Interview

“A historic opportunity”

China is well on its way to becoming the world’s biggest importer. How can companies reap the benefits from this, and how does DB Schenker assist them? Questions to Stephen Zhang, Head of Ocean Freight of the new Greater China organization

Stephen Zhang joined DB Schenker in 2001 and has been working in ocean freight ever since. He values the “anything is possible” approach that characterizes China’s business life, be it in logistics or elsewhere. Photo: DB Schenker
Stephen Zhang joined DB Schenker in 2001 and has been working in ocean freight ever since. He values the “anything is possible” approach that characterizes China’s business life, be it in logistics or elsewhere. Photo: DB Schenker

Mr. Zhang, Shanghai has just experienced its first “China International Import Expo” trade fair. A powerful indicator of the country’s growing status as an importer! What are the factors driving this process?

China’s economy used to be heavily reliant on exports. Yet in recent years, the government has made great efforts to generate momentum toward domestic consumption. Two examples from 2018: import duties on large varieties of consumer goods were reduced by 40 percent on average, VAT was reduced from 17 to 16 percent. This has stimulated customers’ demand, which ultimately boosts import volumes. On the social side, 1.4 billion inhabitants are the foundation to build a top economy on. Over the past decade China has transitioned from a predominantly lower-middle class to a middle, upper-middle and affluent-class society, boosting demand for high value and fresh products from abroad. In 2017 alone, goods worth approximately 1.84 trillion US dollars were imported – exceeded only by the United States!

 

When will China reach the pole position?

In the last 10 years, imports grew at an average of 6 percent higher than those of the US. If that gap remains in 2018 and moderates by 0.15 percent in each of the following years in a baseline scenario, China will become the largest importer by 2022. Thinking more conservatively, I would give it up to 2025 before that happens. Either way, this outlook provides a historic opportunity for enterprises across the world to enter a huge market. In particular, demand for food as well as high-tech and luxury products is constantly growing. And several trends indicate that import volumes will further pick up.

 

What does that mean in terms of logistics – especially for ocean freight, the main mode of transportation in foreign trade?

This development will have a marked impact on cargo import volumes in the upcoming years. Container throughput in China’s ports rose to 238 million TEU in 2017. And the ports have the capacity for further growth! Combined with robust rail and land networks, China has made sure that infrastructure and capacity handling will not be its primary bottleneck. In terms of capacities, strong growth in West to East trade volumes is welcome news for shipping lines hoping to ease existing imbalances. We also endorse this trend – it is now a matter of making the best use of this growth momentum and to develop solutions that provide our customers with efficient supply chains.

 

Why should businesses importing to China actually choose to work with DB Schenker?

In China, we have established our biggest country network consisting of facilities in nearly 70 cities. Operating here for 50+ years, we have gained invaluable business experience and industry knowledge. And seeing as we merged our two clusters into one Greater China organization with harmonized structures and processes in August this year, we are able to offer an even more systematic customer approach. We are able to design solutions covering all parts of the supply chain, for businesses from any industry sector. By strategically combining transportation modes we are reducing lead times and consequently costs. For many customers it is essential that we customize solutions, which we do based on careful analyses of their requirements. Moreover, we closely observe all relevant markets.

 

Which market trends did you observe recently?

Demand for fresh, high-quality food is expected to increase by 17 percent by 2025. So imports of anything from fruit and meat to dairy products become increasingly important. As a consequence, we focus on developing solutions for the perishable industry. Another example is the e-commerce sector. Its incredible growth momentum does not only impact the cargo volume; it actually requires a new set of logistics skills. As e-commerce players attempt to reach a wider geographical pool of consumers in China, we strategically choose the locations of our warehouses and make sure to equip them with highly modern technology and adopt new operations processes.

 

Does the increasing role of imports suggest that in return China’s exports, along with the associated logistics solutions, are losing in importance?

Not at all! China is aiming to create a more balanced economy with healthy proportions of imports and exports. In fact, in the country’s traditional culture, balance is one of the most important factors. China is going through an industrial upgrade with structural transformation. It is inevitable to see some downstream manufacturing switched to other countries. But China has a lot more to offer! We might need to send some sneaker plants away but we already see hundreds of China-manufactured cars waiting at the dock to be rolled onboard vessels, every day, bound for the US, Africa and other Asian countries. China is working hard to move up in the global value chain. Strong exports will be very important for the country for quite a long time – and hence also for us logistics services providers.

Full terminal in Shanghai, the world’s busiest container port: China records ever increasing volumes of import cargo – and with its infrastructure it is poised for further growth

Video: iStock / silkwayrain



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