Demand growth has revealed weaknesses in China’s logistics infrastructure. Still, the country hopes its new “five-year plan” will be sufficient to stop the impending departure of western multinational corporations.
The first long-term plan for modernizing China’s logistics system was unveiled last month by the General Office of the State Council, with an emphasis on enhancing efficiency, resilience, and safety.
Although it is a five-year plan, according to a state news agency, by 2025, a modern logistics system featuring supply/demand adaptation with internal and external connectivity will be in place.
It will be safe, efficient, smart, and green, extending the value chain of logistics services, strengthening the service guarantee of modern logistics to people’s livelihood, and improving current logistics emergency response capacity.
According to an advisor of global logistics, China needed this investment to remain competitive.
China’s transportation and logistics infrastructure has failed to keep up with peak demand in recent years, and “significant” investment will be needed to expand capacity at ports, airports, in the road and rail system.
According to a global logistics advisor, there would need to be an emphasis on lowering logistics costs as a proportion of GDP, which would need business reform, a reduction in tax and other levies, and reducing congestion.
As a result of manufacturers relocating to other countries, logistics managers told reporters that cargo orders from China to the US dropped by as much as 50% in November.
Chinese authorities will need to put in a lot of effort to maintain their position as the preferred off-shoring market, as Western corporations are under pressure to consider alternate Asian production locations.
Improving “green” logistics credentials and supply chain efficiency through digitalization will be essential to meeting the demands of multinational organizations.
The cost of being overly reliant on one country to supply the world and the necessity to expand logistical footprints were made clear by pandemic-induced shortages of completed goods and essential components for manufacture.
According to a Freight and Trade Alliance Head, global supply chains have not learned the value of not putting “all your eggs in one basket.”
An advisor of global logistics cited many companies in 2020 successfully looked for new supply sources and markets for finished goods. However, with China’s opening, their demand for resources and the supply of completed goods will rise.
However, with China’s opening, their need for materials and supply of finished goods will increase. We are now hearing that many companies will resume trading with China and that we have yet to learn the dangers of placing all your eggs in one basket.