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China: The Sesame Door of Ali Baba


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Title: China: The Sesame Door of Ali Baba

China The Sesame Door of Ali Baba
  • Laura Yang
  • Shanghai Institute of Foreign Trade
  • 29th. March, 2007

Foreign Trade History
  • Foreign trade started from as early as the
    Spring Autumn Period in China
  • The silk road in the Tang Dynasty
  • The Opium War ( Caused by UKs deficit in trade
    with China)
  • After 1949, Chinas main trade was with socialist
    countries, the Soviet Union took 50 of total
  • Economic reform opening up to the outside world
    started from 1978
  • From Dec. 2001 China became a formal member of WTO

WTO Entry
  • The History

Chinese Foreign Trade System
  • Centralized control system
  • Vertically unitized system
  • (MONOPOLY of state owned foreign trade
  • Import Export Companies
    (Foodstuffcerealoil, Textile, Mineral Products,
    Medical Health Care, etc.)

(No Transcript)
Foreign Trade System-from1979
  • De-regulation in Foreign Trade Management
  • 19791987 Pilot Period
  • In Guang Dong / Fu Jian / Bei Jing / Tian Jin /
    Shang Hai
  • Allow Local Authority in Foreign Trade Operation
  • 19881990 Operation by contract
  • (total export income, the ratio of turning in,
    export/import balance) target by contract
  • Local Authority in Operation of Local Companies

Foreign Trade System-from1979
  • 19911993 Terminate export subsidy
  • foreign trade companies are responsible for
    their own profits/losses
  • 1994 New Reform
  • single exchange rate
  • legal framework Foreign Trade Law, Import
    Products Management Regulations, Export Products
    Management Regulations, Anti-dumping Regulations,
    Anti-subsidy Regulations, etc.
  • Advisory Plans as for foreign trade volume,
    export income and import expenses
  • Increase business license for foreign trade

Foreign Trade System-from1979
  • After WTO Entry
  • MOFCOM WTO Bureau, WTO resource center, Fair
    Trade Bureau, Office for Handling Foreign Company
  • Local government and different industries---taking
    methods to promote WTO Rules and adapt former
    ways of thinking operations to the new rules.
  • http//www.sccwto.net7001/wto

Post-WTO transition and market opening
  • Product trade--Tariff reduction
  • From 15.3 at the time of accession to 9.9 in
    2005 in general (manufactured products from 14.8
    reduced to 9, agriculture products from 23.2 to
    15.3). global level-39
  • Product trade- Non tariff reduction
  • Import quota, import license, import tendering
    eliminated on schedule by Jan. 1 2005.
  • Service Industry Market Open
  • Foreign banks no regional restrictions (2006)
  • Foreign insurance companies market open
  • Joint venture travel agency and WOFIE (2005-2007)

  • Other areas of opening
  • foreign trade(2004),
  • retail business,
  • transportation(2005-2007),
  • telecommunications(2004-2007)
  • Of the 160 service sectors and sub-sectors
    under the WTO classification, China has opened
    more than 100, accounting for 62.5, close to the
    level of commitments made by developed members

Bilateral Multilateral Trade Relationships
Bogor Goals November, 1994
Osaka Action Agenda November, 1995
Shanghai Meeting, 2001
Trade without discrimination    
Freer trade
Mainland Taiwan HK Macao
ASEAN Nov. 2002 Free Trade
Promoting fair competition
Encouraging development and economic reform
CEPA with Hong Kong
  • CEPA was signed in 2003 and came into full effect
    from 1 January 2004. It provides preferential
    access to the Mainland market and reduced tariffs
    for the export of certain finished goods and
    services by certain enterprises and individuals
    in Hong Kong, whether locally or foreign-owned.
  • On 27 August 2004, CEPAII, was announced. With
    effect from 1 January 2005, more goods and
    services will fall under CEPA and the benefits
    for many of the existing CEPA services will
    broaden. On 18 October 2005, CEPA III was
    signed. With effect from 1 January 2006, all
    finished goods of Hong Kong origin may be
    exported tariff free to the Mainland upon the
    CEPA rules of origin being met. And further
    liberalization measures in 10 service sectors are
    effective from 1 January 2006.
  • For more information http//

Free and Open Trade and Investment
--Bogor Goals November, 1994
  • We further agree to announce our commitment to
    complete the achievement of our goal of free and
    open trade and investment in the Asia-Pacific no
    later than the year 2020. The pace of
    implementation will take into account differing
    levels of economic development among APEC
    economies, with the industrialized economies
    achieving the goal of free and open trade and
    investment no later than the year 2010 and
    developing economies no later than the year 2020.

