China Logistics Development Report 2010 Edition II

China Intelligence Online

中国物流行业发展报告

China Logistics Development Report 2010
Edition II

A sectoral research report from CIO
Informing business in China

www.chinaintelligenceonline.com

1 Table of Contents
1 TABLE OF CONTENTS ......................................................................................................................... 2
2 CHINA INTELLIGENCE ONLINE .......................................................................................................... 12
3 INDUSTRY SNAPSHOT ..................................................................................................................... 13
4 EXECUTIVE SUMMARY .................................................................................................................... 14
5 CHINA LOGISTICS INDUSTRY ............................................................................................................ 24
5.1 OVERVIEW ........................................................................................................................................ 24
5.1.1 GLOBAL ECONOMIC REVIEW .......................................................................................................................... 24
5.2 2009 GLOBAL TRADE REVIEW ............................................................................................................... 26
5.2.1 FOREIGN TRADE GROWTH SLOWED, IMPORT VOLUME SURPASSED EXPORT VOLUME ............................................ 31
5.2.2 ECONOMIC DEVELOPMENT OF CHINA’S COASTAL REGIONS ................................................................................ 31
5.2.3 GENERAL ECONOMIC OVERVIEW; THE POLICY STIMULUS RESULTS ........................................................................ 32
5.2.4 LOGISTICS INDUSTRY DEVELOPMENT OVER 2008-9 AND OUTLOOK FOR 2010 ...................................................... 34
5.2.5 GROWING IMPORTANCE OF LOGISTICS INDUSTRY .............................................................................................. 35
5.2.6 BASIC PRINCIPLES OF DEVELOPMENT .............................................................................................................. 35
5.2.7 PERCEIVED WEAKNESSES .............................................................................................................................. 36
5.2.8 IMPACT OF FLUCTUATING OIL PRICES ON THE LOGISTICS INDUSTRY ....................................................................... 36
5.2.9 FUEL TAX REFORM PLAN ............................................................................................................................... 36
5.2.10 LABOUR LAW ............................................................................................................................................. 37
5.2.11 FOREIGN DIRECT INVESTMENT IN CHINA ......................................................................................................... 37
5.2.12 KEY STATISTICAL DATA ................................................................................................................................. 38
5.3 IMPACT OF NATURAL DISASTERS AND BEIJING OLYMPICS ON CHINA’S LOGISTICS INDUSTRY ................................... 39
5.3.1 IMPACT OF EXTREME WEATHER SPRING 2008 .................................................................................................. 39
5.3.2 THE 5· WENCHUAN EARTHQUAKE ............................................................................................................. 40
12
5.3.3 BEIJING OLYMPICS ...................................................................................................................................... 40
5.4 KEY POLICY DEVELOPMENTS .................................................................................................................. 41
5.4.1 GO WEST .................................................................................................................................................. 42
5.4.2 GOALS IN 2010 .......................................................................................................................................... 42
5.5 THE LOGISTICS STIMULUS PACKAGE ......................................................................................................... 44
5.5.1 THE NEED FOR LOGISTICS INDUSTRY STIMULUS AND RESTRUCTURING PLAN ........................................................... 44
5.5.2 OBJECTIVES ................................................................................................................................................ 44
5.5.3 REGIONAL DEVELOPMENTS ........................................................................................................................... 49
5.5.4 MAIN THEMES ............................................................................................................................................ 49
5.5.5 IMPLICATIONS ............................................................................................................................................ 50
5.5.6 IMPLEMENTATION ....................................................................................................................................... 51
5.6 OPPORTUNITIES FOR FOREIGN LOGISTICS PROVIDERS AND SUPPORTING INDUSTRIES WITHIN POLICY DEVELOPMENT ... 52
5.7 CHALLENGES PRESENTED BY POLICY DEVELOPMENT..................................................................................... 54
5.8 KEY PROJECTS .................................................................................................................................... 55
5.8.1 POLICY IMPLEMENTATION ............................................................................................................................ 55
6 THE GEOGRAPHY OF CHINA’S ECONOMIC ENVIRONMENT................................................................ 56
6.1 OVERVIEW ........................................................................................................................................ 56
6.2 THE EAST COAST (AND FUJIAN PROVINCE) ................................................................................................ 60
6.2.1 GENERAL OVERVIEW ................................................................................................................................... 60
6.2.2 LOGISTICAL OVERVIEW ................................................................................................................................ 60
6.2.3 KEY DYNAMICS ........................................................................................................................................... 60
6.3 PEARL RIVER DELTA (PRD) .................................................................................................................... 62
6.3.1 GENERAL OVERVIEW .................................................................................................................................... 62
6.3.2 LOGISTICAL OVERVIEW ................................................................................................................................. 63
6.3.3 KEY DYNAMICS ........................................................................................................................................... 63

