People to People Ambassador Programs
Logistics and Supply Chain Management Delegation to China
Thomas W. Speh, Delegation Leader

Professional Meeting: “Government’s Role in Logistics Operations and Investment”
Monday afternoon, August 8, 2005, Ministry of Communication, Beijing
Presentation by Mr. Li Zhi Qiang, Deputy Director Department, Highway
Ministry of Communication
Assisted by Mr. Xu Bao Li, Assistant Deputy Director, Department of Highway

Mr. Li and Mr. Xu exchanged business cards with each person from the delegation. Mr. Li welcomed us to the MOC and Tom Speh thanked him for hosting our delegation.

The MOC has 300 people in 10 departments and 100 more in a different maritime building. Their primary function is to control the planning and operations for highways, inland waterways and ports. They have no control over air or rail transportation

Mr. Li began his presentation. There were two main points to his brief presentation:

  1. Description of the current status of the infrastructure and logistics services in China
  2. Problems and issues with logistics infrastructure and operations

Current Status:

  1. The over 9% growth in annual GDP naturally places huge requirements on infrastructure, transportation and logistics services in China. The modern concept of logistics services was not introduced in China until the 1990s, but all related government departments are paying close attention to this field because they recognize the importance of it to supporting the growing economy. They are trying to increase best practices throughout the country and improve infrastructure.
     
  2. Infrastructure: right now, there are 1.87 million km of highways (34,300 km of which are expressways) in China – 2nd largest in world. Many of the expressways are toll roads. There are 35,000 docks/berths in China – 944 can handle bigger ships over 10,000 tons. There are 123,000 km of domestic waterways. In the last 5 years, there has been a significant increase in the amount of money spent on infrastructure, especially expressways. Between 300-400 billion RMB were invested in expressways last year.
     
  3. Goals for highways, ports and logistics facilities.
    1. 85,000 km expressways by 2020
    2. 350 more berths along eastern coast of China by 2020
    3. Increase annual volume shipped by 1.9 billion tons.

Problems and Issues: Even though they are devoted to improving infrastructure, Mr. Li stated that they face some severe problems.

  1. Infrastructure plans are not designed by a single ministry, so plans from multiple industries often don’t match. The Ministry of Communications controls water, ports and highway transportation. The Ministry of Railroad controls the railroads. The CAA Ministry controls air transportation. Mr. Li stated that this often leads to each of these departments building different centers in different parts of a city, which is not effective or efficient – the different centers often can’t work together. Basically the different ministries are scattered and separate from one another, resulting in chaos, not coordination.
     
  2. China needs to make significant improvements in IT. There has been an increased use of IT in distribution centers, but IT in transportation and cargo operations is not as efficient. Mr. Li has visited facilities in the U.S. and knows China has a long way to go. They admire our operations and hope to receive guidance and suggestions from our delegation. China simply does not have efficient consolidation and coordination among transportation modes and companies.

Question and Answer Session:

Q. Given the first problem you mentioned, do you see an integration of all departments into one Ministry of Transportation in the future?

A. In May, a Development and Reform Committee was organized, and it is made up of 15 different departments that affect transportation. Their goal is to fix these logistics issues. The committee has an important meeting scheduled for September.

Q. It appears that enforcement of laws and regulations in trucking are a problem. Do you agree and do you think it contributes to the problems with the conditions of the roads?

A. Mr. Li admitted that it is a problem. They are working on it. They have regulations established limiting weights (and also the maximum length of trucks- entire rig) and they are trying to enforce these regulations on the highways. Eighty-five percent of all traffic accidents are attributed to overloading of trucks. Progress is being made on overloading and they won’t let up. He stated that the key is to use a combination of economic and government policies to develop a system so they won’t want to break the rules.

Q. Follow-up – what are the weight and length limits?

A. Nationwide regulations:
1 axle – 10 tons allowed
2 axle – 20 tons
3-5 axle – 50 tons
6 axles and above – max of 55 tons
14 meters is the maximum length of the truck, including the cab.
They’ve recently added weight and inspection stations along many roads based on U.S. system.

Q. What is the nature of financing for infrastructure development? Is there a combination of government and private financing?

A. For highways, expressways and ports, almost all of it is government financed, but there is some private investment in this area, even from outside China. Mr. Li mentioned that just that last week the Ministry of Railroads announced they were opening some market development for RR. He indicated that this was a pretty strong signal and significant announcement – some change is coming.

Conclusion:

The meeting ended with a final comment from Mr. Li. After visiting U.S. and European logistics facilities, he sees that Chinese logistics have a long way to go. But, there is a lot of opportunity for the outside to help in this development. In Mr. Li’s opinion, China has finished the starting phase and is now ready for rapid development. They can learn from the best practices elsewhere.