The challenges of logistics and transport in China
for foreign companies

1. The logistics infrastructures in China compared with Europe and the USA

China's transport infrastructure continues to develop, which has a direct impact on logistics operations. In 2023, China will transport around 60 billion tonnes of goods. This compares to around 20 billion tonnes for the US and 10 billion tonnes for Europe. This high volume underlines the importance of logistics efficiency in managing international supply chains.

For each mode of transport mentioned below, a comparative table shows the respective capacities of China, Europe and the United States.

1.1. Road transport

 

The improvement of China's road network and the recent construction of thousands of kilometres of highways have facilitated internal transport, but there are, of course, problems of congestion in the major cities. Over the last twenty years or so, China has rapidly expanded its motorway network, which is also the most recent, and has achieved a modern infrastructure linking all major cities. China has 169,000 kilometres of highways and a national road network of more than 5 million kilometres. Continued improvement of this infrastructure is essential to support internal transport. This compares with 87,000 km of motorways in Europe and 78,000 km of expressways in the US. Given the long distances involved in domestic interprovincial transport, the additional costs associated with tolls must also be taken into account.

 

 

Road transport	Mainland China	Europe (EU 27)	United States
Land area	9,6 million km²	4,23 million km²	9,8 million km²
Road network	5,28 million km	5,02 million km	6,58 million km
of which highways	169,000 km	87,000 km	78,000 km

 

 

1.2. Sea and river transport

 

Chinese seaports, particularly Shanghai, dominate world maritime traffic, while European ports such as Rotterdam, Hamburg or Le Havre play a central role for the EU. The volume of Chinese river freight has reached around 3 billion tons in 2023. It offers advantages in terms of cost, but there is a need to manage the risks associated with seasonal variations in water levels and the constraints of port infrastructures. China has a vast network of inland waterways, crucial for domestic trade. Europe also has a solid network, particularly in countries such as Germany and the Netherlands.

Sea & river	Mainland China	Europe (EU 27)	United States
International seaports	34 ports	329 ports	150 ports
River network	110.000 km	52.000 km	41.000 km

 

Below is a table ranking 15 of the world's largest ports according to the volume of containerised freight they handle. It takes into account the top 5 Asian ports, the top 5 American ports and the top 5 European ports, with their world ranking, as well as the evolution of TEU volumes transported in 2005, 2015 and 2023.

 

Top 5 ports in Asia, the United States and Europe				Tonnage in millions of TEUs (20-foot equivalent units)
Region	World ranking 2023	Port	Country	2005	2015	2023
Asia	1	Shanghai	China	18.1	36.5	47.3
	2	Singapore	Singapore	23.2	30.9	37.2
	3	Ningbo-Zhoushan	China	5.1	20.6	32.3
	4	Shenzhen		16.2	24.2	30.1
	5	Guangzhou		6.6	17.6	26.9
America	12	Los Angeles	United States	7.5	8.2	10.7
	18	Long Beach		6.7	7.2	9.7
	19	New York/New Jersey		5.1	6.3	9.2
	25	Savannah		2.3	3.6	5.9
	26	Santos	Brazil	2.7	4.3	5.6
Europe	10	Rotterdam	Netherlands	9.3	12.2	15
	13	Antwerp	Belgium	6.5	9.6	12.1
	18	Hamburg	Germany	8.1	8.9	8.7
	22	Valencia	Spain	3.6	4.7	5.6
	31	Algeciras		3.4	4.5	5.2
Source : Lloyd's, UNCTAD, Containerisation International Yearbook.

1.3. Rail transport

 

The development of China's rail network is improving connectivity, in particular the possibility of transporting Chinese manufactured goods to Europe by rail in less than 2 weeks. Coordination between different modes of transport remains a challenge for intra-Chinese logistics. Companies need to optimise their supply chains to take advantage of rail transport while integrating other modes. In China, a growing proportion of the country's rail network is dedicated to high-speed lines, which are three times more developed than in Europe. While China has the longest high-speed rail network, the United States leads in terms of total track length. The EU, on the other hand, offers many rail connections between countries.

 

 

Rail capacity	Mainland China	Europe (EU 27)	United States
Rail network	155,000 km	220,000 km	225,000 km
Of which high-speed railway lines	42,000 km	11,000 km	750 km

 

1.4. Air transport

 

In 2023, China has 249 airports, including 70 international airports. This includes 5 major international hubs: Guangzhou Baiyun, Shenzhen Bao'an, Shanghai Pudong, Chengdu Tianfu and Beijing Capital. The EU has over 500 airports, including major international hubs such as Frankfurt, Paris Charles de Gaulle and Amsterdam Schiphol. Each country usually operates several airports for domestic and international flights. The USA has an impressive network of over 13,500 airports (public and private), but only around 500 of these offer regular commercial services. The main international hubs are Atlanta, Los Angeles and New York JFK.

 

Air Transport	Mainland China	Europe (EU 27)	United States
Airports	249 airports	+500 airports	+500 airports
Of which international	70 airports	240 airports	150 airports
The 5 largest international air hubs	The Chinese airports of Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu are the 5 main international air transport hubs with weekly direct flights to Europe and to the USA.	Europe's airports London, Paris, Frankfurt, Amsterdam and Munich are the 5 main hubs for air for air transport to Asia and the United States.	The American airports Los Angeles, New York, Chicago, San Francisco, and Seattle are the 5 main hubs for air to Europe and Asia.

