China Distribution & Trading Issue 53 July 2008

Transcription

1 LI & FUNG RESEARCH CENTRE China Distribution & Trading China s Logistics Industry, IN THIS ISSUE : I. Introduction 2 II. Market Overview 2 III. Competitive landscape 8 and developments of market players IV. Major challenges of 12 the industry V. Government initiatives 14 to facilitate the development of logistics industry VI. Conclusion 16 Executive Summary Market overview China s logistics industry demonstrated robust growth in 2007; the total value of products using logistics services climbed by 26.2% to hit 75,228.3 billion yuan. The logistics industry became growingly important in the Chinese economy, its share in China s tertiary industry and GDP were 17.6% and 6.9% respectively. In 2007, the total logistics cost increased by 18.2% to billion yuan. The total fixed assets investment in the logistics industry grew to 1,428.1 billion yuan in 2007, up by 17.4% yoy. The ratio of total logistics cost to GDP remains high at 18.4% in 2007; nonetheless, China s logistics performance tops lower-middle countries according to the World Bank. Competitive landscape and developments of market players Logistics market is fragmented; rising costs and heated competition eroding players gross margin. Revenue of logistics enterprises with integrated services was growing at a much stellar rate (37.9%) than traditional storage- (22%) and transportationfocused enterprises (10.3%) in The scale of leading logistics enterprises is getting bigger. Foreign players accelerate expansion; mergers and acquisitions activities are shifting to high gear. A number of mainland logistics enterprises seeking capital via IPOs. Logistics property market is grasping huge interest. Major Challenges 13/F, LiFung Centre 2 On Ping Street Shatin, Hong Kong Tel: (852) Fax: (852) lfdc@lf1937.com Rising costs, financing bottlenecks, in-house mindsets to handle logistics, localized services, lack of unified top-level institutional coordination and imbalanced transport infrastructure development pose major challenges. Government initiatives pertinent to the development of logistics industry Super ministry reform Opinion of the General Office of the State Council on Implementation of Policies and Measures to Expedite Development of Service Industry Opinion of the MOFCOM on Expediting Development of Modern Logistics Industry in Circulation 1

2 I. Introduction China s logistics developments have caught significant attention these days. As the world factory strives to climb up the global value chain and China s domestic consumer market becomes growingly sophisticated, efficient movement of goods along the supply chains is now critical for every business success as well as China s overall competitiveness. Demand for modern logistics services is growing at stellar pace. Both enterprises and the government are making major commitments to improve the logistics capacity and efficiency; and great strides have been achieved. Though some major challenges pertinent to the logistics industry such as increasing costs, fuel shortages and less than satisfactory infrastructure remain, we believe China s logistics sector will ever improve and become more mature. In this paper, we will introduce to you the latest developments of China s logistics sector. II. Market Overview 1. Logistics industry demonstrated robust growth in 2007 Driven by strong GDP growth, expansion and upgrading of China s industrial base and the flourishing consumer market, China s logistics sector registered another year of impressive growth in The total logistics value 1 climbed further 26.2% last year to hit a record high of 75,228.3 billion yuan. (See Exhibit 1). The annual compound growth rate between 2003 and 2007 is 26.32%. Exhibit 1: The total logistics value, Source: China Federation of Logistics & Purchasing (CFLP) 1 Total value of products using logistics services 2

3 As manufacturing sector plays a key role in China s GDP, it is not surprising that the bulk of logistics business serves for the movement of industrial products. Industrial products accounted for 87.8% of total logistics value in 2007 and it registered a strong 27.9% growth yoy. On the other hand, imported products came second and accounted for 9.7% of total logistics value, showing a yoy increase of 14.8% (see Exhibit 2). Exhibit 2: The breakdown of total logistics value, 2007 Value Category (billion yuan) yoy growth share Industrial products % 87.8% Imported products % 9.7% Agricultural products % 2.1% Recycled materials % 0.3% Others % 0.1% Total % 100.0% 2. The logistics industry became a growingly important component in China s tertiary industry and GDP Exhibit 3 demonstrates the total value-added of logistics industry and respective share in China s tertiary industry and GDP in the past 5 years. The total value-added of logistics industry advanced to billion yuan in 2007, growth accelerated to 20.3% in Its share of the national total in tertiary industry and GDP stood at 17.6% and 6.9% respectively, both showed a mild increase over the previous year. Exhibit 3: The total value-added of the logistics industry Total value-added Share in the Year (billion yuan) yoy growth tertiary industry Share in GDP % 16.2% 6.7% % 16.6% 6.7% % 16.8% 6.7% % 17.1% 6.7% % 17.6% 6.9% 3. The total logistics cost continues to climb The total logistics cost encompasses transportation, inventory storage and management. In 2007, the total logistics cost increased by 18.2% to billion yuan. Exhibit 4 gives you the picture of the total logistics cost and respective components over the past years. 3

