Reduced logistics costs to aid trade

China has unveiled a clear roadmap to drive down logistics costs, a strategic move that officials and analysts said is crucial for enhancing the competitiveness of the manufacturing industry, and strengthening the foundation of the country's real economy as a whole.

As the Chinese economy faces growth pressures, and with the external environment characterized by a rise of trade protectionism, the initiative could enhance the efficiency of economic operations and strengthen the competitiveness and profitability of the country's exporters, they added.

According to the plan, which was jointly issued in late November by the general offices of the Communist Party of China Central Committee and the State Council, the world's second-largest economy aims to establish a "unified, efficient and well-ordered logistics market" by 2027.

Specifically, the government has set a target of reducing logistics costs from the level of 14.4 yuan ($1.97) per 100 yuan of gross domestic product last year to 13.5 yuan by 2027.

"Logistics is the circulatory system that connects the various components of our real economy, from production to consumption, as well as the country's participation in global trade", said He Dengcai, vice-president of the China Federation of Logistics and Purchasing.

Despite ongoing efforts to reduce logistics expenses in recent years, China's logistics expenditure as a percentage of GDP remains relatively higher than that of developed economies, He said.

China's total logistics costs accounted for 14.4 percent of its GDP last year, while the ratio in developed countries like the United States and Japan hovered around 7-8 percent. This gap underscores the substantial work China still needs to do in building a truly integrated and cost-effective logistics network on par with its global peers, He said.

This seemingly small reduction could translate into annual savings of over 1 trillion yuan for businesses across industries. These freed-up resources can then be channeled toward innovation, capacity expansion and exploration of new export markets, He added.

This initiative is not about reducing the prices charged by logistics service providers or cutting into their profits. Rather, it's a strategic shift toward optimizing the entire logistics ecosystem through measures such as improving transportation structure and promoting multimodal transport, analysts said.

Efforts to better harness railway freight and unlock its full potential as a cost-effective logistics solution have been placed at the top of the plan, with more direct freight train services to be added.

Zhang Xiaodong, a professor specializing in transportation management at Beijing Jiaotong University, said as of September, China's total operating railway mileage had surpassed 160,000 kilometers. However, the operating mileage of conventional railways that are capable of providing freight and logistics services amounts to only 114,000 km.

Put even more starkly, China's rail logistics network is only 2 percent of the size of the country's highway network.

A 1 percentage point increase in the railway's share of total freight turnover can reduce the overall logistics cost-to-GDP ratio by 0.1-0.2 of a percentage point, Zhang said, adding that rail's current role in China's transportation market remains significantly underused.

Last year, rail's share of total freight turnover was only around 20 percent — far below the 40 percent level seen in the US. The railway system is a powerful lever for lowering logistics costs, but its true capabilities have yet to be fully realized in China, Zhang said.

To this end, the government, as laid out in the plan, aims to raise rail's share of total freight volume to around 11 percent by 2027, further expanding its share of total freight turnover to some 23 percent.

The building of dedicated railway sidings for facilities located within 20 km of railway stations and handling annual freight volumes of over 1.5 million metric tons will be scaled up, according to national railway operator China State Railway Group.

"By optimizing the railway's role in the logistics landscape, we can unlock its full potential as a cost-effective, environmentally friendly and high-capacity solution," Zhang said.

A set of targeted measures has also been outlined in the plan to promote the integration of various transportation modes under a unified framework. This includes streamlining transshipment procedures, improving cargo handling coordination and enhancing information sharing across the logistics ecosystem.

Meng Xiaoyu, an official with the Ministry of Transport, said the goal is to establish a seamless, one-stop service model that covers the entire logistics process, from the initial order to the final delivery, with a single contract, settlement and insurance arrangement.

Transitioning to a truly multimodal one-stop logistics system is a critical step in lowering overall logistics costs and enhancing the competitiveness of industries, Meng said.

Yang Shan, a sales representative at a container shipping company in Jiangsu province, said that logistics businesses are reaping the benefits of seamless multimodal transportation that are dramatically reducing their supply chain costs.

"In the past, goods would typically go by road to the coast before being shipped by sea. Now, we're able to facilitate a direct transition from inland waterways to maritime transport, eliminating numerous intermediate handling steps and dramatically streamlining the overall process," Yang said.

The company has been able to save nearly 50 percent in average costs per container by shifting to a more integrated river-to-sea approach, Yang added.

The plan also calls on regions where conditions are suited to integrate advanced manufacturing capabilities with modernized logistics infrastructure to drive economic growth and enhance the nation's supply chain resilience.

Zhang Shixin, deputy secretary-general of the National Development and Reform Commission, said given China's expansive geographic reach and the imbalanced allocation of its productive forces, optimizing the logistics network is essential for unlocking the full potential of the country's economic ecosystem where the location of industrial clusters is better aligned with the deployment of logistics hubs.

The manufacturing industry is poised to enhance its edge through the optimization of logistics, as its logistics volume accounts for some 90 percent of China's total, Zhang said.

In particular, to further enhance the competitiveness of electric vehicles, lithium-ion batteries and photovoltaic products, specific measures to improve logistics efficiency and convenience for these green high-tech products have been fleshed out in the plan.

Wen Bin, chief economist at China Minsheng Bank, said that in the face of tariff hikes tipped by some countries on these products, lowering logistics costs will provide a boost to their export prowess and help preserve the stability of global industrial and supply chains.

Efficient logistics can act as a force multiplier, boosting the competitiveness of China's real economy and sharpening its ability to adapt to volatile conditions. This, in turn, will strengthen the foundations for sustained economic growth, Wen added.

wangkeju@chinadaily.com.cn