logistics in China.pdfVIP

Logistics in China PROPERTY AND INFRASTRUCTURE Contents 1 Executive summary 2 Market overview 4 Regulatory environment 6 Competitive landscape 8 Growth challenges 9 Foreign investment considerations 11 About KPMG 12 Contact us ? 2008 KPMG, a Hong Kong partnership and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International, a Swiss cooperative. All rights reserved. Logistics in China 1 Executive summary China’s logistics sector is growing at an extraordinary rate, thanks to the rapid expansion of the country’s industrial base and the rise of domestic consumer markets. Essential to the development of China’s economy, the logistics sector has received considerable attention from policy makers and is attracting growing volumes of both foreign and domestic investment. Having grown annually by around 14 percent over the past four years, expenditure on logistics services, encompassing transport, storage and management functions, reached RMB 3.8 trillion (USD 506 billion) in 2006.1 This expenditure is equivalent to 18 percent of China’s Gross Domestic Product (GDP) — twice that of most developed countries.2 As a result, one of the key issues facing the industry is operational inefficiency. The market is fragmented in terms of the number of operators and their geographical remit. Operators have an opportunity to realise competitive advantage by improving coordination at the national level between transportation, storage and stock control functions. These inefficiencies are exacerbated by a number of other factors, including transportation bottlenecks, regulatory constraints and local barriers to entry. Together, these factors have placed a strain on new and existing operators and have led to a continued rise in costs. Although these issues won’t be resolved overnight, the government has taken positive steps, including opening up the market to foreign logistics companies and simplifying the