China’s logistics inefficiencies could hamper growth
February 21, 2007 by SwizStick
Filed under 3PL, China, Supply Chain Management
Via China Logistics News:
According to Business Week the industry in China is still dogged by inefficiency, with CFLP figures showing that logistics costs accounted for 21.6% of GDP in 2004.
Given that logistics costs come to 9% of the United States GDP and 11% of Japanese GDP, it could be argued that China wastes around one-tenth of its total GDP through logistical inefficiencies.
This seems to be a fair assessment and matches other available figures.
The total handling capacity of China’s coastal ports is already over one billion tons, and capacity is increasing quickly. But not that is not quite enough.
Speaking in January, Shen Yihua, vice director of the commerce ministry’s Waterway Transport Planning Institute, said that China cannot expand port facilities quickly enough to meet rising demand.
China’s economy is dominated by the export market, if they can not build up infrastructure and streamline processes quickly enough, logistical costs and difficulties will increase. China’s rising manufacturing and labor costs in the crowded coastal areas and industrial bases, as well as capacity crunches, already have some companies looking to Vietnam and other SE Asia locations as an alternative or backup to China.
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