Logistics industry in China

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Enterprises are requiring efficient, specialized and socialized logistics service, and will form a market basis supporting fostering and growing of logistics industry in China. Our company is named XXX and it is an e-logistics company operating in China. Our company is operating on a low-cost and effective base. The aim of the Company is to provide fast and in-time delivery in an efficient way to manufacturers and distributors in China.

Opportunities come from

Since China opened up itself to the world, it has been in a process of rapid economy development. China is the fastest-growing economy in the world; it had an annual economy growth rate of almost 10 per cent the past decade (World Bank, 2000). Additionally, China accession to the WTO in 2001 is expected to bring a new round of economic growth. According to a report by the International Investment Bank, China’s economy is forecast to grow at an average six percent annually during the coming two decades (China.org.cn, 2002). Looking decades ahead into the future, many informed observers see China moving steadily to the top of the world’s economic league. The Economist forecasted that, within 20 years, China would become the second largest economy in the world (The Economist, 2001).

Due to the rapid development of China’s economy, more and more foreign companies have seen China as a potential market. Some of them have already invested in China and others are preparing the investments. China now is the largest source of absorbing foreign investments in the world. According to Ministry of Commerce of People’s Republic of China, in the first three months of 2003, the accumulative value of contracted foreign direct investment in China was 22.9 billion and US dollars, setting a record growth rate of 59.59 per cent year-on-year (MOFCOM, 2003). The Economist Intelligence Unit forecast that the FDI in China would reach to nearly 70 billion US dollars in 2005.

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The continuous development of China’s economy will attract more foreign investments. Since logistics has been developing in western countries for a long time, these foreign firms will try to adopt modern and advanced logistic management in their firms in China, the opportunity of China’s logistics development raises. In addition, with more foreign firms entering China market, China domestic firms will adopt western methods in order to become more competitive in the markets, such as just-in-time (JIT) into their production, which brings another opportunity for China’s logistics development.

China wants to turn around a picture where a staggering 90% of the entire production cycle for enterprises is currently taken up by logistical considerations, according to the UN Nations Development Programme’s China Office (Hong Kong Trade Development Council, 2002). Moreover, China government has realized the importance of logistics industry. China’s Ministry of Communications (MoC) released a memorandum in March 2001, urging cargo carriers to expand their services to the logistics area. And, in fact, logistics to create an efficient supply/demand chain is enshrined as a key sector in the country’s 10th five-year plan, leading up to 2005.

However, logistics is not a new industry in China, some firms have already been involved in logistics for a while, and they are more familiar with the local markets and able to provide low-cost services, but they are unable to cope properly with strategic alliances in the supply chain, such as global multi-modal networks, high tech warehousing, services for process integration (such as JIT and processing trade), sophisticated information and communication technology, or logistics consulting. These disadvantages of domestic logistics firms are essential for high quality and global logistics services. With these drawbacks, domestic logistics firms may not be able to gain business from foreign companies. According to MOFCOM, firms with international backing account for more than half the value of China’s trade while most foreign-funded enterprises work closely with their long-term logistics services providers (MOFCOM, 2003).

However, the economy growth discussed above is also in the way with problems. China’s logistics infrastructure is straining under the weight of its new economic growth: insufficient highways, ancient port facilities, and limited runways and airports. The overwhelming of Chinese infrastructure by economic growth has led to relatively expensive and poor quality transport.

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