SHENZHEN, China — China’s government is sending a strong message that it wants to redirect the country’s huge export economy inward, focusing on growth in domestic consumption and industrial development of the vast rural interior. Several Western transportation operators in China say they’re already making the same move, pressing strategies aimed less at the country’s role in global supply chains and more on a Chinese market that is, well, China.
The sprawling China International Logistics and Transportation Fair in Shenzhen last month was filled with local logistics companies trying to get a piece of the global shipping pie, but smaller discussion forums in side rooms described domestic delivery networks that many believe are ripe for change.
“They have done an amazing job of developing infrastructure,” said Martin Winchell, managing director for the Greater China area at Schneider Logistics. “Now it is up to us the find a way to use that infrastructure efficiently.”
Green Bay, Wis.-based Schneider wants to be in China what the company is in the United States, Winchell said — a trucking operator moving goods between various interior points. That’s a departure from the approach many companies have taken over the years as they focused only on China’s enormous export trade fed by outsourced manufacturing for multinationals.
“In China, there is a need to have a large-scale network to serve the market,” Winchell told the forum at the Shenzhen Convention and Exhibition Center. “We are starting to see the development of medium-sized enterprises, which is going to be very important.
Schneider is hardly alone.
C.H. Robinson, the Minneapolis-based dominant player in the U.S. trucking brokerage market, has its sights less on the international forwarding business in China than on the huge potential business as a non-asset-based logistics provider. The company is applying for a domestic truck broker license, but no specific license for the business exists and officials at the company say it’s necessary to allow the business to build greater scale.
That regulatory framework, the U.S. operators say, is an important step that goes along with the highways, bridges, rail track and other transportation construction China is undertaking.
Government officials appear to be paying attention.
At a separate session, Gu Jingyan, director of the Highway Research Institute in the China Ministry of Transport, cited the examples of U.S. companies including Transcore, Getloaded and Landstar as potentially useful models for managing trucking capacity in China.
China’s own transportation operators see changes coming. Hu Jianhua, managing director of container terminal operator China Merchants Holdings, said the country’s top 10 logistics companies hold only 30 percent of the market. That leaves the market ripe for consolidation, which Hu said would come as companies with disparate services bring logistics and distribution functions under the same umbrella.
“Some companies will be eliminated,” he said, “and there will be a higher concentration of business. There will be more and more outsourcing to logistics providers.”
China’s huge, developing interior is a major focus he said. “Transportation for inland customers has proved quite attractive to many enterprises,” he said.
More services are coming to cities such as Wuhan, Chengdu and Chongqing, the western China city that this month attracted direct 747 freighter service from TNT after the city’s burgeoning high-tech manufacturing fueled a 62 percent gain in exports in the first half of this year. But Western operators say tying those cities together in the sort of large, intertwined domestic distribution networks common in North America and Europe will require more than roads and airports.
Winchell said China’s trucking regulations do not separate the tractor from the trailer, making it all but impossible for trucking companies to efficiently load and swap out trailers during operations. In the U.S., he said, Schneider generally owns trailers and hands them off already loaded to independent owner-operators who own their own tractors — a common structure for trucking operations around the world.
The implications are important: Liability for product damage follows the entire truck, and interchange agreements don’t exist.
“Of all the major transportation markets in the world, China is the only one that does not have the tractor-trailer model,” Winchell said. “It allows for standardization of the delivery economy, it allows for palletization, it allows for the development of the logistics industry in China.”
Until that changes, he said, “We are growing our own fleet, but we’re doing that cautiously. We certainly want to be more of an asset player than a non-asset player.”