distribution, also operates four major China transportation hubs in Beijing, Guangzhou, Tianjin and Wuhan.

Much of the expansion is happening away from the long-booming eastern coast, where wages and other costs have been growing. “The 3PLs are finding a way to diversify away from the export-driven coast,” said Jon Monroe, president of Jon Monroe Consulting.

Monroe, who specializes in China logistics, said much of the expansion is in the Yangtze River Delta, which has a population of 472 million, and is still growing rapidly because of governmental efforts to refocus on the domestic demand, rather than export expansion.

In July, Switzerland’s Kuehne + Nagel opened a branch office in Chongqing, extending its Chinese network to 39 locations. Kuehne + Nagel had been serving Chongqing through Chengdu, but the expansion reflects the increased volume of activity in the Yangtze River Delta.

China’s largest 3PLs continue to grow and modernize. Sinotrans recently opened an integrated logistics center near Shanghai, a campus of six warehouses totaling 125,000 square meters.

“YOU MAY SEE

SOME

CHINESE 3PLS

BUY SOME

GLOBAL

COMPANIES.”

 

“Their capabilities are getting more like Western 3PLs,” Armstrong said of the larger Chinese 3PLs.

Topocean Group, which began in Hong Kong, has a broad network of offices in Asia. Scan Well Logistics has annual revenue of $300 million, and handles 100,000 TEUs a year. Meanwhile, Menlo’s acquisition of Chic Logistics seems to be doing well. “They are holding their own,” Armstrong said, recording annual revenue of about $60 million.

“Over the long term, you will see Chinese companies growing in presence and

gaining more business in China,” Monroe said. “They are all fighting to be part of the 3PL global club. It is a very fragmented market, with 18,000 3PLs in 2007. No one 3PL is good at everything.”

When recovery takes place, the pace of acquisitions will revive, and it won’t be just foreign companies that do the buying, Armstrong said. “You may see some Chinese 3PLs buy some global companies,” he said. “At the end of the day, it’s about who can provide the best service.”

Despite the increased sophistication of Chinese homegrown 3PLs, the global 3PLs still plan to expand in China. The reason, Armstrong said, is “foreign 3PLs bring into China their multinational customers from the U. S. and Europe, and they also bring the IT” that Chinese customers need to reduce their logistics costs by gaining visibility into their global supply chains.

Last year, logistics costs in China totaled $743.5 billion, or 21 percent of the country’s GDP, compared with 9. 9 percent in the U. S. As China’s 3PL sector modernizes, logistics spending will become a smaller percentage of the country’s GDP, Armstrong said. JOC