Lessons Learned and Policy Implications
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1 UNDP/ESCAP ARTNeT Consultative Meeting on Trade Facilitation and Regional Integration China s Liberalization in Trade Logistics Service: Lessons Learned and Policy Implications Presented by:yang Zerui China Institute of Int l Studies August 2006 zeruiyang@hotmail.com
2 Outline of the Study I. Introduction II. Logistics Industry in China s Economy III. Trade logistics liberalization Experiences and Lessons IV. Case Studies V. Findings, Suggestions and Conclusions
3 I. Introduction Purpose of the Study Study Methodology Previous Studies
4 Definition (I) logistics is the term used to describe the process by which a product get from the manufacturer to the consumer and includes transportation, storage, packaging, portage, loading and uploading, processing and information transmission
5 Definition of Logistic (2) Logistics Infrastructure & Logistics Service Railway Air freight Highway Trucking Seaports Rail Transport Airports Freight f. & 3PL Service Inland waterway Shipping Warehouse Warehousing & Distribution Legal Framework, Governmental Administration
6 Three basic approaches 1)Review of regulations and previous studies 2)Comparative analysis of key process of logistics liberalization. 3)Interviews and telephone interviews.
7 II. Logistics Industry in China s Economy 2.1 China s Rapid Economical and Trade Growth 2.2 Logistics Industry in China Facts and Trends 2.3 China s Logistics Regime
8 Basic Info I: GDP Growth in China Annually growth rate 9.4%, in billion RMB , In dollar, GDP 289 b to 2250 b Per capita, 280$ to 1700$
9 Basic Info II. Foreign Trade Growth in China Billion US$ Annually growth rates 19% 2005 is 71 times of 1978
10 Basic Info III. FDI Growth in China billion US$ Total FDI by end 2005 US$800 b
11 Trade Logistics Service in China s Economy No.1 biggest industrial sector in economy Percentage to GDP is 20% recent years Market about US$423 billion 2005, percentage decreased to 18.6% Growth rate around % annually
12 China Logistics 2005 Total Ent.s72753 Emp.s 7.607m Assets 3576 B.R Railways 182, 1.725m, 997b Highways 30356, 2.03m, 918b Waterways 4700, 0.69m, 474b Air 459, 0.206m, 377b Pipelines 39, 0.016m, 66.2b Forwarding19247, 0.63m, 173 b Warehousing10177, 0.399m, 258b Post 1834, 0.675m, 126.8b Others 5759, 1.235m, 186b
13 Total Freight Volume million ton-kms Total 12,026 26,207 44,320 78,329.8 Rail 5, , ,770 20,730.5 Road 764 3, , ,573.8 Water 5, , , ,057.6 Ocean 3,532 8,141 17,073 38,552 Air Pipelines Seaport (100 million tons)
14 Total Freight Volume 2005(I) 100 m tons, Growth, percentage Total Railways Highways Waterways Air
15 Total Freight Volume 2005(II) 100 m ton-kms, Growth, percentage Total Railways Highways Waterways Air
16 Total Freight Value, 2005 RMB100m. Growth Percentage Total Ind.l Goods Ag.l Product Imp.d Goods Rec.g Goods Others
17 Logistics Components M.RMB Growth Percentage Total Transport Storage Management
18 Logistics Regime in China Governmental bodies Land Transportation-MOC Water Transportation-MOC Railway Transportation-MOR Air Transportation-CAAC International Cooperation/Negotiation-MOFCOM Post-State Post Bureau General Administration/Coordination-SDRC
19 III. Trade logistics Liberalization Experiences and Lessons 3.1 Three Stages of Logistics Liberalization 3.2 China s WTO Commitments 3.3 Bilateral Arrangements CEPAs and FTAs 3.4 Problems and Issues in Liberalization 3.5 Current Policies and Governmental Actions
20 China Liberalization in Trade Logistics 3 Stages: Before 1979 Planned socialist economy Reform and Open Up After WTO membership
21 Three Stages of Logistics Liberalization in China Events Economy Structure Logistics Area Before 1979-Reform and Open-up policy launched, December 1978, Wholly-planned socialist economy,no logistics concept, No logistics needed Intermediate period, Self-reform, Semi-planned, semi-market economy, Selfexploration on logistics industry, Part-liberalized part-planned, low level After 2001-WTO accession, Towards complete market economy, WTO commitments- based, wholly liberalized,
22 Trade Logistics in China s WTO Protocol (I) Encouraged-Construction and operation of: rail trunk lines (Chinese majority shareholding required); railway branch lines, local railways and connecting bridges, tunnels and ferry service (restricted to JVs only); roads, bridges and tunnels; public wharf facilities; civilian airports (Chinese majority shareholding); warehousing facilities related to transport service. Freight service by road and air (Chinese majority shareholding); general aviation service for agricultural, forestry and fishery sectors (restricted to JVs only); scheduled and non-scheduled international sea transport service; and international, inter-modal container freight service.