 

China has a modern and extensive logistics infrastructure, including an extensive network of highways and high-speed railways, as well as leading sea and river ports. This infrastructure facilitates domestic and international transport, but challenges remain, such as urban congestion and multimodal coordination. Air transport is strengthening its role as a global hub, with 70 international airports. China invests around $1,000 billion annually in the development and maintenance of transport infrastructure. This figure reflects the strategic importance of this investment in supporting the economy and logistics.

 

2. Import warehousing functions in China

Import warehousing plays an essential role in export management for the Chinese supply chain. This process presents both opportunities and challenges that merit careful preparation:

2.1. Buffer stock for partial shipments : Buffer warehouses allow companies to manage the flow of small quantities of goods. However, Western managers need to be aware of the risks involved, such as increased storage costs and fluctuations in demand. Effective management of buffer stock is essential to avoid overstocking costs and stock-outs.

2.2. Demand variability: Companies need to adapt to rapid fluctuations in demand in China, which can pose forecasting and inventory management challenges. Advanced analytical tools and data-driven forecasting are essential to anticipate these fluctuations and adjust inventory levels accordingly.

 

3. Warehousing functions for export from China

Foreign companies' need for warehousing and storage outside China is most often related to the need to consolidate orders for export consolidation and to optimise logistics and transport costs. For example

• Consolidate orders from multiple Chinese suppliers into a single 40' HQ container.

• Carrying out quality control, assortment, order preparation or pick & pack operations in a dedicated warehouse.

While the use of a free trade zone warehousing solution is not necessarily justified in certain situations, the goods are not considered to have been exported to the supplier until they have passed through the export declaration stage with the Chinese customs bureau in the correct form. In other words, the supplier will not be able to claim back the proportion of input VAT paid until the goods have left Chinese territory from a customs point of view. Finally, the Incoterm must be clearly defined according to a precise reference system agreed with the suppliers. Chinese factories often tend to confuse FOB port of shipment with FCA warehouse.

4. Bonded logistics in China

Bonded warehouses in China offer advantages, particularly in terms of cash flow, in terms of managing goods before they are released for consumption on the market, but they also present challenges:

4.1. Storage without transformation

Bonded warehousing without transformation allows goods to be stored in modern facilities and the payment of import duties and VAT to be suspended until customs clearance and delivery to the end customer in China. These operations require efficient inventory management and partial customs clearance times. China has 21 free trade zones in coastal and inland areas. There are many logistics service providers. However, their capabilities are not equal and their limitations may be related to the following:

• Their human resources for fluid, responsive communication in a foreign language.

• Misunderstood customs procedures and goods held up due to missing or incorrect documentation.

• Coordination between warehouse teams and those monitoring supply chain flows.

• The ability to interact effectively with order management software (especially ERP client software).

• Their internal organisation, storage capacity and area, experience in coordinating with road hauliers and courier services.

• Their priorities: the main objective of logistics providers in China is to get goods in and out as quickly as possible. This preference is not always compatible with long storage requirements.

4.2. Storage with processing

For products requiring processing, companies need to navigate a complex regulatory framework, including an assessment of the opportunities in China to use, for example, a temporary admission customs regime. Meeting local safety and quality requirements can be a challenge, especially for sensitive products. There are many possible scenarios, including whether or not to integrate Chinese parts or components, whether or not to modify and test the product with a single or multiple operators, and whether or not to obtain product certification to Chinese standards for domestic sales.

5. Optimising logistics: central warehouse vs. buffer warehouses

The choice between a central warehouse and distributed buffer warehouses can have a significant impact on logistics operations:

• Central warehouse: Although centralisation can offer simplified management, it can lead to higher costs and longer delivery times for remote regions. Storage costs in large coastal cities (Shenzhen, Guangzhou, Shanghai, Tianjin, Qingdao, Dalian, etc) are more expensive than in inland areas. Managers need to balance storage costs with the need for rapid delivery, taking into account Chinese customers' expectations in terms of speed and flexibility.

• Buffer warehouses: The distribution of multiple warehouses provides better geographic coverage, but complicates inventory management and tracking. Companies need to set up integrated management systems to effectively coordinate the different locations and ensure product availability. This option is often easier to implement for companies registered in China.

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6. Other customs issues and regulations on sensitive products

With all this logistical modernisation in China, Western managers also have to deal with a number of specific issues:

• Customs: Customs regulations in China can be complex and are certainly subject to frequent change. For example, a new customs law was introduced in July 2024. Managers need to ensure that their teams are well informed about customs clearance procedures, documentation requirements and potential delays. Compliance with customs regulations is essential to avoid penalties and supply chain disruptions. Find out more about the organisation and characteristics of Chinese customs.
  

• Hazardous goods regulations: Dangerous goods, including chemicals and flammable materials, are subject to strict regulations in China. Companies must ensure that their storage and transportation operations comply with local safety standards. Managers must work with experienced and appropriately licensed logistics partners to manage these complex requirements and minimise risk.
  

• Storage of perishables : The storage and management of perishable (such as food, including wine) requires special attention. Temperature and humidity requirements must be strictly adhered to to prevent product deterioration. The same applies to other sensitive products such as pharmaceuticals and cosmetics. Companies must invest in appropriate storage infrastructure and set up monitoring systems to ensure product quality and safety. Regulatory inspections and customer complaints in China are risks that must be considered.