Untangling The Knots Along China's Cotton Road

By Jim.Robinson|January 29, 2009

China has undergone an infrastructure building campaign unrivaled in recent history. China began to open up its doors to the outside world in fits and starts in the 1980-90s. During the 1980s, the large transportation providers DHL, UPS, FedEX and Exel were all vying for their toe-hold on the mainland through joint ventures with the various government transportation groups like Sinotrans and newly-privatized enterprises. China seemed to re-awaken after Deng Xiaoping’s famed Southern Tour in 1992 when he proclaimed, “to get rich is glorious!”

The east coast highway and port system has reached or surpassed international standards around the centers of commerce in Beijing, Shanghai and the Pearl River Delta in Guangdong Province. The government has slowly allowed international firms to operate independently of their joint venture partners. With China’s entry into the World Trade Organization in 2004, restrictions on foreign direct investment were officially loosened, but multinationals were still functionally required to navigate the bureaucracy of multiple layers of government.

According to Datamonitor, the Chinese logistics market is projected to grow in the low teens through 2010, after posting a remarkable 22.6% compounded annual growth rate from 2001 to 2005. Today, China has 16 major ports and a shipping capacity of 50 million tons per year. China has a highway network of over 30,000 km of highways, second only to the U.S. in total kilometers. Despite this phenomenal growth, logistics costs remain high relative to overall production. For example, logistics costs represent 20% of GDP in China vs. 11% in Japan.

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Even though the Chinese government has restrictions against the practice, many trucks are overloaded with bales to increase profit margins.