中国物流发展报告 China Logistics Development Report 20 10 2


6.4 THE YANGTZE RIVER DELTA.................................................................................................................... 65
6.4.1 GENERAL OVERVIEW .................................................................................................................................... 65
6.4.3 KEY DYNAMICS ........................................................................................................................................... 66
6.5 BOHAI BAY ........................................................................................................................................ 67
6.5.3 KEY DYNAMICS ........................................................................................................................................... 68
6.6 THE SOUTHWEST ................................................................................................................................ 69
6.6.3 KEY DYNAMICS ........................................................................................................................................... 70
6.7 THE NORTHEAST ................................................................................................................................. 71
6.7.3 KEY DYNAMICS ........................................................................................................................................... 71
6.8 NORTHWEST CHINA............................................................................................................................. 73
6.8.3 KEY DYNAMICS ........................................................................................................................................... 73
6.9 CENTRAL CHINA ................................................................................................................................. 75
6.9.3 KEY DYNAMICS ........................................................................................................................................... 75
6.10 THE YANGTZE RIVER (CHINA’S THIRD COAST)............................................................................................. 76
6.10.3 KEY DYNAMICS ........................................................................................................................................... 77
6.11 URBANISATION AND THE CHANGING STRUCTURE OF LOGISTICS NETWORKS ....................................................... 79
7 REGIONAL MARKET DYNAMICS ....................................................................................................... 80
7.1 GROWTH OF INTA-ASIA FREIGHT MOVEMENT ............................................................................................ 80
7.2 ASIA’S DECOUPLING MYTH ................................................................................................................... 82
8 AIR TRANSPORT.............................................................................................................................. 85
8.1 OVERVIEW ........................................................................................................................................ 85
8.2 REVIEW OF AIR CARGO INDUSTRY IN 2009 AND OUTLOOK FOR 2010.............................................................. 89
8.2.1 REVIEW OF AIR CARGO INDUSTRY IN 2009 ..................................................................................................... 89
8.3 OUTLOOK FOR 2010 AND 2011 ............................................................................................................. 94
8.3.1 INFRASTRUCTURE AND MAIN PROJECTS .......................................................................................................... 96
8.4 KEY DYNAMICS ................................................................................................................................... 99
9 ROAD TRANSPORT ........................................................................................................................ 100
9.1 OVERVIEW ...................................................................................................................................... 100
9.1.1 INDUSTRY DEVELOPMENT OVER 2008-9 AND OUTLOOK FOR 2010 ................................................................... 100
9.1.2 INFRASTRUCTURE AND MAIN PROJECTS ........................................................................................................ 102
9.2 KEY DYNAMICS ................................................................................................................................. 105
10 EXPRESS DELIVERY SECTOR ........................................................................................................... 106
10.1 OVERVIEW ...................................................................................................................................... 106
10.2 REVIEW OF 2009 .............................................................................................................................. 109
10.2.1 OVERVIEW ............................................................................................................................................... 109
10.2.2 SIGNIFICANT IMPROVEMENT IN THE ADMINISTRATIVE ENVIRONMENT................................................................ 113
10.2.3 THE INTEGRATION OF EXPRESS SERVICE BUSINESSES ....................................................................................... 113
10.2.4 E-COMMERCE ENHANCES THE CONTINUOUS GROWTH OF THE EXPRESS SERVICE INDUSTRY .................................... 114



