Download logistics trends series

LOGISTICS TRENDS SERIES
The Future of China
Global Business Strategy
June 29, 2012
CHINA’S TRANSFORMATION OVER LAST DECADES
China has undergone a major transformation in the past decades,
emerging as a major powerhouse of the world economy
Economic Facts
Logistics Facts
China has progressed from being a closed economy to a
market oriented one that plays a major global role. In 2010,
China became the worlds largest exporter in addition to
the stellar growth along all major economic indicators
Key Indicators
1980
2010
CAGR
Over the past decade, China has invested heavily in
developing infrastructure and this has supported the
growth of the economy to a large extend
Key Indicators
1995
2010
CAGR
GDP ($ billion)
189
5,926
12.2%
Rail Network (1000 km)
62.4
91.2
2.6%
Per Capita Disposable Income ($)
280
3,000
8.2%
Highway Network (1000 km)
1,157
4,008
8.6%
Population Total (Million)
981
1,338
1.0%
Navigable Inland Waterways
(1000 km)
110.6
124.2
0.8%
Population Urban (%)
20%
45%
4%
Air Freight (1000 Tons)
875.5
5,265
12.7%
Life Expectancy (Years)
66.9
73.3
0.3%
Ocean Freight (1000 TEU)
4,080
31,279
14.5%
Telephone lines (per 100 people)
0.2
21.9
16.6%
Logistics Trends Series | Global Business Strategy | Jun-2012
Number of Airports
175
Number of Seaports
>2,000
DHL Global Forwarding | Page
2
CHINA’S FIVE YEAR PLANS
The government has consistently set and achieved challenging targets in
their Five Year Plans focusing on social and economic development initiatives
12th Five Year Plan
2011 - 2015
8th Five Year Plan
1991 - 1995
4th Five Year Plan
• Urbanization to reach 51.5%
1971 - 1975
• Gross output growth of Industry and
agriculture to reach 12.5%
 Achieved and exceeded
• 130 billion Yuan infrastructure
construction
 Achieved and exceeded
• Output targets for grain, cotton, steel,
coal, electricity and rail freight
 Achieved and exceeded
• GDP growth ~8%
• Develop foreign trade
 Achieved - Trade volume
reached $1 trillion
• Improve standard of living
 Achieved - Per capita income
increased to 1,578 Yuan
• Increase energy, communications
and raw material production
 Achieved - Infrastructure
investments well above
target
Logistics Trends Series | Global Business Strategy | Jun-2012
• Reduce dependence on exports by
increasing domestic consumption
• Moving coastal regions from “world’s
factory” to R&D and services sector
• 36 million low-cost apartments for
people
• 45,000 km new hi-speed rail network,
83,000 km of new highway network
• Investment in environment protection
industries
DHL Global Forwarding | Page
3
CHINA’S 2011-2015 PLAN – KEY TASKS
The focus up to 2015 is on turning China into a consumption
driven economy, oriented towards innovation and the environment
Key Focus Areas
Descriptions
• Shift away from an export driven economy based on low wage rates
Shift from export to
domestic consumption
Expand “social safety net”
and public services
• Create higher value-added products
• Increased focus on service sector, which is critical to an urban
economy
• Boost in social welfare spending to reduce Chinese citizens’ need to
save. This increase in disposable income is expected to drive up
domestic consumption
– National medical insurance
– Urban and Rural pension scheme
– 36 million homes being built for low-income households
• Focus on “Green Growth”
Improve the quality of the
environment
• Increased investments in clean energy
• Development of rail network and inland waterways to support green
transportation
Logistics Trends Series | Global Business Strategy | Jun-2012
DHL Global Forwarding | Page
4
EXPECTED CHANGES
More Domestic Demand
More Urban Population
2011 Savings Rate (%)
80
31
60
17
CN
IN
13
RU
10
BR
• Savings rate in China is one of
the highest in the world, showing
there is potential to encourage
more household spending
• The government plans to
upgrade provision of pension,
health insurance, public
education and affordable
housing, citizens will result in
more disposable income to
spend on goods and services
More Environmentally
Friendly
2,000
Urban Population as % of
China Total
1,500
46
40
1,000
20
500
0
0
1960
1980
2000
2020
• Urbanization is expected to
increase constantly over the
coming years due to many
economic projects by the
government in large cities (e.g.
Chongqing city development
program)
• Urban lifestyle will have impact on
the Chinese society
• Higher household spending
• Changing lifestyle
• Higher need for services
• Increasing education
Logistics Trends Series | Global Business Strategy | Jun-2012
CO2 Emissions
(Million Tons of Carbon)
1950
1970
1990
2010
• Plans to reduce pollution,
increase energy efficiency and
ensure stable, reliable and clean
energy supply
• Clean vehicles are seen as a key
development technology and it is
likely that the transportation and
logistics industry will be a source
of demand to help stimulate this
new focus area
• Increasing need for green
logistics services
DHL Global Forwarding | Page
5
IMPACT OF CHANGES ON THE ECONOMY & TRADE
Manufacturing and exports are expected to slow down, thereby changing
the logistics requirements of the country
Industrial Production Growth (%)
Merchandise Exports Growth (%)
+25%
+40%
+20%
+30%
+20%
+15%
+10%
+10%
+5%
-10%
Forecast
0%
1981
Forecast
0%
1991
2001
2011
2021
2031
-20%
2041
• Industrial production growth has remained around 15% on
average for China over the past decades
• However as China moves from “Made in China” to
“Designed in China”, traditional low cost factories will lose
favor against high-value sectors like biotechnology and new
energy vehicle industries with plans to develop these
industries to compete and succeed on a global scale
• Thus over the next decades, a slow down in industrial
production in China is anticipated
Logistics Trends Series | Global Business Strategy | Jun-2012
1981
1991
2001
2011
2021
2031
2041
• Over the past decade, China has attained the status of the
low cost manufacturing hub, exporting its produce to the
West
• However the move to encourage more domestic demand
together with the overall economic shift to more design and
less manufacturing will all contribute to lower exports
• Subsidizing public and private investments only in strategic
industries, increasing minimum wages and the push for
services sector and creating R&D hubs are all expected to
limit the growth in merchandise exports
DHL Global Forwarding | Page
6