4 Exhibit 4: Total logistics cost and its composition, Share in logistics total cost Management 14% 14% 14% 13% 13% Storage 30% 29% 31% 32% 33% Transportation 56% 57% 55% 55% 54% (1) Transportation cost Transportation cost consists of the cost incurred in the transportation of goods by means of railway, road, airplane, and other transporting modes. In 2007, it recorded billion yuan, up 17.9% yoy, accounting for 54.4% of the total logistics cost. Exhibit 5 records the composition of transportation cost and respective growth rates of each segment in Road transport accounted for the biggest share. Exhibit 5: Composition of transportation cost and respective growth rates, 2007 Value (billion yuan) yoy growth Total % Road % Railway % Water % Air % Pipeline* % Freight forwarding and other means % * estimated figures 4

5 Exhibit 6 shows you the share of different transportation cost in Exhibit 6: Share of transportation costs, 2007 (2) Inventory storage cost Inventory storage cost comprises interest fee, warehouse fee, processing cost, depreciation, distribution cost, packaging cost and insurance cost. The inventory storage cost was billion yuan in 2007 (see Exhibit 7), recording a yoy increase of 21.2%. It accounted for 32.9% of the total logistics cost, being the second largest among the three cost components. Exhibit 7: Composition of inventory storage cost and respective growth rates, 2007 Value (billion yuan) yoy growth Total % Interest fee % Warehouse fee % Procesing cost % Depreciation % Distribution cost % Packaging cost % Insurance cost % Interest fees, the interest costs of money if the inventories were sold, accounted for 42.2% of inventory storage cost in 2007, reflecting room for improvement in inventory management (see Exhibit 8). 5

6 Exhibit 8: Share of inventory storage costs, 2007 (3) Management cost Management cost includes the spending on managing logistics information, particularly on third-party logistics (3PL) and fourth-party logistics (4PL). Management cost as a proportion of overall costs has only grown slightly over the past years. The management cost in 2007 was billion yuan, witnessing a growth of 13.6%. It accounted for 12.7% of the total logistics cost. Looking ahead, as market players increasingly seek to improve operating efficiency along the supply chain as well as consider outsourcing non-core business functions, spending on management costs should witness some major growth. 4. Investment in fixed assets grew steadily The total fixed assets investment in the logistics industry grew to 1,428.1 billion yuan in 2007, up by 17.4% yoy. Such investment help improve the infrastructure capacity for the logistics industry. As shown in Exhibit 9, transportation accounted for 76.8% of total investment share. It received billion yuan in investment in 2007, recording a yoy increase of 10.8%. Exhibit 9: Composition of total fixed assets investment,

7 5. The ratio of total logistics cost to GDP remains high; nonetheless, China s logistics performance tops lower-middle countries The ratio of total logistics cost to GDP can reflect the efficiency of logistics operation in the economy. In general, the higher the ratio, the less efficient is the logistics industry. As shown in Exhibit 10, China s ratio has been standing at around 18% over the past few years; and the level is twice that of most developed countries. The ratio rose from 18.3% in 2006 to 18.4% in The climbing labor and fuel costs had played a role in such increase. Exhibit 10: Total logistics cost as a percentage of GDP, According to the 2007 Logistics Performance Index 2 released by World Bank, which measures the logistics performance of different places, China ranked 30 among the 150 assessed locations. Developed or high-income countries such as Singapore, Netherlands and Germany topped the chart (see Exhibit 11). Exhibit 11: Logistics performance in 2007 Place Rank Place Rank Singapore 1 Norway 16 Netherlands 2 Australia 17 Germany 3 France 18 2 The Logistics Performance Index measures country performance across several dimensions of logistics and to benchmark that logistics performance against 150 countries. More than 800 logistics professionals worldwide were asked to rate country performance in seven logistics areas, namely, efficiency of clearance process by customs and other border agencies, quality of transport and information technology infrastructure for logistics, ease and affordability of arranging international shipments, competence of local logistics industry, ability to track and trace international shipments, domestics logistics costs and timeliness of shipments in reaching destination. For detailed information, please read Connecting to Compete: Trade Logistics in Global Economy released by the World Bank at siteresources.worldbank.org/inttlf/resources/lpireport.pdf 7

