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14 September 2012


Chongqing and Chengdu the inland China stars
By Raymond Duan

Upgraded infrastructure and services for logistics and foreign trade promise bright prospects for information technology producers and supply chain service providers in China’s landlocked areas of Chongqing and Chengdu, two of the largest cities in the Sichuan basin.

After overcoming high logistics costs and the lack of bonded zone services that used to confine the city to a distant end of the supply chain, Chongqing has shot into manufacturing stardom in recent years, Chongqing Mayor Huang Qifan told a Customs seminar recently.

The growth of gross domestic product was maintained at a high level of 14 percent in the first half of the year, compared to a national rate of 7.8 percent, municipal data shows.
The municipality that is built around the confluence of the mighty Yangtze and Jialing rivers is expected to generate 20 million monitors, 30 million printers and 50 million computer notebooks in 2012, Qifan said, and by 2015, it is expected to grow into the world’s largest production base for notebooks.

Throngs of logistics operators and forwarders have flocked to Chongqing and Chengdu following the set up of plants by manufacturers and assemblers such as Acer, Asus, Compal, Dell, Foxconn, HP, Intel and Legend, which makes Chengdu and Chongqing the world’s top hubs for IT manufacturing.
Chongqing is also expanding routes to the West. Mu Huaping, director of the Chongqing municipal economic and information industry commission, said today it takes about 35 days for cargoes to be shipped from the city to Europe by the Yangtze River and ocean transport, about 16 days to travel by a rail link between Chongqing and Duisburg of Germany, and about half a day by air.

As more shipping and air routes open to Japan and the Americas and there is a step-up in rail-sea links and air freighter flights around the world, Chongqing is expected to become an even bigger hub for overseas trade.

Over the past three years, Chongqing’s total import and export volume has risen by 94.7 percent annually, a feat that is rare, even in China.

Zhang Rong, executive general manager of Minsheng Logistics, noted the sharp improvement in transport infrastructure and services. Over the past three years, the city lowered incoming costs via vertical integration of the supply chain, reduced outbound logistic costs by building Customs ports, established inland bonded zones for processing cargo flow, and promoted upgrading of processing trade. “However, the chain supply service still face challenges, such as long-terms profit returns, high land charges and overloading of trucks,” she said.

Zhang’s company used to focus on shipping but diversified when IT makers started moving in. Minsheng Logistics has ventured into land and air forwarding for both domestic and international businesses.
Liao Jiuxing, manager in charge of European markets at the Chongqing branch of Kerry EAS Logistics, said 2012 will be another bright year, both for imports and exports. Kerry’s major clients in Chongqing are in the notebook business.
Liao’s concern of insufficient cargo capacity at Chongqing airport has been resolved since March with the opening of a new terminal at the Lianglu Cuntan Free Trade Port Area. In the first six months, Cuntan port saw its outbound containers grow 10.6 percent to more than 150,000 TEUs.
Chen Yuan, an official with the administrative committee of the free trade port, said the area is destined to become the distribution centre of Chongqing.
“The most prominent feature of the area is its Customs clearance services and tax breaks, which result in lower costs, speedier capital flow and easier transport,” Chen said.
Before the opening of the free port, notebook computers made in Chongqing had to be sent to Hong Kong in containers, reintroduced to Shenzhen afterwards, and sent to stores in, for example, Hunan province in Central China. Now, the notebooks can settle Customs formalities inside the free port area and be sent directly to Hunan.

The container handling capacity at Cuntan Bonded Zone will reach two million TEUs a year after the third phase of construction is finished in a couple of years, according to the local government.

At Chengdu, while multinationals like Maersk and DHL launched new offices and extended services, local supply chain service providers, more aware of their roles in globalisation, have also been upgrading their operations to catch up with international speed and efficiency, said He Lei, secretary general of the Chengdu Logistics Association.
The major strain in the supply chain used to be the lack of outlets and service platforms toward international markets, he said.
“The authorities have started investing heavily in broadening air and land channels to international markets to get around this problem,” he added.

Apart from opening more freighter and passenger flights to Europe and America, Chengdu has clinched agreements with German railway operators to use the Eurasia continental railway bridge. Containers from Chengdu can now reach Europe via Xinjiang, northwest China, by rail.
However, one headache for rail container operators is the empty space on return trips to China. Both Chengdu and Chongqing governments are encouraging imports from Europe and Americas so that more Western products could be consumed in Southwest China, but they want the West to loosen up their export restrictions against China.

Amid the current global economic downturn, the region is under pressure as some of the high-end manufacturing is moving back to advanced nations and the low-end processing to Southeast Asian nations. The region has to improve the quality and efficiency of its core industrial chain to meet these challenges, said Mu.

Article is quoted from CARGONEWSASIA
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