NORTH ASIA TRADE - Logistics: the Next Frontier for China

By: | at 08:00 PM | Channel(s): International Trade  Logistics  

By Karen E. Thuermer, AJOTThe figures are staggering. China’s trade surplus could top US$120 billion in 2006, up over 22% from estimated 2005 figures of US$97.4 billion, according to China‚s State Information Center. With so many goods now being produced in China, docks and tarmacs are overflowing with Chinese made goods.
While manufactures worldwide are taking advantage of China‚s cheap costs by outsourcing much of their production there, logistics remains the expensive part of the equation despite the fact that “logistics” is now one of the hottest words in China.
In fact, when quotas were eliminated on Chinese-made textiles and apparel entering the United States, arguments were quickly made that Central America and Mexico still made sense for their manufacturing due to lower transportation costs and quicker transit times. The position has merit, given escalated fuel expenses and time-to-market concerns. The cost of moving goods from China to other world markets is costly and complicated.
Still, the fact remains: The more than two decades of economic reform and transition to market economy has brought China unprecedented economic expansion. China is truly the manufacturer of the world and now close to becoming the world‚s largest market for goods. To a large extend, its further growth hinges on logistics. The government and private companies are investing heavily in logistics operations and infrastructure. Everyone is determined to make the system work as efficiently and cost effectively as possible.
Hong Kong and Pearl River DeltaChina’s infrastructure has improved dramatic with new airports, seaports, highways, logistics parks, and distribution centers being built at a record setting pace. In Southern China, Hong Kong remains the major cog in the wheel for moving cargo from the Pearl River Delta thanks entirely to its highly efficient and well connected airport and seaport. Today, the PRD is home to about 7,500 large multinational manufacturing enterprises and tens of thousands of smaller and medium-sized establishments.
But challenges persist. Goods must still be cleared by Customs before crossing the Mainland‚s border both to and from Hong Kong. While Hong Kong may now be part of China, the territory operates under its own system and set of policies—those which make it the freest economy in the world.
Wait times at the boarder have improved considerably as trucks queue to have papers and merchandise inspected. Yet, delays and traffic congestion can cause shipments to miss-connect with scheduled vessels sailing from the Port of Hong Kong. The port’s participation in the US government’s Container Security Initiative (CSI), a US Customs initiative designed to prevent global sea cargo from being exploited by terrorists, makes it even more critical that shipments reach port terminals as scheduled.
To offer an alternative, a number of ports are being developed in the PRD. Still, the Port of Hong Kong, a defining feature of the Hong Kong Special Administrative Region (HKSAR), has major advantages. It is renown for being the most efficient port in the world, offers the largest number of sailings, and sets a world example for port management and operational expertise. Unparalleled anywhere else, terminal operators are capable of making 40 to 50 movements per hour.
Still, new capital investments in ports in Shenzhen are capturing a portion of the business. Recent streamlining of Customs requirements for ocean-to-ocean transshipment and deepwater drafts at Yantian has helped heighten that port’s competitiveness. While steamship line rotations might not be as attractive, Yantian is offering inducements to shippers to help build traffic at the port.
“For companies like Hasbro and Wal-Mart that can save an extra $100 per container, the difference is significant,” states James E. Thompson, chairman of Crown Worldwide Holdings Ltd and chairman of Hong Kong’s American Chamber of Commerce.
Mr. Thompson contends that the Port of Yanitan could overtake the

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American Journal of Transportation