The rise of logistics in China

The increasing growth of international trade in China makes this country an attractive destination for fundings and especially in the freight sector. Constant innovation, the huge increase in infrastructure for logistics, and human talent development have caught our eye.

In a competitive environment such as the logistics industry, China decided to take a differentiating step. Foreign demand for its products became important and it grows every day. Facing this, they knew how to quickly manage their processes to achieve enviable efficiency and management.

Companies from all over the world want to access this market since they noticed the good profits they can get. Its growth became so remarkable that seven of the world’s top ten ports are originally Chinese. Thus, this market is becoming important and worthy of our consideration.

What makes logistics so special in this country?

We can say that China‘s current dominance in logistics is linked to the high logistics costs they have, as strange as it sounds. This drives a strong tendency to innovate quickly so they can reduce such costs and test new business models that would work in that context. In this way, it becomes a platform for innovators who are willing to take disruptive decisions.

Thus, it becomes attractive for fundings and we also see an increase in business activity. Even six of the ten best-funded logistics startups are placed in China. This increase can be illustrated by comparing the fundings made in the United States with those made in the Asian country: While in 2014 the US received 54% of total funding, China just received 19%. But, this changed in 2019, because China got 40% of the total funding, and the US only 35%*.

This incentive is so strong that the country became the leader in foreign disruptive innovations funding. In addition, the government, aware of the significant changes coming, is promoting the ascent of Chinese companies in logistics and taking advantage of this opportunity.

Also, e-commerce plays an important role here, because the country managed to handle it very well. They understand what the clients’ demands are, so now they can respond in a timely manner and develop strategies especially focused on them. Big companies involved are leading the logistics digital revolution and taking big steps if we compare them with the ones in Europe. 

Not only have they developed technological solutions, but they have also focused on human talent development and how to link them together. Logistics services are not only goods transportation anymore, and that’s why every part of the process must be perfected. Our technological advance will be useless if our team is not prepared for it, so we should pay attention to the future of jobs in international logistics and how to respond to it.

China has clearly made the logistics take a big jump and its incorporation is significant for everyone nowadays. Once again, this shows us how necessary it is to integrate logistics with digitization so we can reduce costs and boost our customers’ experience at the end of the day. 

*Source: Startup funding in logistics by McKinsey & Company.