10.2.5 THE ESTABLISHMENT OF CHINA EXPRESS ASSOCIATION.................................................................................... 114
10.2.6 MAJOR ISSUES .......................................................................................................................................... 115
10.3 OUTLOOK FOR 2010 ......................................................................................................................... 116
10.3.1 AS NATIONAL MACRO ECONOMY IMPROVES, EXPRESS DELIVERY MARKET ACHIEVED RAPID GROWTH ................... 116
10.3.2 BOOSTING INDUSTRY DEVELOPMENT THROUGH IMPLEMENTATION OF NEW POSTAL LAW .................................... 117
10.3.3 EXPLORE NEW MARKETS AND NEW BUSINESS MODELS .................................................................................. 117
10.3.4 IMPROVED SERVICE QUALITY WITH ENHANCED COMPETITION .......................................................................... 118
10.3.5 ACCELERATE INDUSTRY RESTRUCTURING ....................................................................................................... 118
10.4 RESULTS FROM THE FIRST SURVEY OF THE EXPRESS INDUSTRY ...................................................................... 118
10.4.1 MARKET STRUCTURE ................................................................................................................................. 123
10.4.2 SMALL SCALE ENTERPRISES ......................................................................................................................... 123
10.4.3 LARGER SCALE ENTERPRISES ....................................................................................................................... 124
10.5 GOVERNMENT POLICY........................................................................................................................ 125
10.5.1 POLICIES TO MITIGATE FINANCIAL SLOWDOWN............................................................................................... 125
10.5.2 ADMINISTRATIVE LEGISLATION .................................................................................................................... 125
10.5.3 REFORM AND DEVELOPMENT OF COST CONTROLS AND PRICE ADJUSTMENTS ....................................................... 126
11 E-COMMERCE LOGISTICS DEMAND................................................................................................ 128
11.1 OVERVIEW ...................................................................................................................................... 128
11.1.1 DEVELOPMENT OVER 2008-9 AND OUTLOOK FOR 2010 ................................................................................. 128
12 PORTS AND INTERNATIONAL TRADE .............................................................................................. 131
12.1 DEVELOPMENT IN 2008-9 AND OUTLOOK FOR 2010 ................................................................................. 132
12.2 MARITIME CONTAINER TRANSPORT SECTOR ............................................................................................ 134
12.2.2 KEY STATISTICAL DATA ............................................................................................................................... 138
12.3 INLAND WATERWAY DEVELOPMENT ...................................................................................................... 141
12.3.1 CONTENT OF THE NATIONAL PLAN FOR INLAND WATERWAYS AND PORTS .......................................................... 142
12.3.1 YANGTZE RIVER WATERS............................................................................................................................ 143
12.3.2 PEARL RIVER WATERS................................................................................................................................ 143
12.3.3 THE BEIJING-HANGZHOU GRAND CANAL AND HUAIHE RIVER WATERS .............................................................. 144
12.3.4 CHONGQING ............................................................................................................................................ 144
12.3.5 WUHAN .................................................................................................................................................. 145
12.3.6 NANJING ................................................................................................................................................. 145
12.3.7 KEY DYNAMICS ......................................................................................................................................... 146
12.4 OVERVIEW OF CHINA BULK PORT DEVELOPMENT ..................................................................................... 147
12.4.1 PORT PRODUCTION GROWTH SLOWED AS 3 PORTS JOINED THE ‘100M TON PORT CLUB’ ..................................... 147
12.4.2 THROUGHPUT OF MAIN CARGO .................................................................................................................. 147
12.5 PORT ANALYSIS- BULK CARGO OPERATIONS ............................................................................................ 149
12.5.1 PORT THROUGHPUT OF MAJOR CARGO CATEGORIES ...................................................................................... 149
12.5.2 COAL TRANSPORT ..................................................................................................................................... 149
12.5.3 QINHUANGDAO ........................................................................................................................................ 151
12.5.4 TIANJIN ................................................................................................................................................... 151
12.5.5 CANGZHOU HUANGHUA............................................................................................................................. 151
12.5.6 TANGSHAN PORT ...................................................................................................................................... 151
12.6 IRON ORE TRANSPORT ....................................................................................................................... 152
12.6.1 RIZHAO PORT ........................................................................................................................................... 154
12.6.2 TANGSHAN PORT ...................................................................................................................................... 154
12.6.3 NINGBO-ZHOUSHAN PORT ......................................................................................................................... 154
12.6.4 TIANJIN PORT ........................................................................................................................................... 154
12.7 OIL PRODUCTS TRANSPORT ................................................................................................................. 155
12.7.1 NINGBO-ZHOUSHAN PORT ......................................................................................................................... 159
12.7.2 QINGDAO PORT ........................................................................................................................................ 159



