By Wang Wei & Liu Tao, Institute of Market Economy of DRC

Research Report Vol.17 No.2, 2015

I. New opportunities and demand for innovative development of China’s logistics industry

1. The logistics industry enters a key phase of transforming the driving force for development

While the national economy is shifting from a high-speed growth to a medium-to-high-speed one, the logistics industry also enters a key phase featured by switching to a different growth speed and transformation in development. After experiencing high-speed growth phases with an annual increase of 20% from 1990 to 2000 and 15% from 2001 to 2010, China’s logistics industry enters a new phase with a medium-to-high-speed of about 10%, badly in need of a new growth dynamic and balance. On the other hand, due to the rising cost of factors such as labor, land and fuel, it has been difficult for the industry to reduce cost since 2009. Total cost in logistics industry takes up 18% of total GDP, a rather large share. The trend of a further decline is nowhere to be seen, which forces the industry to seek an innovative breakthrough.

2. Profound changes in the patterns of production and consumption in China bring new opportunities for innovation in logistics industry

The rapid development of industrialization and urbanization not only promotes the consumption markets to gather in cities, especially in large-scale city clusters or metropolitan areas, but also advances the shift and clustering of industrial and agricultural production in areas with comparative advantages in production factors, resources and environment. For example, labor intensive industries accelerate their move to the central and western regions. Advanced manufacturing speeds up their relocation in the east. Scattered farming is more concentrated, and shifts from areas around cities and city clusters to areas with concentrated agricultural production. All of these developments push China’s logistics to adjust its operation pattern. From 2000 to 2013, the average distance of transporting goods in China increases from 326 km to 410 km, with an increase margin equal to that in the 20-year period from 1980 and 2000. It can be seen that China’s logistics is increasingly characterized by “large scale, long distance, wide radiation and multi-level”. The development in logistics industry will promote the adjustment in the distribution, restructuring and integration of logistics resources and factors. It will drive logistics enterprises to develop towards consolidation and networking. It will also boost investment growth in logistics facilities and facilitate equipment upgrading. All these potential changes will provide significant development opportunities for restructuring, upgrading and innovation in the logistics system in China.

3. The increasingly improved infrastructure strongly boosts the innovative development in logistics industry

With more than 30 years of continuous construction since the reform and opening up, a comprehensive transportation network has almost been established in China, which is composed of various means of transportation like railroad, highway, waterway, aviation and pipeline. In recent years, with the accelerated investment in infrastructure, China is entering a new stage of rapid upgrading and improvement of infrastructure, which is represented by high-speed railways, expressways and modernized comprehensive transportation hubs. Except in a few regions and on some railway routes, the insufficiency of the national transportation capacity has been alleviated as a whole. Therefore, the buyer’s market in transportation, even in the entire logistics, has taken shape. The increasingly improved infrastructure and greater service capacity are favorable for the integration and optimized allocation of all kinds of logistics resources in line with the demand of the logistics market. The development of infrastructure is also favorable for logistics innovation characterized by variety, diversity and multi-level. It helps establish an integrated, intensive and efficient logistics service system so as to facilitate the reduction of logistics cost and the improvement of efficiency.

4. The rapid development of a new generation of information technology provides new driving force for logistics innovation

At present, a new generation of information technology is undergoing rapid development, with internet of things, cloud computing, mobile network and big data at its core. Its growing popularity and wide application in logistics industry will comprehensively improve the informatization and integration of logistics supply chain, and further advance technological innovation in logistics in a wider scope. While it promotes quicker emergence of new services, business models, industrial organizations, functional platforms and logistics facilities, information technology will profoundly change the allocation of logistics resources, facilitate the transformation and upgrading of logistics industry, all of which will make the logistics cost to start a new round of decline and provide strong momentum for its innovative development.

II. The innovative development in China’s logistics industry starts to take off

1. New diversified services become increasingly active

At present, 70% of the services of China’s logistics enterprises concentrate on transportation and storage. However, many enterprises have started to explore and expand new services. The trend of diversified services starts to be seen. Such services as delivery, logistics information service, circulation and processing, logistics consulting, project designing, packaging, logistics finance and real estate are more and more active. For example, the percentage of logistics enterprises engaged in delivery, information service, consulting, and system designing and finance service rose to 70.5%, 48.6%, 25.8% and 16.3% in 2012 from 45%, 40%, 21.9% and 12% in 2008, respectively①. Service innovation shapes up to be the basic innovative activity of logistics enterprises.

2. Rapid development of new subindustries is the highlight of logistics innovation

In recent years, a new trend of specialization and segmentation in logistics service can be seen, boosting the rapid development in the new subindustries such as hazardous cargoes, liquid chemical products, energy, motor vehicles, cold chain and express delivery. Let’s take express delivery as an example. Driven by the fast development of e-commerce and online shopping, the business volume of China’s express delivery has maintained the growth as high as 50% for four consecutive years since 2011. In 2014, its business volume ranks at the top in the whole world for the first time. It shapes up to be the emerging logistics business with the fastest growth as well as the highlight of the development of the logistics industry.

3. New logistics organization injects new impetus into the development of the logistics industry

On the one hand, private logistics enterprises with modern management structure and innovative ability, such as Shunfeng Express, Debang Logistics, Xinning Logistics and Feima International, are becoming the leading enterprises in the logistics subindustries like express delivery and the outsourced logistics. Among them, some have been listed in the stock markets at home or abroad. Some 20 more are preparing to go public at home or abroad. These new private logistics enterprises have become market players with innovative vigor.

On the other hand, logistics clusters and platforms start to develop. While logistics enterprises move towards and gather in logistics parks, transportation hubs and around manufacturing clusters, some logistics clusters start to take shape in some regions. In the meantime, such logistics functional platforms as Zhejiang Transfar, Guangdong Lin’an Logistics Group and Shanghai Exchange for Overland Cargo Transportation also start to emerge, through which medium and small logistics enterprises serve customers and expand their market.

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①Report on China’s Modern Logistics Development 2014, compiled by the Bureau of Economic Operation and Adjustment of National Development and Reform Commission, and Modern Logistics Research Center of Nankai University, Beijing University Press, 2014.