[photopress:logistic_China.JPG,full,alignright]China now accounts for 8% of global exports and recently overtook Japan as the world’s third-largest country in terms of foreign trade volumes. Exports have more than doubled over the last five years and are expected to double again by 2010, accounting for 11% of the global total.
According to the China Federation of Logistics and Purchasing (CFLP), logistics industry revenue grew 20% in 2002, 27% in 2003, 30% in 2004 and 33% in 2005. Which is pretty snazzy and shows amazing growth. But the picture is far from perfect.
According to Business Week the industry in China is still dogged by inefficiency, with CFLP figures showing that logistics costs accounted for 21.6% of GDP in 2004.
Given that logistics costs come to 9% of the United States GDP and 11% of Japanese GDP, it could be argued that China wastes around one-tenth of its total GDP through logistical inefficiencies.
This seems to be a fair assessment and matches other available figures.
The total handling capacity of China’s coastal ports is already over one billion tons, and capacity is increasing quickly. But not that is not quite enough.
Speaking in January, Shen Yihua, vice director of the commerce ministry’s Waterway Transport Planning Institute, said that China cannot expand port facilities quickly enough to meet rising demand. In 2005, the turnover capacity of coastal ports was officially 2.52 billion tons, but 3.38 billion tons were actually handled.
He said, ‘In the next 10 years, the development of port construction should be faster than economic growth.’
David Oldridge, an associate at consultancy JHK Hong Kong, suggested where the main problems lie: ‘institutionalised bureaucracy.’ Up to five government organizations are involved in the logistics function in China, many of which operate on a provincial level.
Jaime Bolton, Greater China and North Asia supply chain management lead for consultancy Accenture, said, ‘I guess in any country those types of processes can be streamlined. If you look at the facts and you see that logistics is double the cost of elsewhere, I think there are certainly opportunities for streamlining.’
Source: Businessweek
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