China ends some road tolls, lowers electricity prices to ease cargo flow

THE Ministry of Commerce and the State Council have unveiled measures to tackle the "unsustainable" situation of rising logistics costs, with government officials regarding the entire sector as a bottleneck restricting trade.

Companies have experienced operational costs outstripping the increase in revenues. Total logistics costs surged by 11.9 per cent year-on-year from January to November to CNY8 trillion.

According to data from the National Development and Reform Commission, logistics companies moved products valued at CNY163.4 trillion (US$25.96 trillion) between January and November, up 9.7 per cent compared to the same period the previous year.

This increased activity translated into higher revenues with turnover rising by 6.8 per cent from January to October, year on year. This compared to 3.4 per cent growth in the first nine months.

Government measures to cut costs and improve efficiency include the abolition of some road tolls, which are said to account for a major part of Chinese transport costs, plus cheaper electricity and water for the production and circulation of agricultural produce.

A report by the UK's Transport Intelligence highlighted that "recent tax reforms have also had a negative impact on costs, with many operators complaining that the new value-added tax regime has increased their burden rather than reduced it".

"With the government seeking to stimulate consumption, in part by relaxing credit, pressures on logistics companies will only increase. The inability of the domestic industry to keep pace with demand was highlighted by the November 11, 'Singles Day' Internet shopping peak, when many logistics companies failed to cope, leaving consumers disappointed," it said.

Demand momentum is forecast to continue, with companies such as Wal-Mart planning to open 100 new stores in China over the next three years and to focus on developing e-commerce. Last year, it acquired a majority stake in Chinese e-commerce company Yihaodian.

Fixed asset investment in the logistics sector rose by 22.2 per cent year-on-year to CNY3.5 trillion from January to November. The industry's value-added output increased 9.5 per cent to CNY3.2 trillion in the first 11 months last year, Chinese media reported.