8 Place Rank Place Rank Sweden 4 New Zealand 19 Austria 5 United Arab Emirates 20 Japan 6 Taiwan, China 21 Switzerland 7 Italy 22 Hong Kong, China 8 Luxembourg 23 United Kingdom 9 South Africa 24 Canada 10 Korea Republic 25 Ireland 11 Spain 26 Belgium 12 Malaysia 27 Denmark 13 Portugal 28 United States 14 Greece 29 Finland 15 China 30 Source: World Bank Although China s logistics industry has huge room of improvement, China was able to take the lead among the lower middle-income countries, according to the World Bank. This is a significant international recognition of the robust developments of the logistics industry. Indeed, we believe the ever-expanding infrastructural networks in China will help drive down enterprises logistics costs. (Please read our Distribution and Trading Issue 43-45, Transport Infrastructure Developments in China I-III for more in-depth knowledge of China s infrastructural projects). III. Competitive landscape and developments of market players 1. Logistics market is fragmented; rising costs and heated competition eroding players gross margin China s logistics market is fragmented, characterized by tens of thousands of logistics firms; and many of them are small, poorly organized and with rudimentary infrastructure and technology. A vast majority of the players lack nationwide capabilities and serve a narrow customer base; and focus mainly on simple trucking and storage functions. Competition is fierce, particularly in the low-end market. With rising fuel and labor costs, many smaller players are feeling the pressures and are being phased out rapidly. Increasing costs and heated competition are hurting the profit margins of the logistics industry. According to estimates, average gross margins have dropped from 30% in 2002 to below 10% in 2007 for logistics enterprises in China. Gross margins are even thinner for warehousing enterprises (3-5%) and transportation enterprises (2-3%). 2. Enterprises offering integrated services showed most impressive revenue growth As China s manufacturing sector climbs the value ladder and domestic consumer market becomes more sophisticated, there is growing demand for quality and more time-sensitive logistics services, which is a definite plus for players with better technology know-how (e.g., security systems, cold chain services and automated tracking and sorting). 8

9 Indeed, according to the to the latest study of the Chinese logistics enterprises released by the CFLP in 2007, revenue of logistics enterprises with integrated services was growing at a much stellar rate (37.9%) than traditional storage- (22%) and transportation-focused enterprises (10.3%) in Increasing scale of leading players According to the latest ranking of logistics enterprises in China released by the CFLP in 2007, the scale of leading logistics enterprises is getting bigger in China. In 2006, 35 out of the top 50 most competitive logistics enterprises recorded sales revenue exceeding 1 billion yuan; 24 exceeding 2 billion yuan and 18 exceeding 3 billion yuan (see Exhibit 12). Exhibit 12: Scale of leading logistics enterprises, Logistics enterprises with sales revenue: Exceeding 1 billion Exceeding 2 billion Exceeding 3 billion Exhibit 13 demonstrates the top 20 transport and logistics enterprises in China. These players achieved total sales revenue of billion yuan in 2006, accounting for around 7% of the total revenue share in that year. Exhibit 13: Top 20 transport and logistics enterprises Ranking Enterprises Sales revenue in 2006 (Billion yuan) 1 China Ocean Shipping (Group) Company China Shipping (Group) Company ( ) Including: China Shipping Container Lines Company Limited China Shipping Development Co. Ltd 9.77 Guangzhou Maritime Transport Group Co. Ltd 1.71 ( ) China Shipping Logistics Company Limited China National Foreign Trade Transportation (Group) Corporation (Sinotrans) ( ) Including: Sinotrans Jiuling Transport & Storage Co. Ltd

10 Ranking Enterprises Sales revenue in 2006 (Billion yuan) Sinotrans Yuli Group Co. Ltd China National Materials Storage and Transportation Corporation (CMST) 9.04 Including: CMST Development Stock Company Limited (CMSTDC), Nanjing China Railway Express Company Limited China Railway Container Transport Co. Ltd International Cargo Transport Limited of China Guangdong Nan Yue Logistics Company Limited Yuan Cheng Group Company Limited Shandong International Transportation Corporation Maritime (Group) Company Limited Kerry EAS Logistics Limited Orient International Logistics (Holding) Co Ltd SINOPEC Pipeline Transport & Storage Company China Petroleum Transportation Corporation China Merchants Logistics Group Co. Ltd Qingdao Haier Logistics Co. Ltd Chongqing Port Logistics Group Co. Ltd Qingdao Fuxingxiang Logistics Co. Ltd China Railway Material Company DHL-Sinotrans

