Last updated: 8/3/2023

Inside China's Logistics Landscape: Amit’s Personal Journey In China Amidst Global Economic Shifts

Lately I had a business trip to Shenzhen China to meet my vendors after almost 4 years! 

I have not met them previously due to pandemic restrictions.

I've had the privilege of experiencing first-hand the ebbs and flows of the global logistics industry. 

Here I am in China, a country that's undergone remarkable economic changes, especially since the fallout from Pandemic. The journey has been enlightening, and I'm eager to share my insights with you all.

Shenzen on the Move

As I set foot in Shenzhen, I'm immediately impressed by the magnitude of the city and the people.

Everywhere you look, people are on the move, seemingly undeterred by the world's ongoing economic and political shifts. 

It's no secret that the global landscape has shifted after the pandemic. Interest rates have risen worldwide, and economies, including the US and China, are wrestling with the ripples.

The Economic Situation

People, co-workers are all admitting that the economic situation now in China is a struggle and they do not have the trust anymore in the China local government.

With my experience working with the Chinese people for more than 20 years and with my latest visits in China, to hear that first hand from the Chinese citizens was mind blowing.

Normally any critics on the government will be revealed in an “upside-down logic” discussion behind closed doors.

This time, I feel that the Chinese are not afraid to show their emotions and their deep concern about the current economic situation.

Lifting zero you know what restrictions has released pent up demand for services and ended supply chain disruptions.

In-person services such as catering, accommodations, tourism & entertainment which were restricted during the lockdowns, rebounded strongly.

In contrast, consumption of goods, which continued even during lockdowns remain weak.

Unemployment Rate High

Despite the current momentum in services consumption, overall consumption is constrained by relatively high unemployment rates and large number of graduate students entering the labor market this year.

The official youth jobless rate, which only includes people actively seeking work, rose to a record 21.3% in June after the world's second-biggest economy lost steam in the second quarter. 

Policymakers have struggled to put the economy on a more stable footing since the pandemic.
Employment there only recovered to two-thirds of pre-pandemic levels till March, when the you know what faded. Young people remain major workers in the manufacturing sector, so they were hit more badly.

US Tensions

Another factor that has impacted the commerce & E-commerce industry is that Chinese people believe that the US are pushing the Chinese ministry to improve and scale the commerce relations which eventually affect the Chinese economy rather due to the high duty tariff (what we refer as the Trump tariff) or preventing a Chinese Tech company to be active in the US as an example.

The US has banned the sale and import of new communications equipment from five Chinese companies, including Huawei and ZTE, amidst concerns over national security. 

The popular TikTok platform which as of April 2023, at least 34 (of 50) states have announced or enacted bans on state government agencies, employees, and contractors using TikTok on government-issued devices. 

State bans only affect government employees and do not prohibit civilians from having or using the app on their personal devices.

Due to all the above, the Chinese people strongly put a blame ion the US for creating trouble all in order to weaken the Chinese industry.

Another impact of the US – Chinese trade war is that we can see the shifting economic winds, we are witnessing a remarkable trend: 

Manufacturers Leaving China

Many manufacturers are leaving China and establishing new factories in Vietnam. A combination of factors is driving this shift. 

Vietnam offers a favourable business environment, with lower labour costs and attractive tax incentives. The country has also successfully navigated its pandemic response, enhancing its appeal to manufacturers looking for stability.

In China, these changes mean the logistic landscape is pivoting. 

There's a reduced demand for export-related services, and an increased interest in domestic distribution networks. 

The export industry, once a stalwart of China's economic might, is facing challenges. The ongoing U.S.-China trade tensions and tariffs have further strained this sector. But it's not all doom and gloom; it's also an opportunity for innovation.

Freight Forwarding Industry Looking Grim

Another key point which I believe anyone that manufactures products in China and export goods from China origin must consider choosing the right freight forwarding company to work with.

This subject is of course very personal to me as I discuss this topic numerously but in my latest trip to China I found that there was a huge growth in the number of freight forwarding companies and providers during the pandemic when the general freight cost was the highest that ever recorded, and the demand for export goods from China was at their highest peak.

Now the whole industry suffering from low traffic and decreased overall volume, the side effects of this phenomena is devastating.

More and more freight forwarding companies are going bankrupt during 2023 affecting sellers without any possibility to recover their goods.

Just imagine yourself in a position of getting a notification that your current FF went bankrupt. What you will do next?!

Hence, knowing your FF, do your due diligence about them online and working with a FF you trust is really a key for long term success.

Latest freight forwarding companies that went bankrupt in 2023, are Speedship, Shenzhen Quanyi cross-border company  & Shenzhen ZhangGui international logistics.

From conversations with locals, I learned about the government's efforts to stimulate the economy by encouraging internal consumption. Policies such as "dual circulation" are being implemented, emphasizing self-sufficiency and internal markets. This is a shift from China's previous export-focused growth model. For the logistics industry, this means a surge in demand for domestic distribution networks and delivery services.

Stepping into Guangzhou's ports, I'm greeted by a flurry of activity. 

E-commerce Silver Lining

While global trade uncertainties have hit hard, the rise of e-commerce is a silver lining. With more people shopping online, there's a massive demand for delivery services within China. 

Despite the international turmoil, the local industry is far from stagnant; it's merely changing course.

To give some perspective, our local Chinese vendor has about 20 sales managers for global clients while for domestic Chinese client’s the same company has over 180 sales people.

That reveals the magnitude of the domestic capacity the Chinese potential market and the opportunity it can bring working in the local market.

In Shenzhen, I meet Xiao, a truck driver for a local delivery company. He tells me how his job has become busier over the past few years. "We are delivering more packages within China than ever before," he says, a testament to the country's internal consumption drive.

Staying Resilient

In the grand scheme of things, the shifts in the Chinese logistics industry paints a picture of resilience and adaptability. While global economic changes pose challenges, the Chinese are finding ways to turn adversity into opportunity.

The economic changes and industry shifts have certainly affected the lives of locals. Still, there's a sense of resilience that permeates through every conversation I have. The Chinese are used to weathering storms, and the current global climate is yet another test of their resilience. It's inspiring to see this spirit in action.

From a freight forwarding perspective, our business needs to reflect these changes. As CEOs, we need to understand and adapt to these shifts, focusing more on domestic markets and e-commerce logistics. We must stay agile, flexible, and customer-focused to continue providing valuable service to our clients.

As I wrap up my journey through China, I'm reminded of the constant flux in our world. 

Economic and political situations change, industries evolve, and people adapt. 

It's been an enlightening experience, one that's taught me about resilience and adaptability in the face of change.

Till next time, signing off from China. 

Stay resilient, stay strong, and keep moving forward. We'll navigate these uncertain times together.

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