China’s economic growth in 2015 was the slowest since the height of the global financial crisis in 2009. Many businesses and investors are edging for the exits. Should we be packing, too?
It’s a question that has been posed many times. Are China’s best days behind us? Now that the country has posted its weakest GDP figures in years, concerns are rising around the world. Will the slowdown have a significant effect on Europe or the United States? What about certain industries, like logistics?
First of all, I believe that worries about China’s deceleration are exaggerated. The country has maintained an extremely high average GDP growth rate of 7.5% per annum for the past decade. Compare that to 2.3% in the United States during the same period. China’s current slowdown is a natural effect of its shift from an investment-driven to a consumer-driven economy. There’s no need to brace for a hard landing, as some have suggested. We are not witnessing an economic crash, but rather an organized deceleration into more sustainable models of growth. Those of us doing business in China shouldn’t be surprised. The government’s most recent Five-Year Plan acknowledges the transition.
The Chinese economy is gearing up for far higher volume and velocity of international trade than ever before
This alone does not mean that China’s best is ahead – but national trade policy suggests that it is. The Chinese economy is gearing up for far higher volume and velocity of international trade than ever before, both as a regional hub and a potentially immense import market. “Belt and Road”, the infrastructural master plan to create numerous overland trade networks connecting China, Europe, and the rest of Asia, is slated to add US$2.5 trillion in Chinese trade within a decade. “Made in China 2025” aims to shift national manufacturing from its low-cost base to highly efficient, highly innovative production. Even prosaic policies like customs clearance integration suggest that officials are doing everything they can to generate greater international market opportunities and economic growth.
Logistics providers can play a crucial role as enablers of China’s future growth – particularly when it comes to bolstering and supplementing the investments made by governments and national enterprises. For one thing, we can boost trade route connectivity. For example, we link customers in remote areas of the country to air and ocean freight hubs where capacity can’t otherwise be scaled up quickly. We can also create infrastructure to handle the vast volume of both current and anticipated trade. Chinese policymakers expect increased trade activity and have even set aside US$40 billion to fund major infrastructure projects. So far, we’ve established multimodal corridors that carry Chinese goods to Europe in 14 days, trucking routes between ASEAN and China that can be traversed in a week, and more than 13 gateways and hubs across the country that provide a range of transport modes. And we’ll likely increase our investment in infrastructure as the Eurozone and ASEAN take full advantage of “Belt and Road” to connect with Chinese consumers.
But even with all that in mind, knowledge is perhaps the greatest delivery that international logistics providers can make. China’s workforce will need to learn new skills and adopt new service standards on a national level if the country is to transition its economy to more efficient trade and liberalized domestic demand. Initiatives as big as “Belt and Road” or as small as streamlined customs clearance will struggle to succeed without the support of companies with vast experience handling everything from large scale international supply chains to the details of domestic delivery.
With trade routes running all over the world, including to, from and within China, international logistics providers bring this experience to the table. We are leveraging our expertise to prepare for and tap into potential opportunities. For example, we’ve placed our top Chinese and overseas talent in more than 40 locations along the “Belt and Road” network. And because China is, and will continue to be, a hotbed of service innovation, our teams have begun stepping into new market opportunities like e-commerce and food imports as domestic demand gains momentum.
China’s trade ambitions are as massive as they are complex. In order to realize them, everything from the smallest processes to the biggest infrastructure investments must be tackled with local knowledge and a global perspective. International logistics providers have decades of experience to deliver that perspective, and that’s something my team and I are striving to do. We are in a unique position to not only contribute to China’s growth, but also to quite literally have a hand in facilitating trade between China and the rest of the world. After all, it’s people who operate our trains, planes, and trucks.
China’s economy is most certainly going through a major transition, but I think the best years are yet to come. If we plant the right seeds now – the infrastructure, skills and services the country needs – we’ll have much more growth to look forward to.