High cost of logistics in China to spur demand for sophisticated services

The future is bright for industry players.

China’s logistics costs reached 17.9% of GDP in FY13, 9.5ppt higher than the average for developed countries such as the US, Japan and Germany.

According to a research note from Maybank Kim Eng, as a result, it expects a continued drive to lower logistics costs, advancement of technology and the improvement of infrastructure networks to further stimulate demand for sophisticated logistics services.

The report said that this will translate into numerous business opportunities for experienced logistics providers with solid service know-how.

Further, structural, rather than cyclical, drivers support the uptrend in China’s logistics sector over the long term.

Here's more from Maybank Kim Eng:

We see seven key drivers underpinning solid logistics demand in China:

1) growth in e-commerce volume, driven by online shopping and “Haitao” demand;
2) manufacturers relocating production, stimulating supply chain services;
3) increase in enterprise outsourcing accelerating third-party logistics (3PL);
4) rise in demand for value-added services translating into more profit opportunities;
5) upgrading of logistics facilities enhancing unit revenue;
6) expansion of Chinese enterprises overseas generating crossborder logistics demand;
and 7) more favourable government policies creating a more positive operating environment.