May 19, 2024


Studying business science

Freight Forwarding in China – Seizing the Initiative in the Downturn

Latest 2010 figures show that China has now overtaken Japan as the second largest economy in the world after Japan.

This improvement in the relative performance of China is encouraging news to the freight forwarding sector in China, that has been battling with the global downturn in trade in recent years. However, even with the global slowdown, there was some growth in China’s freight transport infrastructure in 2009, as it anticipated this improvement in performance and planned for growth in demand for freight services. China’s response to the global economic downturn has been to seize the initiative and plan for a better future for China import.

Over recent years, China has experienced a worldwide decline in demand for Chinese imports and this has of course had a huge impact on the freight services industry of the export dependent country. Demand for China imports such as toys, furniture and textiles has been dampened by the most severe economic downturn in decades.

Nowhere has the decline in demand for China imports been felt more keenly that in the box traffic trade. China’s two largest container ports are Shanghai and Shenzhen. The throughput figures at both have seen year on year falls and the throughput figures mask an even worse performance in terms of laden containers. The Shenzhen port figures for freight forwarding are a direct reflection of manufacturing in the Pearl River Delta.

As imports to China have also declined as a result of its own domestic slowdown, the volume declines have been evident in both inbound and outbound containers.Inbound cargo includes raw materials and components, which are then processed into finished goods for export at factories in the southern Guangdong, China’s economic powerhouse. The high level of import of raw materials for subsequent processing and export means that the freight services sector in China has had a double whammy, as declines in manufacturing due to decreased demand for China import has a direct knock on effect on international freight traffic into China as well.

Throughout this difficult period, domestic demand in China has accounted for some increases in domestic container trade, and this has been welcome news for many a shipping company. Domestic demand has generally been seen in increased trade in cargo from the south of China to the North.In general, the benefits of domestic freight transport have been experienced more in the Shanghai, northern ports such as Quingdao and Tianjin and the smaller ports, as they handle a bigger proportion of domestic trade by shipping companies.

However, spurred on by the impact of the global slowdown on China, Beijing has increased its focus on improving the international freight transport infrastructure. The China government has spearheaded a raft of initiatives. This includes both physical upgrades and revisions to the systems that affect international trade and international freight services.

Other initiatives have also helped pave the way for the next upturn, such as new direct shipping links between China and Taiwan. Kaohsiung in Taiwan, which was the world’s third busiest container port in the 1990s,saw its ranking slip with China’s economic rise, as a lack of direct transportation links with China undermined its position and importance for the freight company.

A deal between the two former political rivals has renewed Chinese interest in the port, driving investment plans. Shipping companies previously made costly detours through third countries to get cargo from one side to the other. So the new direct shipping links will make freight transport more streamlined and cost effective.

Other initiatives related to the freight services industry have also taken shape during the period of economic slowdown, putting China in a better position as the recovery arrives.

One interesting initiative has been a joint venture between America’s CYBRA Corporation and Key West Technologies which have joined forces with the Chinese Transport Ministry’s Water borne Transportation Institute (WTI) to develop and manufacture container tracking devices for international freight. A joint venture, Beijing Smart Shipping Technologies (SST),has been set up to develop smart shipping container devices and other smart transport tools to create higher consignment visibility in maritime shipping. CYBRA, which is a developer and distributor of bar code software for IBM, will join its partners in developing the world’s only real end-to-end global tracking and monitoring solution for the freight services industry.

As world leader in exports, despite the slowdown, China is thus taking a leadership role in supply chain tracking, monitoring and management. It is believed that in the future, safe inter modal freight transport will depend on smart technologies. China’s role in facilitating the commercialisation of such products will be of great benefit to shipping companies and indeed every freight company, allowing them to add value to their service. The smart technology will enable each piece of cargo to be tracked, monitored and managed anywhere in the world.

Because of initiatives such as these together with the raft of international freight infrastructure improvements being put in place by the government in China, China will be in pole position to maximise on the global economic recovery when it comes.