12.7.3 DALIAN PORT ........................................................................................................................................... 159
12.7.4 TIANJIN PORT ........................................................................................................................................... 159
13 PORT DEVELOPMENTS .................................................................................................................. 160
13.1 CONSTRUCTION OF COASTAL PORTS ...................................................................................................... 161
13.1.1 CONSTRUCTION OF CONTAINER TERMINALS .................................................................................................. 161
13.1.2 COAL TERMINAL CONSTRUCTION ................................................................................................................. 162
13.1.3 CRUDE OIL TERMINAL CONSTRUCTION ......................................................................................................... 163
13.1.4 IRON ORE TERMINALS................................................................................................................................ 164
13.1.5 CONSTRUCTION OF EMERGING TRANSPORT SYSTEM TERMINALS....................................................................... 164
13.2 DEVELOPMENT OF INLAND PORTS 2009 ................................................................................................. 167
13.3 THE DEVELOPMENT OF THE SHIP-BUILDING INDUSTRY ............................................................................... 169
13.3.1 SHIP-BUILDING INDUSTRY-2009 REVIEW ..................................................................................................... 169
13.3.2 STRENGTHS AND WEAKNESSES OF CHINA’S SHIPBUILDING INDUSTRY ................................................................. 171
13.3.3 LOOKING AHEAD....................................................................................................................................... 172
13.4 CHINA’S HARBOUR MACHINERY INDUSTRY- CURRENT SITUATION ................................................................. 174
13.4.1 MAJOR HARBOUR MACHINERY MANUFACTURERS IN CHINA ............................................................................ 174
13.5 DEVELOPMENT OF THE CONTAINER MANUFACTURING INDUSTRY .................................................................. 176
13.5.1 CURRENT SITUATION OF THE CONTAINER MANUFACTURING INDUSTRY IN CHINA ................................................ 176
13.5.2 CONTAINER EQUIPMENT LEASING AND RENTAL MARKET CONDITIONS ............................................................... 176
13.5.3 MAJOR CONTAINER MANUFACTURING COMPANIES........................................................................................ 176
13.5.4 THE CONTAINER MANUFACTURING INDUSTRY- LOOKING FORWARD.................................................................. 176
13.6 RELATED HARBOUR SHIPPING BUSINESS ................................................................................................. 177
13.6.1 THE DEVELOPMENT OF SHIPPING COMPANIES IN HARBOUR ............................................................................. 177
13.6.2 SHIP AGENCY SERVICE ............................................................................................................................... 177
13.6.3 CARGO AGENT DEVELOPMENT .................................................................................................................... 177
13.7 DEVELOPMENT OF THE PORT LOGISTICS INDUSTRY .................................................................................... 179
13.7.1 CURRENT SITUATION OF THE PORT LOGISTICS INDUSTRY IN CHINA .................................................................... 179
13.8 DEVELOPMENT OF DRY PORTS IN CHINA ................................................................................................. 180
14 FREIGHT FORWARDING ................................................................................................................. 181
14.1 REVIEW OF FREIGHT FORWARDING INDUSTRY IN 2009 AND OUTLOOK FOR 2010............................................. 181
14.1.1 REVIEW OF FREIGHT FORWARDING INDUSTRY IN 2009 ................................................................................... 181
14.2 OUTLOOK OF FREIGHT FORWARDING INDUSTRY FOR 2010 .......................................................................... 182
15 THE RAIL SECTOR .......................................................................................................................... 184
15.1 OVERVIEW ...................................................................................................................................... 184
15.1.1 DEVELOPMENT IN 2008-9 AND OUTLOOK FOR 2010 ...................................................................................... 184
15.1.2 HIGH-SPEED RAIL...................................................................................................................................... 186
15.1.4 KEY DYNAMICS ......................................................................................................................................... 189
15.1.5 RAIL FREIGHT COMPANIES .......................................................................................................................... 190
16 WAREHOUSING ............................................................................................................................ 191
16.1 OVERVIEW OF 2008-9 AND OUTLOOK FOR 2010...................................................................................... 191
16.1.1 BEIJING-TIANJIN-BOHAI BAY TRIANGLE ........................................................................................................ 191
16.1.2 YANGTZE RIVER DELTA............................................................................................................................... 192
16.1.3 PEARL RIVER DELTA................................................................................................................................... 193
17 APPENDIX..................................................................................................................................... 194
18 BEIJING AND BOHAI BAY REGIONAL OVERVIEW ............................................................................. 194
18.1 BEIJING .......................................................................................................................................... 194
18.1.1 LOGISTICS DISTRIBUTION CENTRES ............................................................................................................... 194
18.1.2 SPECIAL PROCESSING ZONES/INDUSTRIAL PARKS INFRASTRUCTURE NETWORK .................................................... 195
18.1.3 WAREHOUSES BONDED, GENERAL, AND DANGEROUS GOODS .......................................................................... 198
18.1.4 PORT ...................................................................................................................................................... 200



18.1.5 LOCAL AND FOREIGN 3PLS.......................................................................................................................... 200
18.1.6 GOVERNMENT CONTACTS .......................................................................................................................... 203
18.2 TIANJIN .......................................................................................................................................... 205
18.2.4 PORT ...................................................................................................................................................... 209
18.2.5 LOCAL AND FOREIGN 3PLS ......................................................................................................................... 209
18.3 JINAN ............................................................................................................................................ 212
18.3.2 SPECIAL PROCESSING ZONES/INDUSTRIAL PARK INFRASTRUCTURE NETWORK ...................................................... 213
18.3.4 PORT ...................................................................................................................................................... 213
18.4 QINGDAO ....................................................................................................................................... 215
18.4.4 PORT ...................................................................................................................................................... 217
18.5 HARBIN .......................................................................................................................................... 220
18.5.2 SPECIAL PROCESSING ZONE/INDUSTRIAL PARKS INFRASTRUCTURE NETWORK ...................................................... 221
18.5.4 PORT ...................................................................................................................................................... 222
18.6 CHANGCHUN ................................................................................................................................... 224
18.6.4 PORT ...................................................................................................................................................... 226
18.7 SHENYANG ...................................................................................................................................... 228
18.7.4 PORT ...................................................................................................................................................... 231
18.7.6 GOVERNMENT OFFICES .............................................................................................................................. 232
18.8 DALIAN .......................................................................................................................................... 233
18.8.4 PORT ...................................................................................................................................................... 237



19 PEARL RIVER DELTA ....................................................................................................................... 240
19.1 GUANGZHOU ................................................................................................................................... 240
19.1.4 PORT ...................................................................................................................................................... 244
19.2 SHENZHEN ...................................................................................................................................... 247
19.2.4 PORT ...................................................................................................................................................... 250
19.3 ZHUHAI .......................................................................................................................................... 254
19.3.4 PORT ...................................................................................................................................................... 256
19.4 FOSHAN ......................................................................................................................................... 259
19.4.4 PORT ...................................................................................................................................................... 261
19.5 JIANGMEN ...................................................................................................................................... 264
19.5.4 PORT ...................................................................................................................................................... 265
19.6 DONGGUAN .................................................................................................................................... 267
19.6.4 PORT ...................................................................................................................................................... 269
19.7 ZHONGSHAN ................................................................................................................................... 272
19.7.4 PORT ...................................................................................................................................................... 274
19.7.6 GOVERMENT CONTACTS ............................................................................................................................ 275
19.8 HUIZHOU ........................................................................................................................................ 276



