I mentioned in JoC columns over the past few weeks an overwhelming impression from nearly a month traveling in China: The stage is being set for a quantum leap in internal consumption that will drive rapid growth in domestic logistics and a transformation of that industry.
Domestic logistics in China is still highly fragmented and undeveloped, with millions of truckers and none controlling more than 1 percent of the market and internal borders that require frequent handoffs of cargo.
Yet highway, road, tunnel and bridge infrastructure is seeing a rapid buildup and demands are rising from retailers seeking national logistics networks to match their own increasingly national retail networks.
According to Erik Autor, vice president and international trade counsel at the National Retail Federation:
"I was in Shanghai in August speaking at a conference on home textiles, attending the big home textiles trade show, and visiting factories in Jiangsu province north of Shanghai. What really struck me was that the goods I was seeing were obviously not intended for the U.S. market. When I asked about this, the response I got was that the financial crisis taught Chinese manufacturers that they can no longer depend on the U.S. and EU export markets.
"In the U.S., home products market has collapsed. Meanwhile, homes and apartment are being built all over China, spurring a big consumer demand for home furnishings. They see the domestic market as the growth area now.
"A manager of one of the biggest bedding factories in China (owned by his family) told me he thought manufacturing was a sucker's game, and he wanted to get into retail – creating something like a Bed-Bath-And-Beyond in China."
This is similar to what I heard. While in Chongqing last month I visited a barebones but still fairly large shopping mall that was full of furniture, bathroom and home furnishings stores where the styles were clearly aimed at local tastes. Consumerism is definitely starting to take hold, and it's likely to be a long-term development of great significance.
In written commentary dated Nov. 19, Stephen Roach, chairman of Morgan Stanley Adia, predicts that the 5-year plan for 2011-2016 will be heavily oriented to building the social safety net as a foundation for consumer spending.
He said, "In a post-crisis climate likely to be characterized by ongoing sluggishness in external demand, China will have no choice other than to turn to a new model, one driven much more by internal private consumption. I fully expect that this transition will be the centerpiece of the next 5-year Plan."
Contact Peter Tirschwell at email@example.com.