Free and Open Trade and Investment
--Osaka Action Agenda November, 1995
  • The Osaka Action Agenda provides a framework for
    meeting the 'Bogor Goals' through trade and
    investment liberalisation, business facilitation
    and sectoral activities, underpinned by policy
    dialogues and economic and technical cooperation.
    As part of this framework, General Principles
    have been defined for Member Economies as they
    proceed through the APEC liberalisation and
    facilitation process.

Trade Facilitation Action Plan (TFAP)
  • In 2001, APEC leaders meeting in Shanghai
    announced a goal to reduce transaction costs
    across the region by 5 over 5 years.
  • In 2002, officials developed TFAP, operating
    under the auspices of the Committee for Trade and

 Principles of the WTO trading system
  • Trade without discrimination
  • 1. Most-favoured-nation (MFN) treating other
    people equally
  • 2. National treatment Treating foreigners and
    locals equally   
  • Freer trade gradually, through negotiation
  • Predictability through binding and transparency
  • foreign companies, investors and governments
    should be confident that trade barriers
    (including tariffs and non-tariff barriers)
    should not be raised arbitrarily tariff rates
    and market-opening commitments are bound in the
  • discouraging unfair practices such as export
    subsidies and dumping products at below cost to
    gain market share
  • Encouraging development and economic reform
  • more beneficial for less developed countries
    giving them more time to adjust, greater
    flexibility, and special privileges.

Chinese Logistics Industry-History and Structure
  • History
  • 1949-1979 Planned Economy Period
  • Transport and warehousing were mainly done by
    wholesalers and merchant transport warehousing
    companies, among which wholesalers totaled 80 of
    market share.
  • 1980-Mid 1990s Innovation Period
  • Manufacturers and retailers started to build
    their own warehouses and fleets.
  • Transport warehousing companies began to
    provide services directly to manufacturers.
  • Government started trail of logistics parks. But
    changes were not so obvious.

Chinese Logistics Industry-History and Structure
  • History (continued)
  • Mid 1990s-present Modern Logistics
  • With foreign investment coming into China who
    also brought in modern logistics principles and
    network systems and increased market competition,
    more and more manufacturing companies realized
    the importance of logistics.
  • At the same time, when more and more joint
    venture 3PL companies and private logistics
    companies appeared in the market, some
    manufacturing and merchant enterprises started to
    turn towards logistics outsourcing. This has
    implied the start of modern logistics industry in

Chinese Logistics Industry-History and Structure
  • Structure
  • Governors
  • Ministry of Commerce
  • Ministry of Railway
  • Ministry of Communication
  • Civil Aviation Administration
  • Customs General Administration
  • State Administration of Taxation
  • The Ministry of Public Security
  • State Administration for Industry and Commerce

Chinese Logistics Industry-History and Structure
  • Structure (continued)
  • Companies in it
  • Third-party Logistics Companies
  • In-house Logistics Division in Manufacturing or
    Merchant Companies
  • Logistics Education and Research Organizations
  • Logistics Equipment and Facility Companies
  • Logistics Information Service and Consulting
  • Logistics Real Estate Investors

Types of 3PLs in China
  • Large SOEs (such as Sinotrans, COSCO and China
    Post) with extensive transport and warehousing
    assets, broad national networks, and strong
    relationships with central and provincial
  • Medium-sized domestic logistics providers
    (generally privately owned), which focus on one
    or two key industries.
  • Logistics divisions of manufacturers and
    processors, primarily providing services to
    internal customers, but sometimes offering 3PL
    services to outside companies.
  • Foreign logistics providers, including
    multinational firms, new Wholly Foreign Owned
    Entities (WFOEs) and smaller firms working in
    niche markets.

Scale of 3PL Market
  • According to Morgan-Stanley Asia-pacific
    Investment Research Group
  • Annual logistics expenditure is over
    200 billion in China, in which 3PL only accounts
    for 2, namely 4 billion

  • (2003)

Chinese Logistics Industry-Policies
  • Central Policies
  • Current Policies
  • Transport Related Policies
  • Distribution Related Policies
  • Foreign Investment Policies
  • Taxation Policies
  • Import Export Policies
  • Customs Regulations
  • Inspection Regulations, etc.