19.8.3 PORT ...................................................................................................................................................... 277
19.9 ZHAOQING ...................................................................................................................................... 279
19.9.3 PORT ...................................................................................................................................................... 279
20 YANGTZE RIVER DELTA .................................................................................................................. 282
20.1 SUZHOU ......................................................................................................................................... 282
20.1.4 PORT ...................................................................................................................................................... 286
20.2 NANJING ........................................................................................................................................ 289
20.2.4 PORT ...................................................................................................................................................... 292
20.3 HANGZHOU ..................................................................................................................................... 296
20.3.4 PORT ...................................................................................................................................................... 301
20.4 WENZHOU ...................................................................................................................................... 305
20.4.4 PORT ...................................................................................................................................................... 307
20.5 NINGBO ......................................................................................................................................... 309
20.5.4 PORT ...................................................................................................................................................... 312
20.6 SHANGHAI ...................................................................................................................................... 315
20.6.4 PORT ...................................................................................................................................................... 324



21 PAN BEIBU BAY REGION ................................................................................................................ 330
21.1 NANNING ....................................................................................................................................... 330
21.1.4 PORT ...................................................................................................................................................... 332
21.2 BEIHAI ........................................................................................................................................... 333
21.2.4 PORT ...................................................................................................................................................... 335
21.2.6 GOVERMENT CONTACTS ............................................................................................................................ 336
21.3 QINZHOU........................................................................................................................................ 337
21.3.4 PORT ...................................................................................................................................................... 338
21.4 FANGCHENGGANG............................................................................................................................. 340
21.4.4 PORT ...................................................................................................................................................... 341
21.5 ZHANJIANG ..................................................................................................................................... 344
21.5.4 PORT ...................................................................................................................................................... 346
21.6 HAIKOU .......................................................................................................................................... 348
21.6.4 PORT ...................................................................................................................................................... 349
22 THE CENTRAL & WESTERN REGIONS .............................................................................................. 352
22.1 WUHAN ......................................................................................................................................... 352
22.1.2 SPECIAL PROCESSING ZONES/INDUSTRIAL PARKS............................................................................................ 352
22.1.3 WAREHOUSES: BONDED, GENERAL, DANGEROUS GOODS ............................................................................... 354
22.1.4 PORT ...................................................................................................................................................... 354



22.2 CHONGQING .................................................................................................................................... 357
22.2.2 SPECIAL PROCESSING ZONES/INDUSTRIAL PARK INFRASTRUCTURE NETWORK ..................................................... 358
22.2.3 WAREHOUSES: BONDED, GENERAL, AND DANGEROUS GOODS......................................................................... 359
22.2.4 PORT ...................................................................................................................................................... 359
22.3 KUNMING ....................................................................................................................................... 362
22.4 CHENGDU ....................................................................................................................................... 369
22.4.4 PORT ...................................................................................................................................................... 372
22.5 GUIYANG ........................................................................................................................................ 376
22.6 XI’AN ............................................................................................................................................. 380
22.7 YINCHUAN ...................................................................................................................................... 385
22.8 URUMQI ......................................................................................................................................... 389
22.9 LANZHOU........................................................................................................................................ 393
22.10 XI'NING ...................................................................................................................................... 396



22.10.1 LOGISTICS DISTRIBUTION CENTRES ........................................................................................................... 396
22.10.2 SPECIAL PROCESSING ZONES/INDUSTRIAL PARKS INFRASTRUCTURE NETWORK ................................................ 396
22.10.3 WAREHOUSES BONDED, GENERAL, AND DANGEROUS GOODS ...................................................................... 396
22.10.4 LOCAL AND FOREIGN 3PLS...................................................................................................................... 397
22.10.5 GOVERNMENT CONTACTS ...................................................................................................................... 397
23 DISCLAIMER ................................................................................................................................. 399



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3 Industry Snapshot
Not even the worst economic crisis in 80 years could halt the growth of China’s logistics industry. The world’s
rising economic superpower still put up growth numbers that aroused the envy of the rest of the world.
Beijing continued to invest enormous sums of money into massive infrastructure projects, building new
airports, railway lines, expressways, and intermodal centres. China’s full-speed march into modernity
appeared far less affected by the dire news emanating from other corners of the world than many of the
more developed regions.

Logistics, the industry that greases the wheels of the great Chinese economy, continued to grow at a rapid
pace. Yet to argue that the 2008-9 was a uniformly positive year for the industry would ignore several
troubling signs. Port throughput growth fell nearly everywhere in China over the period; and no place
suffered a steeper growth decline than the Pearl River Delta, China’s most developed economic region.