11 4. Foreign players accelerate expansion Foreign players are eyeing the opportunities of the Chinese market and continue to accelerate their expansion. Some prominent examples include: UPS will relocate its Asian logistics hub from Philippines to Shenzhen in 2010; the new 1-million-square-foot logistic hub will have fives times the capacity of the existing one. The hub will be able to launch 100 flights per week and its 400 staff will be capable of sorting 18,000 packages an hour. DHL announced late last year that it would build its North Asia hub in Shanghai Pudong International Airport with a total investment of USD 175 million. To be completed in 2010, it will have the capacity to sort conveyable shipments to a peak capacity of up to 20,000 parcels and 20,000 documents per hour. The establishment will also reinforce DHL s multi-hub strategy in Asia Pacific as it complements the Central Asia Hub in Hong Kong and its other Asian hubs. FedEx will start its new Asia-Pacific delivery centre in Guangzhou s Baiyun Airport by the end of With a total investment of USD 337 million, FedEx predicts that the new delivery center to be able to handle revenue of USD 11 billion by 2010 and USD 65 billion by Merger and acquisition activities shifting to high gear China s logistics sector has caught significant attention and mergers and acquisitions (M&As) are growing gear. Some examples include the proposed acquisition of Shanghai Jiayu Logistics Co., Ltd ( ) by YRC Worldwide Inc. ( ), the purchase of key operating assets of BaoYun Logistics ( ) by Schneider Logistics (Tianjin) Co. Ltd ( ), the acquisition of Shanghai-based 3PL Chic Holdings ( ) by Menlo Worldwide ( ). Also, China s state-owned logistics service provider Sinotrans Group and China Yangtze Transportation Group ( ) are in talks for a merger and related reorganization. If goes ahead, the merger would create the second largest shipping logistics firm by assets in China. In fact, the growth of big-scale deals worth USD 50 million or more in China s transportation and logistics sector has also grown strongly, according to PricewaterhouseCoopers. (See Exhibit 14). The four deals announced for targets in China during the first quarter in this year were all local-market (within-border) deals, reflecting the strong interests for players to consolidate local market scene. Exhibit 14: Number of deals in China worth USD 50 million or more Source: PricewaterhouseCoopers 11

12 6. A number of mainland logistics enterprises seeking capital via IPOs Optimistic with China s logistics market potential, many are interested in investing in Mainland logistics players. A number of transportation and logistics enterprises are riding investors interest and have sought public listings recently. The China Railway Construction Corporation ( ), the country s largest railway contractor, was dually listed in both Hong Kong and Shanghai Stock Exchanges early this year. The Tianjin Binhai Teda Logistics (Group) Corporation ( ) was also listed on the growth enterprise board of the Hong Kong Stock Exchange months ago. It is reported that Ningbo Port, one of the largest coastal ports in China, will be dually listed in Shanghai and Hong Kong soon. For many smaller players, however, raising fund in the capital market is far more difficult. With much weaker capital strength, many smaller players see pressures mounting due to climbing operating costs. 7. Logistics property market is grasping huge interest Demand for logistics facilities and warehousing is booming in China. Along with the appreciation potential of industrial land prices in China, a growing number of foreign industrial property developers and specialist investors are attracted into the high-end logistics property development field with an ambition to make China their top markets. Some prominent players include ProLogis (present since 2003) that has built nearly 30 logistics parks in China, AMB (present since 2004), Macquarie Goodman Group (2005), Singapore s Mapletree Logistics (2005), Mapletree Investment (2006), United Kingdom s Gazeley (2007) and Japan s New City Corporation (2007). Global property investor LaSalle Investment Management has also announced a major logistics joint venture with Italian developer Realty Vailog this May to buy and develop four logistics facilities in Shanghai. Bringing with them extensive experience and expertise, China s logistics property standards are set to improve. Meanwhile, some domestic property developers such as Hopson Development Holdings Limited ( ), Guangzhou R&F Properties Co. Ltd ( ), Hengda Real Estate Group ( ), Forte (Group) Co. Ltd. ( ) and Green Land Group ( ) are also setting foot in the logistics property market. IV. Major challenges of the industry 1. Rising costs Fuel prices Fuel prices in China have continued to climb over the past years. Take diesel fuel as an example, its price has jumped by 86% from 2002 to November On June 19, China s National Development and Reform Commission announced the biggest-ever adjustment to energy-related prices. Gasoline and diesel prices were both up by about 17-18% to reach 6,980 yuan per tonne and 6,520 yuan per tonne respectively while jet fuel prices will be raised to 7,450 yuan per tonne, up by 25%. It is estimated that fuel accounts for 35-40% of transportation enterprises overall costs; rising fuel costs will undoubtedly put pressures on players. China s fuel prices are under government control. Despite the price hikes, it is noteworthy that there is still a substantial discount between China and international fuel prices. This has resulted in tight fuel supply, as refineries were reluctant to supply to domestic market. A number of refineries were shut down last years, with queues at petrol stations and rationing reemerging in some regions. These add to the difficulty for efficient deliveries. 12

