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Outsource boom in danger of 'hard landing'.
(From Lloyds List)
CHINA'S outsource logistics boom cannot hide the threat of an 'economic hard landing' that will leave supply chain operators with expensive overcapacity.
A new analyst's report* by Transport Intelligence in London says that China's logistics and express industry is enjoying a period of spectacular growth helped by the 'increased acceptance' of out-sourcing by Chinese manufacturers and retailers.
But it also lists 10 key challenges for the emerging Chinese logistics industry ranging from poor infrastructure, bureaucracy and a lack of IT standards to high transport costs and domestic trade barriers.
Author John Manners-Bell states: 'There are a number of challenges on the horizon, ranging from deep-seated structural problems to the unpalatable prospect of an economic 'hard landing'.'
According to the report the Chinese logistics industry will expand with a compound annual growth rate of 33% up to 2007. This will be supported by the outsourcing of logistics functions as the practice gradually gains credibility and as 'more sophisticated' logistics companies enter the market.
Although the report follows the conventional wisdom on China's future role as the world's manufacturing powerhouse, the outlook for the medium term is by no means as upbeat.
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