A driver waited for cargo to be loaded onto his truck at a port in Shanghai. SHANGHAI — For years, China’s export juggernaut has been fed by highly efficient factories, low-cost labor and a fleet of container ships capable of transporting huge volumes of toys, textiles, electronics and other goods to every corner of the world.
Container trucks near a port in Shanghai. Most freight is moved by independent trucking companies, which have protested high taxes and fuel prices.
But there is a surprisingly weak link in the Made in China chain.
Moving those goods from the factory floor to one of China’s enormous seaports — often a drive of less than two hours — typically means relying on an independent trucking company. And as vital as trucking is to China’s mighty export machine, the government seems to be ignoring the drawbacks of what analysts say is an increasingly disorganized, inefficient and even costly way to transport factory goods to seaports.
Trucking’s tenuous status has been underscored by recent prοtests and demonstrations by drivers. Last week, in an unusually bold display of public anger, 2,000 truckers went on strike in Shanghai to complain about the rising cost of fuel and unfair government transportation fees. Some protestors hurled rocks, tried to overturn police cars and smashed the windshields of truck drivers who refused to join the strike.
Container trucks near a port in Shanghai. Most freight is moved by independent trucking companies, which have protested high taxes and fuel prices.The Shanghai municipal government eventually ended the three-day strike by arresting protestors and threatening strike organizers, while also promising to lower some fees that trucking companies must pay to use the roads and seaport.
But the challenges that trucking pose to China’s $1.5 trillion a year in exports are still in place — and could become even greater, now that huge factories have begun relocating to poorer, inland regions to save on labor costs.
“Our concern is that as these factories move away from the coast, the service standards won’t keep pace,” said Ken Glenn, an executive at APL, a transportation services company. “Rail and barge are even less developed.”
Within China, thousands of small trucking companies, many of them family-owned, compete by promising low-cost delivery. Then they overload their 18-wheelers in dangerous ways, pay bribes to ward off highway inspectors and hope to eke out tiny profits.
Now, though, with global oil prices sending the cost of fuel soaring, many truckers say they are heading toward bankruptcy.
“We’re paying a lot more money for fuel than we did three years ago, but what we get paid for freight has stayed the same,” said Qi Zhenwei, a truck owner stationed at a dusty trucking depot near one of Shanghai’s busiest ports. “How am I supposed to survive?”
Mark Millar, a China logistics expert at M Power Associates in Hong Kong, sees Chinese trucking as “a seriously fragmented and brutally competitive industry.”
“Most of the drivers are owner-operators, and in order to make money, they carry more cargo than the truck is supposed to hold,” Mr. Millar said. “This is obviously not a healthy model.”
Not all trucking in China is such a seat-of-the-pants affair. Some global companies transport goods by truck in sealed shipping containers from factory to dock, sometimes accompanied by security escorts.
But more often, goods destined for export are delivered to seaports by small trucking companies — usually hired by logistics firms that bargain to get the lowest possible shipping price. To scrape by, many of the small trucking firms violate the law, pay bribes to avoid heavy fines and transportation restrictions, and even force drivers to sleep in the trucks overnight, sometimes in insecure parking lots.
These rigors might seem to contradict the heavy investment in infrastructure and expressways that China has made to make its transportation network more efficient.
But many of this country’s modern roadways are expensive toll roads. And the government has placed tough regulations on many aspects of the transportation industry, which analysts say have burdened companies with heavy taxes, insurance and government fees. As a result, transporting goods by truck in China is relatively more expensive than doing so in the United States.
Read More Here: http://www.nytimes.com/2011/04/29/busin ... ss&emc=rss
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This is very interesting.
In the land of cheap labour, transportation costs are double what they are in the US, and as we all know, with rising labour prices, china is moving manufacturing inland. What will this mean for China's future? If they don't get a domestic market up and running for the majority of Chinese goods, it will mean that the farther the move inland, the less cheap Chinese export goods will be, and since China's economy is built primarily on exports, this will mean the end to China's GDP growth. (And if you add to the that the potential negative China Export Subsidy ruling coming from the WTO, the party may be over sooner than we think.)
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I posted this elsewhere the other day. It is about food prices, but it is really another example of the high cost of transportation in China.
China’s Cheap Vegetables Problem
A Chinese vegetable vendor waits for customers at a market in Hefei, east China’s Anhui province on April 14, 2011.
When China suffers inflation, food prices are always a significant part of the problem. But the conundrum China’s leaders face with this latest round of inflation is somewhat bizarre: While the country’s consumer price index is running at a near three-year high, vegetables are so cheap that tons and tons of them are being left to rot away in the fields.
Of course, vegetables are still expensive in the cities, and only in the cities, and that’s exactly where the problem is. According to the official Xinhua News Agency (in Chinese), fat, juicy Chinese cabbages are selling at one yuan per 500 grams in city markets — ten times the price the cabbage growers can fetch in the countryside.
Why, with urbanites paying such princely sums, are farmers leaving their cabbages on the ground? Because middlemen, transportation companies and the government itself are pocketing the bulk of the price differential.
Logistics-induced costs accounts for two thirds of the total cost for vegetables nationwide, Zhou Wangjun, vice director of the National Development and Reform Commission’s price section, is quoted by Xinhua saying.
It turns out the problem isn’t limited to produce. Referring to official statistics, Xinhua also said logistics-related costs constitute as much as 21.3% of China’s gross domestic product, compared with just around 10% in developed countries. In a rather baffling example, Xinhua said it costs between 6 and 8 yuan to move one kilogram of goods via land transport from Shanghai to Guizhou, a province in the southwest, while it costs only 1.5 yuan to fly the same amount from Shanghai to New York.
According to estimates by Wang Tongsan (in Chinese), a researcher at the Chinese Academy of Social Sciences, 82% of the world’s toll-charging highways are in China, with road tolls accounting for as much as 50%-70% of logistics costs nationwide.
Read more here: http://blogs.wsj.com/chinarealtime/2011 ... s-problem/
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It's going to be interesting to see how this pans out. The way transportation is run today is making living/eating in China's cities too expensive meaning that the migrant labour that used to inhabit the factories are choosing to remain in the countryside. Which in turn has prompted manufacturing companies to set their sites on the hinterland for factory expansion, but such plans will eventually cause such an increase in price for their products that there won't be any advantage to manufacturing in China at all. It's like a snake eating its tail, it won't end well.
The major problem I see here is the CCP. Their greed for road toll profits are what's making cities unaffordable to live in and countryside towns unaffordable to manufacture in. They are like a bunch of rabbits over grazing and expanding in a confined environment eating the grass before it has a chance to produce seed... Rabbits don't do well in a desert I'm afraid... This little glitch, the cost of roads, could be the one that topples the whole system.
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Another good article, on the logistics of moving manufacturing West:
"Go West" into China ... carefully"
Companies that are considering moving production into China's interior must weigh the trade-offs of lower costs against the impact on their supply chains.
It is estimated that the cost of shipping a 40-foot container from Wuhan to Shanghai by barge equals the cost of moving 10 tons by truck. Another comparison of transport options along the Yangtze River shows that the cost of shipping one TEU from Chongqing to Shanghai via truck (RMB yuan 20,000, or approximately USD $2,900)
http://www.dcvelocity.com/articles/2011 ... _to_china/