13 Land cost The new land use tax rates have been effective in China since January The land use tax rates have generally increased by 1 to 3 times, subject to the discretion of local governments. The increase in land use tax has put tremendous pressure on land-intensive warehousing enterprises. According to the interview of 63 warehouses enterprises by China Materials Storage and Transport Association ( ), the increase in tax have on average added RMB 1 million to enterprises expenditure. 2. Financing bottlenecks Shrinking operating cash flows are hurting smaller players with weaker capital strength. The problem of capital bottlenecks heightened with a series of tightening measures in the country the People s Bank of China announced a 100bp increase in required reserve ratio to 17.5% on 7 June; meanwhile, it has also raised the benchmark interest rates by 6 times in Interest expenditures for enterprises are increasing. With fewer financing methods, many smaller logistics players are at growing risks of being phased out. 3. In-house mindsets slows down 3PLs developments in China Although the majority of multinational corporations use 3PLs in China, it is estimated that only 15% of domestic companies outsource their logistics functions today. Logistics has traditionally been viewed as a transportation service. Many enterprises, in particular the country s state-owned enterprises (SOEs), have handled logistics as an in-house function. 3PLs share of China s logistics market is estimated to be around 20%, considerably lower when compared with 35% in the European Union, 57% in the United States and 80% in Japan. This self-management mentality has hindered the development of China s logistics sector. 4. Localized services increase supply chain costs As most logistics companies in China operate only in their immediate regions and take little initiatives to develop more comprehensive networks, a three-tier distribution system has emerged at the national, provincial and local levels over the past decades. The multi-layered distribution system has lowered efficiency and visibility. Lack of scale economy has made these players susceptible to the rise in operating costs. Besides, the fact that a large number of logistics players covering only the basic activities of transportation, handling and warehousing has hindered enterprises exposure to logistics coordination, especially on an inter-provincial level and national level. This greatly hampered supply chain efficiency in China. 5. Lack of unified top-level institutional coordination Multiple government departments have been responsible for monitoring different aspects of the logistics industry in China, including Ministry of Commerce (MOFCOM), State Bureau of Civil Aviation (the then Civil Aviation Administration of China), Ministry of Transport (the then Ministry of Communications), Ministry of Railways (MOR) and State Postal Bureau (SPB) ; this has complicated coordination at the top level and led to a lack of unified industry standards in China. Practitioners often complain various segments within the logistics sector, such as transportation, warehousing, information, machinery, postal and etc., use different and even contradictory industry standards. This increased the difficulty of communication of parties along the supply chain. 13

14 Red tape and poor coordination also pose troubles for enterprises wishing to expand their business in China. Obtaining license approval from different authorities for different types of logistics services is a case in point. It is hoped that the recent institutional reform of the central government will change the picture. More details will be discussed in Part V. 6. Imbalanced transport infrastructure development Although strong exports in past decades have stimulated the infrastructural development in China in important coastal regions, infrastructure capacity in China is unbalanced. Transportation bottlenecks remain common given the vast geographical span, in particular in Central and Western China and the rural regions. And connections between rail, road and port facilities still have much room for improvement. The severe snowstorm in January, the serious railway accident of the Qingdao-Jinan Railway in Shandong province and the devastating earthquake in Sichuan in May reveal the vulnerability of the country s infrastructure. China s toll road problem is also another big issue and causing driving expensive in China. Abuses such as overcharging in some provinces are not uncommon. According to a National Audit Office (NAO) report earlier this year, 158 illegal toll stations in 16 provinces had overcharged a total 14.9 billion yuan by the end of These practices have led to higher transportation costs. 7. Constraints on human resources China s logistics industry is growing fast; yet, the demand for talent has outstripped supply in the logistics industry. Many practitioners lack modern management knowledge and skill sets to cope with ever-changing needs of the industry. Shortage of professionals can hinder the further growth of the industry. V. Government initiatives to facilitate the development of logistics industry Realizing the logistics industry is critical to economic success, the government has played strong emphasis on improving the commercial landscape. Some key initiatives are summarized below. 1. Super ministry - streamline the transport system by integrating relevant departments In March 2008, the institutional Super-ministry Reform was approved in National People s Congress. To boost administrative efficiency and reduce cost, the government has done away with and merged some ministries and departments. The Ministry of Transport is one of them. Exhibit 15 shows the organization of the new Ministry of Transport. After the reorganization, the functions of different government departments regulating civil aviation, postal services, communications and urban public transportation are consolidated. It is hoped that coordination among departments will be enhanced. 14

