The move came after China said it will help stabilize global supply chains amid a logjam in the US
China has unveiled a new state-owned logistics group that aims to be a global supply chain organizer, as the country moves to bolster supply chain security and stability amid disruptions and uncertainties during the Covid-19 pandemic.
China Logistics Group, which is being formed by combining the logistics assets of four companies, already runs logistics hubs in 30 Chinese provinces as well as five continents, and operates three million vehicles.
The group also has property rights on 24.26 million sq. m. of land, owns 120 designated railway lines, and has 42 futures delivery warehouses.
The move came after China said it will help stabilize global supply chains at the recently concluded Group of 20 meeting and amid a logjam in the US that has grabbed headlines.
Hao Peng, head of China’s State-owned Assets Supervision and Administration Commission, said at the founding ceremony that the company should strive to ensure smooth flows of production factors under the dual circulation development paradigm and forge a secure, reliable and highly efficient modern logistics system.
Li Hongchang, deputy director of the Chinese Transportation Economic Research Center, told the Global Times that the move shows a top-level intention to restructure assets and capital of the state-owned logistics and transportation sector so that enhanced competitiveness and vitality are achieved.
From a long-term perspective, the move is conducive to fostering China’s logistics security and beefs up China’s logistics sector globally, Li said.
China Logistics Group, formed through a merger of China Railway Materials, China National Materials Storage and Transportation Group, Huamao International Freight Limited Company Shenzhen Branch, China Logistics, and China National Packaging Corp, aims to provide comprehensive logistics services to customers and organize global supply chains by developing international trade links and freight services, futures delivery, cross-border e-commerce, and cargo trains between China and Europe.
The company will be an addition in the cargo freight market, where China State Railway Group Co also plays a vital role.
The move showed top decision makers are shifting their attention from global transportation hardware ownership toward better management on global supply chains, Li said.
Analysts said state-owned logistics companies are doing a superb job in handling commodity freight over long distances, but they are less competitive when it comes to the transportation of so-called “white goods” (e-commerce goods) and goods requiring speedy delivery.
For instance, Li said that in the utilization of multi-modal transportation that combines railway and sea freight, state-backed companies only have 2.5 percent of the market, despite the world-recognized efficiency of this transport mode.
Hopefully, the restructuring and the addition of stakeholders will foster a change in efficiency, Li said.
The new group will include as strategic investors the parent firms of China Eastern Airlines, COSCO Shipping and China Merchants Group, which will respectively hold shares of 10 percent, 7.3 percent and 4.9 percent.
In the first six months of 2021, the value of China’s social logistics reached 150.9 trillion yuan (US$23.24 trillion), up 15.7 percent year-on-year, outperforming the pre-pandemic level, according to a report by the China Federation of Logistics and Purchasing in August