Where are China's high logistics costs and how can they be reduced?

At the 13th China Logistics Investment and Financing Conference and the 2nd Chengdu-Chongqing Regional Supply Chain Development Conference held on 26 May, Huang Qifan, vice chairman of the Finance and Economics Committee of the 12th National People's Congress and former mayor of Chongqing, pointed out as follows.

According to the National Bureau of Statistics, last year, the total cost of social logistics in China accounted for 14.7 per cent of GDP, down 1.3 percentage points compared with 16.0 per cent in 2015. But horizontally, the indicator is not only higher than that of the United States (about 7 per cent) and the European Union (about 6 per cent), but also nearly 5 percentage points higher compared with the 10 ASEAN countries, which is about 10 per cent.

"Five percentage points is 6 trillion." Huang Qifan said, "Our business enterprise profits account for about more than 10 per cent of GDP, roughly more than a trillion dollars. If the 6 trillion saved from logistics costs is turned into corporate profits, then business development will be greatly accelerated."

Logistics cost reduction and efficiency has been on the line, how to break down the task, as soon as possible to smooth the gap with neighbouring countries?

Huang Qifan analysis, last year, the composition of the total cost of 17.6 trillion social logistics, including 9.6 trillion of logistics and transport costs, more than 5 trillion of logistics and warehousing costs, as well as a variety of enterprises, departmental management costs expenditure costs totalling more than 2 trillion. Specific operational ideas can also start from these three aspects.

Logistics transport is not economic, first of all, from the transport of goods is not economic.

As Huang Qifan said, from the current stage of China's industrial industrial structure there are logistics transport is too large, too much energy consumption, waste recycling circular economy is not in place. One of the most direct problem is that, as the source of industrial industry of all kinds of raw materials used to account for a relatively high.

According to the data he gave, last year, the global amount of resources developed from underground was about 25 billion tonnes, and our country used 13 billion tonnes, accounting for roughly a little more than 50 per cent, but the industrial output value of our country is only 30 per cent of the global total value.

As our productivity is not yet at the level of the world's industrial powers, we consume too many resources as an industrial power, and this will be reflected in the excessive logistics and transport.

In addition to the high consumption per unit of material, there are two similar problems: on the one hand, China's energy consumption per unit of GDP is similarly high, about 1.5 times the world average; on the other hand, the recycling capacity of waste products is low, especially the recycling of all kinds of industrial products, equipment and terminals.

Huang Qifan pointed out that China's industrial recycling rate of about 10 per cent, while economically developed countries is usually 40 to 50 per cent, which is a "huge mine".

In Huang Qifan's view, these three aspects are related to the industrial structure and productivity development goals, and the logistics system is also related. If we can effectively achieve the optimisation of the three aspects, will not only promote the "dual-carbon" goal to achieve success, but also will greatly reduce the total cost of social logistics accounted for. According to his estimation, the reduction will be in the range of 2 to 3 percentage points.

In addition, there is also room for optimisation in the mode of transport.

Generally speaking, among the three modes of transport of public, railway and water, automobile transport has the highest energy consumption and the highest freight cost per tonne kilometre. According to Huang Qifan, the price of car transport is roughly five times that of ship transport and three times that of railway transport. As a result, to reduce costs, "there should be a logic of public-to-water and public-to-rail transport."

But the fact is that our railway transport and water transport both account for a relatively low percentage. Last year, China's total annual cargo transport was 50.61 billion tonnes, of which 4.93 billion tonnes of railways and 8.55 billion tonnes of waterways, accounting for 9.7% and 16.9% of the total freight volume, respectively.

How to make low energy consumption, low-cost waterways and railways function further?

On the one hand, for rail freight, Huang Qifan pointed to a large number of industrial development zones across the country, "all the development zones of the 'seven passes and one level', no 'railway passes', should be 'eight passes and one level '", especially for industrial development zones of more than 100 billion output value, "there should be a railway directly, loading and unloading directly on the train.

Due to the lack of the "last kilometre" of seamless docking, the factory shipments have to rely on the car to the railway station, twice loading and unloading is very inconvenient. That is, after loading on the car, some enterprises choose not to go to the railway station, but directly with the road transport, railway transport function has not been well played. With reference to the United States railway transport accounted for more than 20% of the total freight proportion, "China if you can increase 10 percentage points, will save 1 trillion yuan of logistics costs".

On the other hand, the inland navigation capacity is insufficient, mainly reflected in the Yangtze River's restricted shipping. According to Huang Qifan analysis, the Yangtze River, there are engineering barriers, the Three Gorges Dam design freight capacity of 1.4 billion tonnes, in the beginning of the operation has not been able to meet the upstream capacity, and to 2030, 2035, the upstream capacity will be expected to reach 3 billion tonnes. In the face of the "bottleneck over the dam", the excess capacity should even be achieved by car transport "over the dam".

In fact, the potential capacity of the Yangtze River should not be underestimated. Huang Qifan mentioned that the Mississippi River in the United States is equivalent to 12 railway capacity, the Yangtze River is wider than the Mississippi River, but now there are only 6 railway capacity.

To release the suppressed capacity there are two ideas, one is to build a second gate in the Yangtze River Three Gorges, so that the freight capacity doubled to 2.8 billion; the second is to create a dam, so that the Yangtze River to increase the capacity of another 6 railways.

In addition, even the motorway itself, there is room for logistics cost reduction. Huang Qifan said that according to globally accepted rules, operational highways usually stop charging tolls after 25 to 30 years of operation. If most of China's highways can be toll-free by this age, they can still shed 1 to 2 trillion yuan a year.

According to his calculations, through the public-to-rail and public-to-water transfers, as well as changes in the institutional mechanism for highway tolls, it will be possible to reduce the total cost of social logistics by another 2 percentage points.