Furthermore, upon closer inspection China’s logistics industry still has significant structural problems that
may undermine future development. Logistics still comprise over 18 percent of GDP, a figure more than
double that in developed economies. The industry suffers from under-agglomeration, and many registered
logistics companies operating in China lack professional standards and operational efficiency.

Despite tremendous government effort to spread China’s newfound prosperity to less-developed regions,
the gap between China’s coastal area and its interior remains large - and growing. The country’s varied
economic regions remain less integrated with each other than with various parts of the outside world.
Bureaucratic hassles—such as fines levied upon inter-provincial trade—have prevented the massive Chinese
economy from operating as a cohesive unit hindering the emergence of national brands able to compete on
a global stage.

Aware that suboptimal logistics performance threatens to obstruct overall economic development, Beijing
has expended enormous effort in rectifying these problems. Investment in transport infrastructure received
a jolt by a CNY 586bn stimulus package, and the Chinese government confidently claims that a nationwide
high-speed rail network will be in place by 2020. New airports, expressways, and container terminals will
also affect the logistics landscape in coming years.

In addition, reforms such as the Fuel Tax Law have indicated a growing willingness for Beijing to consider
green solutions in its logistics industry policy. The coming years are likely to witness an increased emphasis
on environmentally-sound practices, a move that could lead to greater industry consolidation as smaller
firms struggle to compete in a rapidly changing landscape.

Few observers expect the global economic slowdown to have reversed itself fully by the end of 2010, and
correcting structural flaws in the logistics industry will require time, even by the standards of the Chinese
government. The industry showed impressive resiliency in the wake of natural disaster in 2008, overcoming
both the unseasonably cold weather in the winter and the tragic Sichuan earthquake in May.

Betting against its ability to overcome an economic slowdown would similarly be unwise – even though the
World Bank now forecasts that a recovery independent of stimulus spending is likely to require a broad
structural change in the composition of GDP growth drivers.



4 Executive Summary
Global Economic Review

The economic slowdown that began in 2008, as global GDP fell 2.2 percent through the year, had a
pronounced effect on the world’s developed economies, who registered a collective GDP decline of 3.3
percent in 2009. On the other hand, developing economies grew by 1.2 percent, a figure greatly influenced
by China and India’s persistently impressive growth. Aside from those two giants, developing world GDP
figures appear far worse. Without a doubt, 2009 was a trying economic year for the vast majority of the
world’s nations.

The following chart illustrates China’s total GDP and its percentage growth rate over the previous year
from 2003 to 2009.

China GDP 2003-2009
40 14

35 12
30
10
25
8
20 GDP (in CNY trillion)
6
15 Growth Rate (%)
4
10

5 2

0 0
2003 2004 2005 2006 2007 2008 2009

Source: National Economic and Social Development Report, National Bureau of Statistics of China

Primary goods in the global energy markets experienced ups and downs in 2009. Overall, the average price
of oil throughout the year equalled USD 61.92. Coal prices finished 2009 on an upswing, a trend that only
continued through the beginning of 2010.

Key statistical data

 The total value of social logistics increased by around 6 percent in 2009 to CNY 95 trillion, a reduction in
the growth rate of almost 12 percent from 2008 figures indicating that the industry had largely
recovered to pre-crash levels in terms of revenue, if not growth.

 The total value-added of logistics industry reached CNY 1.9965 trillion in 2008, an increase of 15.4



percent from 2007 and a growth rate decline of 4.5 percent. The value-added of the logistics industry
accounted for 16.5 percent of total value-added services and 6.6 percent of GDP. This figure reached
1.47 trillion in the first nine months of 2009 again indicating that the worst effects of the slowdown
were largely behind the industry.

 China's total import and export value topped USD 2.21 trillion in 2009, down 13.9 percent year-on-year.

 Of this total, the value of goods exported was USD 1.2 trillion, down 16 percent year-on-year, while the
value of goods imported was USD 1.01 trillion, decreasing by 11.2 percent from the previous year.

 China's Consumer Price Index (CPI), a main inflation gauge, dipped 0.7 percent in 2009 year-on-year,
with food prices registering a 0.7-percent year-on-year rise.

 China's gross domestic product (GDP) rose 8.7 percent year-on-year in 2009 to reach CNY 33.53 trillion
(USD 4.9 trillion).

Global Trade Review

The economic slowdown that began in 2008, as global GDP fell 2.2 percent through the year, had a
pronounced effect on the world’s developed economies, who registered a collective GDP decline of 3.3
percent in 2009. On the other hand, developing economies grew by 1.2 percent, a figure greatly influenced
by China and India’s persistently impressive growth. Aside from those two giants, developing world GDP
figures appear far worse. Without a doubt, 2009 was a trying economic year for the vast majority of the
world’s nations.

Global trade plummeted sharply in 2009, as World Trade Organisation estimates reported a 12 percent
decline in world trade flows during the year. Though as the year progressed the pace of worldwide trade
quickened, the percentage decline still marked the worst year for global trade since World War Two.



The following chart illustrates the total foreign trade volume, imports and exports in China 2003-2009.

