trade and technology war coupled Taiwan risk put trade flows and logistics at risk.