The massive growth of manufacturing within Asia is presenting opportunities for consolidation and break bulk on an unprecedented scale. Since China opened its doors in 1980, its phenomenal growth has been gaining worldwide attention. With 1.3 billion people, China accounts for 68% of the East Asian economy and ranked second in the world, with GDP growth of 8% in 2000.

The contents of most electronic gadgetry sold in the United States are sourced in Asia, and the garment industry, a long-time staple of Chinese manufacturing, has likewise increased its exports. Toys, after-market auto parts, and just about anything else that involves otherwise-high-labor are being made and exported from China.

Initially, most manufacturing was grouped around coastal areas. Guangdong province, across the water from the traditional trade port of Hong Kong and served directly by Guangzhou and Shenzhen, developed a thriving garment industry. In more recent times, Guangdong has specialized in the low-tech manufacture of consumer items such as found in any Target or Wal-Mart.

Shanghai has cultivated the high-tech market. Free trade zones and government incentives have lured some of the world’s most prominent names in computers and engineering. In addition, they are developing the Chinese auto industry through joint ventures with Volkswagen, Fiat, and General Motors.

The Chinese aviation industry has settled in the mountainous regions of central China, around Chengdu. This was primarily for strategic defense reasons because of cool relations with the then-Soviet Union. This has spawned an enclave of component manufacturers in the region.

The Chinese government is looking to emulate the success of the aviation industry and push manufacturing inland to share the wealth and prevent a serious problem—the flight of the population from the inland to the coastal cities.

Chinese transportation infrastructure, although in development since the communist regime took over in 1949, is antiquated by Western standards. Logistics is an infant concept that is getting much attention from Taiwanese and Hong Kong forwarders as well as the state-controlled freight-forwarding agencies, such as SINOTRANS. The US forwarders are attempting to catch up with the strong foothold of the Europeans. Chinese-American relations have traditionally been strained and this has restricted access to our top forwarders. The Europeans have continued to court the Chinese since the early days of the great trading houses of Hong Kong and Canton and have subsequently captured a larger share of the market.

Yantian: An Ideal Logistics Option

South China has seen the strongest growth in the country and is, in fact, the largest exporting zone in the world. Traditionally, most South China exports were channeled through the port of Hong Kong to worldwide destinations. This is rapidly changing, however, with the recent new developments in the Shenzhen ports—namely, Shekou, Chiwan, and Yantian—which are just north of border. The container throughput of these ports has experienced dramatic growth from 1995 to 2000.

Yantian is one of the most popular of all the Shenzhen ports because of its depth, 16 to 22 meters, which compares to Shekou’s 10.7 meters and Chiwan’s 14 meters. And with purpose-built infrastructure, Yantian is most conveniently located to serve the entire Pearl River Delta, which generates as much as 40% of China’s total GDP. The port also has direct services to Europe, America, Australia, and Asia as well as with the other ports in Mainland China. Because of all this, Yantian has enjoyed the greatest growth among the Shenzhen Ports.

Yantian and the WTO

The new regime in China is preparing itself wisely for entry into the World Trade Organization (WTO) and the subsequent flood of overseas influence on its economy and people. The growth of Yantian as a logistics center is expected to be further enhanced once China enters the WTO, with the following taking place:

The customs procedures will be further streamlined and simplified;

Trade will increase with the removal of quotas and tariffs; and

Removal of foreign investment restrictions in sectors including finance, insurance, telecommunications, retailing, and transport.

Doing businesses under a more transparent, standard, and less-limited environment will in turn create the following opportunities that positively influence the logistics development.

Fewer foreign trade restrictions implies a colossal increase in cargo volume for finished goods. Although China already produces one-third of all suitcases worldwide, one-fourth of the world’s toys, and one-eighth of the world’s footwear and clothing, these numbers represent only 3% of the world market share because of restraints imposed by tariff and quota barriers. Total trade is expected to double in five years from $473 billion in 2000 to $800 billion and to reach $1,000 billion by 2010.

Increase in FDI

Today, 360,000 foreign enterprises employ 10% of China’s industrial population. After China’s accession to WTO, the number and amount of foreign investment is expected to increase tremendously.

Prosperous trade demands comprehensive and efficient logistics services, and many businesses in China consider logistics and distribution to be their most important problem. Therefore, the need for high-quality, efficient and professional 3PLs with global networks is tremendous.

In the past five years, logistics opportunities have been explored to develop logistics services in the Yantian region. Many companies there now offer to shippers facilities that include comprehensive warehousing and distribution facilities, which are comparable to those in Hong Kong.

New Global Alliances

To capture the potential development of the South China region, established logistics service providers in China are actively forming partnerships with international logistics specialists to further enhance their networks from China to major markets in the world, a classic example of a win-win collaboration among 3PLs. Look for alliances such as these when choosing carriers to and from South China in the future. wt