Mike King | Aug 23, 2011 9:37AM EDT
Despite rising costs for manufacturers in coastal regions, China has vast potential for logistics companies and forwarders as government incentives open up interior regions, said a senior shipper representative.
With workers in short supply on the coast where production costs are rising, the lengthening of export supply chains as manufacturing industry moves inland to reduce costs will create huge opportunities for third-party logistics companies, said John Lu, chairman of the Asian Shippers Council.
“At the moment, logistics is one of the big obstacles to China's development,” he said. “As industry migrates inland, demand for logistics services will increase both for domestic and international shipments.
In an effort to open up the country’s interior region by reducing the logistics burden on shippers and consumers, China’s State Council last week announced a range of tax reductions, road toll fee cuts, land policy incentives and infrastructure investment commitments.
Lu said the longer supply chains will provide opportunities to logistics companies able to keep interior manufacturing cost competitive.
“As these logistics services are developed, and the income of people inland increases, opportunities will increase again because there will be more domestic movements of cargo,” he said.
A number of major manufacturers have set up production centers in Vietnam and elsewhere in Asia to reduce productions costs, but Lu was skeptical that this represented a major migration of industry away from China.
“Companies based on the coast where living and land costs are high still have plenty of places to move to without leaving China if they can’t remain competitive on the coast,” he said. “Inland China is still cheaper than everywhere else. Even if costs do rise, they have the experience, the manufacturing size, the volume, the raw materials supply — they have everything.”
-- Contact Mike King at michael@borderline.eu.com