Strategic Analysis of the Chinese Logistics Market: Industry Research Report

Strategic Analysis of the Chinese Logistics Market

Published Date: June 2007

Published By: Frost & Sullivan

Page Count: 148

Order Code: R1-5851

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This Frost & Sullivan research service titled Strategic Analysis of the Chinese Logistics Market provides an analysis of the key trends and future growth prospects of the logistics market as well as the third-party logistics market in China. This study also provides an insight into the major restraints that are hampering market growth and provides strategic recommendations to logistics service providers.

Rapid Economic Growth and Increasing Influx of Foreign Direct Investments Drive Demand for Logistics Services

Booming economic growth and the increasing influx of foreign direct investments (FDI) in China have driven demand for logistics services in 2006. The Chinese Government deregulation on foreign-owned logistics companies has also increased opportunities for these companies to increase their market penetration. Moreover, increasing government support related to transportation infrastructure has also aided the development of the logistics industry and its market growth. At the end of 2005, following the completion of the Chinese Government’s 10th five-year plan on transportation infrastructure, the total railway length reached 76.6 thousand kilometers and the length of highways stood at 1.9 million kilometers, with up to 41.0 thousand kilometers as express highways.

"The 2008 Beijing Olympic Games and the 2010 Shanghai Exposition are also expected to spur logistics demand domestically and internationally," notes the analyst of this research service. "Besides, the evolution of logistics and the supply chain software industry and the government’s encouragement is driving the modernization of the logistics sector in China."

Customer-focused Solutions Crucial for Market Success

Despite the lucrative growth opportunities, the complex licensing process at multi governmental levels of authorities and the fragmentation of the market are the key factors restraining growth. "The high levels of complex rules and regulations set by the national, regional, and local government authorities have made it challenging for foreign logistics service providers to move goods from one province to another," explains the analyst. "In addition, the lack of logistics expertise and poor information technology integration are hampering the growth potential of the logistics market."

In the future, improving the logistics infrastructure by integrating road and rail networks, construction of airports in second tier as well as third tier cities, and setting up of free trade zones are expected to create better connectivity to link ports and airports, creating opportunities for advanced logistics solutions. Moreover, logistics service providers would do well to streamline their operations and reengineer their management methodology with the active deployment of technology. With higher operation efficiencies and cost reduction, service providers will be able to offer more competitive prices. Service providers are also recommended to develop customer-focused solutions and pricing for various modules of services, instead of quoting a common price for all clients. Besides, establishing long-term relationships with the government, including each city transport authority as well as the central government will prove beneficial for logistics service providers.

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