23 Trade Logistics in China s WTO Protocol (II) Restricted-Cross-border trucking, water transport, rail freight, and agency business (shipping, freight service, cargo handling on board foreign vessels, and advertising, etc.) Prohibited-Postal service (except courier service)
24 Regulatory framework for foreign participation in logistics Sub-sectors Foreign participation Authority Int.l freight forwarding Regulated MOFCOM A.F forwarding Regulated, CAAC, MOFCOM Logistics center Encouraged MOC, MOFCOM Domestic trucking Regulated MOC, MOFCOM Consolidation Regulated MOC, MOFCOM Warehousing Encouraged MOC, MOFCOM Customs brok H. Regulated GAC, MOFCOM Shipping line Regulated MOC, MOFCOM Airline Heavily Regulated CAAC, MOFCOM
25 Problems and Issues in Logistics Liberalization On Rules/Regulations and Governmental Administration Hardware and software Freight forwarding & other 3PL Services Warehousing General
26 IV. Case Studies What Impedes Logistics Firms Doing Business? 4.1 Comparison of Different Logistics Firms 4.2 State Owned Enterprise China Post 4.3 Private Enterprise--DWT 4.4 Foreign Invested Enterprise DHL
27 Comparison of Different Logistics Firms (I) SOEs FIEs Private Law/R.Limit. No Yes Yes Company Scale Big Big Small Efficiency Low High Mediate Human Cost Low High Low C.Competition Low High High Local Protection No No Many Future Growth Limited Bright Bright
28 Comparison of Different Logistics Firms (II) General Advantages SOEs-Free law/regulatory environment, Governmental support FIEs-Worldwide network, sufficient capital. Private-Swift management and low administrative fees General Disadvantages SOEs-Low efficiency FIEs-Law/regulatory limit, high expansion cost Private-Law/regulatory limit, small scale, difficult to get capital
29 V.Findings, Policy Recommendations and Conclusions 5.1 Findings 5.2 Policy Recommendations 5.3 Conclusions
30 Findings 1, an integrated part of China s liberalization and modernization drive in economy. 2, economy benefits from trade logistics liberalization. 3,in advance position in logistics liberalization. 4, an undeveloped trade logistics country. 5, market access still a big problem;competition fierce; discrimination widely existed. 6, Area differences and local protection enlarged.
31 Suggestions (1) governmental effective administration; (2) to keep liberation step with economic growth; (3) National treatment to all types of logistics firms; (4) Integration of domestic logistics market; (5) Privatization or partly privatization, or at least private-management of SOEs logistics firms; (6) Comprehensive consideration and state s strategy on logistics industry and liberalization.
32 Conclusions still a less-development logistics country; Many logistics problems and issues caused by the liberalization, hardware and software area The administrative structures on logistics industry in China are no longer suitable; both an opportunity and a challenge to China s economy and to Chinese government. improvement in logistics software is more urgent than in hardware, domestic market integration is more urgent than further liberalization to the outside world.
33 Thank You!
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