Total Volume of Foreign Trade in China
140 70

60
120
50
100
40

80 30

60 20

10
40
0
20
-10

0 -20
2002 2003 2004 2005 2006 2007 2008 2009

China TEU Total
Foreign Trade TEU Total
Domestic Trade TEU Total
China TEU Growth%

Source: National Bureau of Statistics of China

The added value of China’s primary industries reached CNY 3.55 trillion in 2009 with an increase of 4.2
percent, a growth rate down 1.3 percent from the year before. Added value in secondary industries reached
CNY 15.70 trillion, up 9.5 percent on 2008 with a growth increase of 0.2 percent, while tertiary industries
reached an added value of CNY 14.29 trillion, up 8.9 percent on 2008 with a growth decline of 0.6 percent.
Primary industries were thus hit less hard than secondary and tertiary industries, a result from government-
led intervention.

Key areas of policy change

 Reducing market access barriers

 Tightening of supervision over the logistics market

 Further improving the Customs clearance environment

 Increased cooperation in the East Asian region



China’s Economic Geography

The Chinese economy is better understood not as a single unit but rather a decentralised collection of
several regional economies that interact with one another less than one might expect. This arrangement—
which differs from other large countries such as the United States—results from China’s transition from a
command to a market economy.

Such fragmentation has resulted in the apparent lack of major, globally recognized companies emerging
from China, particularly given the size of its economy. Larger Chinese firms have enormous difficulty
managing their parent-subsidiary networks; companies under the same corporate umbrella often fail to
cooperate and even work at cross-purposes.

Growth of Inter-Asian Trade

Within Asia, the PRC is the largest driver of regional exports, but its final demand accounts for only 6.4
percent of total Asian trade, which was only half the contribution from Japan and slightly below a quarter of
the US. The results show that the G3 economies are still the main ultimate export destinations for finished
goods leaving Asia, when taking into account the share of intermediate goods trade that is for assembly and
production within the region, but that is eventually shipped out of the region.

Based on these data, CIO estimates that of the total volume of finished goods leaving Asian countries as
exports, around 20 percent is destined for Asian markets with around 60 percent absorbed by G3 countries
and the remainder headed for the rest of the world (ROW).

Air Freight

While most carriers, as well as shippers, appear confident that 2010 will represent a general stabilisation of
overall demand—a return to 2008 volumes—most believe that this demand is likely to take the shape of
mini-troughs and mini-peaks, due to the continued unpredictability of demand. This said however, given last
year’s last minute scramble for capacity, it is unlikely that shippers will be prepared to run inventories as low
as last year. In general, while most predict that 2010 will prove to be a much more positive year for the air
freight market in China, it seems unlikely that carriers will be keen to reintroduce capacity back into the
market straight away. Instead preferring a much more gradual approach as demand develops helping to hold
up freight rates and limit liability in what remain uncertain times.

Future growth will however be dependent on several factors:

 Macro-economy stabilized.

 Foreign trade began to resume growth.

 International transshipment centers of air express giants will play a great role.

 Uncertainties caused by the economic crisis and legacy policies do remain.

China’s investment in airport infrastructure development will be enormous. According to a plan formulated
in 2008, the country intends to spend more on airport infrastructure development over the next five years



than the entirety of its airport investment program since the start of the reform era, a figure likely to
approach USD 20bn by 2013.

Road Haulage

Some estimates indicating that up to 30-40 percent of China’s road haulage firms experiencing sever losses
with many forced to withdraw from the market altogether. Given the high levels of fragmentation and lack
of standardization and national registration in the sector it is extremely difficult to accurately gauge the real
level of loss or indeed the number of companies forced to withdraw from the sector over the period. It is
however possible to say that the vast bulk were only marginally profitable and were – especially given
Beijing’s commitment to consolidate the sector – living on borrowed time.

Perhaps the most significant trend—besides the global economic meltdown—facing road transport in China
is the passage of a new fuel tax law, implemented on 1 January 2009.

Express Delivery and E-Commerce

Postal business achieved a total income of CNY 109.5bn in 2009, up 14 percent. In particular, the express
delivery sector grew by 17.3 percent in terms of revenue and reached CNY 47.9bn; total volume increased by
22.8 percent to CNY 1.86bn pieces.

Beijing’s new Postal Law has made waves in the express delivery industry. More dire predictions estimate
that up to 80 percent of private express delivery enterprises will be unable to compete and fold from the
industry. In the long term though the express delivery market in China promises only to expand, buoyed by
the phenomenal growth of the nascent e-commerce industry.

In 2009, as part of an industry wide trend the two largest state-owned express companies - China Post EMS
and China Post Logistics Company - completed integration and hence formed a new company, China Postal &
Express Logistics.

The number of Chinese netizens reached 383m in Q4 2009, including over 109m online buyers. The e-trading
turnover of SMEs amounted to almost CNY 2 trillion, accounting for 1.5 percent of the nation’s GDP. China E-
Commerce shopping market is estimated to grow by over 50 percent in 2010, which means a total delivery
volume of about 1bn or so.