Chinese Logistics Industry-Policies
  • Central Policies
  • New Changes
  • Nine ministries jointly announced

    Chinese Logistics Industry.
  • National Development Reform Commission, 13
    government ministries, 2 associations
    Ministerial Associate Meeting System

Chinese Logistics Industry-Policies
  • Municipal Policies
  • Shang Hai Tenth 5-year Plan
  • Logistics being one of the four strategic
  • Three areas of logistics development
  • Port Logistics (airport, deep seaport)
  • Distribution Logistics
  • E-commerce Logistics
  • Three Logistics Parks
  • Pu Tuo Logistics Park
  • Pu Dong Airport Logistics Park
  • Waigaoqiao Bonded Zone

Shanghai and the port
  • China has ten ports whose freight volumes exceed
    100 million tons a year. The ports of Shanghai,
    Shenzhen, Qingdao, Tianjin, Guangzhou, Xiamen,
    Ningbo and Dalian are listed among the worlds top
    50 container ports.
  • Shanghai Port was the largest port in the world,
    as its freight volume in 2005 reached 443 million
    tons, exceeding Singapore Port for the first

Shanghai and the port
  • A 20-year, US 14.5 billion project that aims to
  • 52 berths along a
  • 13-km waterfront
  • with a draught of at least 15 meters
  • at the Yangshan Deepwater Port

Shanghai and the port
  • Shang Hai Deep Seaport
  • 1.6-km total length along seashore
  • 5 container berths
  • Total investment 6 billion RMB
  • 32.2 km sea bridge with 4 driveways
  • Future of the port
  • At the end of 2007, annual turnover will be 2.20
    m TEUs with 50 transshipment.
  • By 2015, annual turnover will be around 15 m to
    17 m TEUs

Chinese Logistics Industry- Market Open
  • From 2005, areas include road freight transport,
    leasing, wholesaling and retailing of general
    products and their distribution, import export
    truck transportation, etc. have been opened to
    overseas investors.
  • Restrictions regarding geographical coverage and
    shareholding percentage will be eliminated.

Chinese Logistics Industry- Market Open
Multinational Logistics Companies Investment in
  • They came to China in the 20 80s
  • DHL(??) was the first pioneer. It established
    DHL-SINOTRANS in 1986 jointly with SINOTRANS.
  • It has planned to invest 215 million EURO in the
    next 5 years to upgrade its transportation
    capacity in Shanghai, Beijing, Guangzhou,
    Shenzhen, etc. Its going to open 50 rep.
    offices, 3 logistics centers and 16 consignment

Multinational Logistics Companies Investment in
  • FedEx(????)entered China in 1984. It has now
    business in 220 cities in China. In Oct. 2001, it
    opened the largest logistics center in China in
    Shanghai Pudong Airport.
  • In Dec. 2004,it announced its Shanghai Head
    office in China.

Multinational Logistics Companies Investment in
  • UPS (????????????) entered China in 1988 by
    establishing a joint venture with SINOTRANS.  
      UPS FedEx DHL TNT80 market share in
    express delivery service in China
  • TNT(????)has planned to increase its branches in
    China from current 25 to 100 by 2010

New Trend in Investment from 2005
  • Move from joint investment to sole investment.
  • TNT terminated its joint venture with SINOTRANS
    in 2003
  • UPS started its way of sole operation on 2nd.
    12, 2004.
  • Seeking new market by extending services to
    Chinese domestic companies.
  • Geographically expand to Northeast China and
    Central Western China.

Chinese Logistics Industry-The Olympic Games
  • Direct Logistics Cost (in RMB)

Chinese Logistics Industry-The Olympic Games
  • Total Distribution Volume

Chinese Logistics Industry-The Olympic Games
  • Olympic Logistics Center in Beijing
  • http//

Chinese Logistics Industry-Future Development
  • Economic growth brings about huge demand for
    logistics services
  • Currently every 10,000 GDP produces 9,200 ton
    mile transportation
  • Total logistics expenditure accounts for 15-20
    of national GDP
  • In the next 3-5 years, logistics will grow by
  • annually