15 Exhibit 15: Ministry of Transport Ministry of Communications Civil Aviation Administration of China * State Bureau of Civil Aviation Urban traffic management under the Ministry of Construction State Post Bureau Functions merged Put under * Ministry of Transport * Newly established Dissolved after restructuring Source: National People s Congress 2. Opinion of the General Office of the State Council on Implementation of Policies and Measures to Expedite Development of Service Industry logistics industry added to the encouraged category Further to the initiatives stipulated in China s 11 th Five-Year Program in 2006 and the subsequent Opinion of the State Council on Expediting Development of Service Industry ( ) in March 2007, the State Council announced the Opinion of the General Office of the State Council on Implementation of Policies and Measures to Expedite Development of Service Industry ( ) in March 2008 to facilitate the development of service industry during the 11 th Five-Year Program period. Pertinent to the development of China s logistics industry, the National Development and Reform Commission will implement the revised Catalogue for Guiding Foreign Investment in Industries (2007 revision) with a view to transforming the economy from quantity- to quality-focused through better utilization of foreign investment. High-end services sectors including logistics were newly added to the encouraged category. 3. Opinion of the MOFCOM on Expediting Development of Modern Logistics Industry in Circulation strengthening policy support for modern logistics To facilitate the continuous, rapid and coordinative development of logistics industry, the Ministry of Commerce (MOFCOM) announced in March 2008 the Opinion of the MOFCOM on Expediting Development of Modern Logistics Industry in Circulation ( ) with reference to China s 11 th Five-Year Program in 2006 and the subsequent Opinion of the State Council on Expediting Development of Service Industry ( ) in Highlights of the Opinion are as follows: 15

16 (1) Major objectives ii. To boost the awareness for modern logistics concepts such as supply chain management iii. To develop 3PLs and nurture competitive logistics enterprises iv. To develop the rural logistics v. To strengthen the cold chain logistics to promote consumption safety vi. To promote the application of advanced logistics technology vii. To promote inter-regional as well as international cooperation viii. To improve management on international freight agent business ix. To identify pilot areas for showcasing the modern logistics operation and promote performance of logistics industry x. To strengthen infrastructure for sustainable development of the industry (2) Policy Initiatives i. To offer policy support to modern logistics enterprises and logistics parks: provide loans for enterprises with great potential for service development and upgrading. ii. To strengthen policy support for fresh food logistics: provide funds for building a system for food safety. iii. To strengthen policy support to import of logistics technology and equipment: provide financial assistance for importing logistics technology and equipment. iv. To strengthen policy support to pilot areas designated for logistics development: coordinate with relevant departments for various forms of policy support. v. To expand opening up of logistics industry and encourage foreign investment to Central and Western China vi. To ensure greater coordination among different parties in order to facilitate movements of products: improve interregional circulation of commodities and services. 4. National Development and Reform Commission to push for the Development Plan for Modern Logistics To promote China s logistics development, the National Development and Reform Commission has drafted the Development Plan for Modern Logistics ( ) and is seeking the comments from relevant departments and local governments. The plan hopes to increase the usage of modern technology, enhance balanced regional developments, improve multi-modal connections and promote green logistics in China. It is expected that the plan will be launched in VI. Conclusion China s logistics market is growing rapidly. As China moves up the value ladder and its domestic consumer market becomes more sophisticated, further demand for modern logistics services shall be anticipated. Looking ahead, integrated service providers shall see stronger growth than their more traditional rivals. Meanwhile, fierce competition and ever-rising costs will speed up market consolidation. Finally, with major government efforts to develop the country s logistics sector, we believe the market environment will continue to improve. Copyright All rights reserved. Though endeavours to ensure the information discussed in this material is accurate and updated, no legal liability can be attached as to the contents hereof. Reproduction or redistribution of this material without s prior written consent is prohibited. 16