Looking ahead to the future, the MOT has highlighted tier-3 and tier-4 cities in the eastern region and tier-2
and tier-3 cities in the central and western regions as becoming new growth areas for the industry in coming
years.

Port Sector

As 2009 drew to a close, China had 413 ports with a total of 31,050 productive berths—of which 1,416
berths were over 10,000 tons. Coastal ports registered 5,119 productive berths—1,157 over 10,000 tons—
while inland ports had 25,931 productive berths, 259 over the 10,000-ton level.

Of berths over 10,000 tons, 665 were between 10,000 and 30,000 tons, 252 between 30,000 and 50,000
tons, 366 between 50,000 and 100,000 tons and 142 berths in excess of 100,000 tons.



The global slowdown had an immeadiate impact on China international container trade sector with ports in
numerous regions reporting disappointing figures for the Chinese New Year period.

In general, the south of the country was hit hardest, with port further north faring much better. At least part
of the reason for this is that ports further north depend less on the lower value exports that tend to be the
mainstay of certainly Guangdongs economy. Tianjin, for example, was boosted by the fact that much of its
exports originate in the Binhai Free-Trade Zone, which tend to produce higher-tech products and the fact
that its portfolio of shipping routes is less dependant on China-Eurpoe or US routes.

Due to a rebound in the second half of the year, volumes began to rise again. China registered a 2009
throughput of 121m TEU, a 6 percent drop from the previous year. Of this figure, coastal ports handled
109m TEU while inland ports handled the remaining 12m TEU. These two figures represented declines of 5.9
percent and 7.4 percent, respectively. If not for a fourth quarter surge in throughput numbers, these
numbers would be even gloomier.

Cotainer Growth
(% over previous year)
50

40

30

20 2007
2008

10 2009

0

-10

-20

IWW

Underfunding caused infrastructure and floating equipment to deteriorate badly and the navigable network
fell from 172,000 km in 1960 to 123,300 km by 2004. However, as part of the country’s drive to open up the
hinterland of China to foreign investment, IWW projects are once again back in vogue.



For the Yangtze, the current Five Year Plan emphasis has shifted away from the original idea of generally
accelerating construction and operation of inland river ports along the Yangtze to a more focused strategic
development of Chongqing, Wuhan and Nanjing, with the new Shanghai Yangshan mega-port functioning as
the region's deep-water transhipment point.

The new container rail network is planned to play a key role in the development of the IWW sector. This
combined with lower inland wages and growing domestic consumption will make the IWW sector in China a
major target for foreign investors.

Bulk

Despite the overall slowing of growth in 2009, three new ports joined the 100m ton club. The new ports to
reach the mark were Jiangyin in Jiangsu Province, Xiamen in Fujian Province, Zhanjiang in Guangdong
Province and Huzhou in Zhejiang Province. Jiangyin and Huzhou are both river ports.

Over the course of 2009, coal imports increased by almost 211 percent to 125.83m tons. Over the same
period, China’s coal exports fell 50.7 percent year-on-year to 22.4m tons, with production up 12.7 percent to
2.96 bn tons; making China a net importer of coal on an annualised basis (China’s net coal import reached
103.43 m tons in 2009).

Iron ore imports grew rapidly in 2009. Chinese imports of iron ore showed robust growth in 2009, increasing
42 percent to 628m tonnes. Crude steel production within the country also increased, from 500m tonnes in
2008 to 568m in 2009.

However, uneven distribution iron ore terminals are unevenly distributed a cause of steel company
distribution patterns in China and network inefficiency. According to adjustments in the steel plant
distribution pattern, China will build 12 super-large iron ore vessels with a capacity of 400,000 tonnes, in
turn triggering new changes in the ore terminal distribution pattern.

Oil

By 2009 there were 24 crude oil terminals with handling capacities in excess of 100,000 tons operating along
China’s coastline.

Dependence on imported crude oil continues to increase each year as China's crude oil imports rise to 51.29
percent last year with demand buoyed by stimulus measures. 2009 marks the first year China’s dependency
on imported oil exceeded 50 percent, with figures from the General Administration of Customs showing
imported oil in December hitting a record 21.3m tons, pushing the country's total oil imports last year to
204m tons. Domestic production reached 190 million tons of oil in 2009.



Total Crude Consumption Versus Crude
Import Volume
450
400
350
300
250
200 2000

150 2009

100
50
0
Total Crude Oil Consumption (m Crude Oil Import (m tons)
tons)

Port Development

There a many projects on-going and planned in the port industry in every sector. A comprehensive list of
projects is included in the masin body.

Ship Building

Export Share of China Ship Exports 2009
Bulk Cargo Ship Oil Tanker Other Container Ship

12%
32%

37%

19%

Source: China Association of the National Shipbuilding Industry

In spite of the global slowdown, main business revenues and profits within the shipbuilding industry
maintained a growth rate of over 30 percent in numerous provinces and municipalities including; Jiangsu,


China Logistics Development Report 2010 Edition II

China Logistics Development Report 2010 Edition II

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