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Home » 2015 to See Focus on Domestic Transportation, Warehousing & Manufacturing in China

2015 to See Focus on Domestic Transportation, Warehousing & Manufacturing in China

February 20, 2015
SupplyChainBrain

Domestic Transportation: While transportation has improved at a painstakingly slow rate in China over the past several years, there are some forces at work for more rapid change. Food safety and e-commerce are two driving forces that are creating demand for improved transportation, and we expect to see their impact in 2015.

Because of recent high-profile food safety incidents, we can anticipate action to be taken to improve food supply chains.  Currently, only about 15 percent of meat and poultry is stored and transported in temperature-controlled environments, but the government would like to see that doubled in 2015.  For cold logistics providers, there is a significant business opportunity in western provinces.

The other driving force—that is, e-commerce—has been shaping last-mile delivery and will continue to do so in dramatic ways. Pick-up locations are growing significantly as e-commerce retailers establish partnerships with convenience stores. Growth in the express delivery market has far outpaced that of the overall logistics industry, and we expect that trend to continue.

In addition to the impact of market demand, the government is also taking measures to improve logistics infrastructure. In September 2014, Premier Li Keqiang issued a policy aimed at encouraging foreign investment in logistics. However, it will only be effective inasmuch as foreign logistics firms can compete in the extremely cost-sensitive China market. The likes of FedEx, UPS and DHL will be able to perform domestic express business as premium service providers. 

Warehousing: Investment in the logistics property sector will continue to be strong in spite of limited land supply.  E-commerce retailers see investment in real estate as a strategic move, and thus contribute significantly to the net absorption of warehouse property. Developers face greater difficulties than retailers in obtaining land for logistics use, but they will still have significant funding available as investors are attracted by the relatively strong logistics market. Naturally, this means warehouse rents will rise steadily in 2015.

Growth of the material-handling equipment market is expected to pick up to 30 percent a year by some estimates, especially in domestically-sourced equipment. Chinese companies are gaining share in the automation market as they offer significantly cheaper alternatives for slightly lower-performing ASRS cranes. Given rising warehouse rents, end users will seek more efficient storage, which will result in demand for low-cost automated storage systems. 

Manufacturing: China’s manufacturing cost advantage continues to shrink, so we will continue to see some relocation to lower-cost countries in Southeast Asia. However, because of the strong supply base and existing manufacturing capability in China, the shift will be slow. As wages and the value of Chinese currency increase, manufacturing for export will struggle. Manufacturing for domestic orders will grow at a modest pace, tempered by slowing GDP growth. 

                                                  The Outlook

2015 should be a year of long-awaited improvements in transportation, though the improvements will be limited to very specific areas such as cold chain and last-mile delivery. Warehouse rents will increase, making investment in logistics projects attractive to developers. For warehouse end users, the extra cost of space will drive a need for storage solutions such as ASRS.  This year will present opportunities for cold chain in western China, express delivery, and domestically-sourced material handling equipment.

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    KEYWORDS China China development Chinese logistics services Global Logistics Industrial Manufacturing international trade Jim Serstad Logistics Managing Director supply chain management: china Technology Tompkins Asia Transportation & Distribution Transportation Management Warehouse Management Systems warehousing in China
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