How can China reduce its logistics costs? Experts offer recommendations →

Release date:

2024-03-29

Author:

Jinhua Logistics

According to data released by the China Federation of Logistics and Purchasing, in 2023, the ratio of total social logistics costs to GDP stood at 14.4%, down 0.3 percentage points from the previous year. Put simply, for every 100 yuan of GDP generated, logistics costs amounted to 14.4 yuan—0.3 yuan less than the prior year.

The fourth meeting of the Central Financial and Economic Affairs Commission called for effectively reducing logistics costs across the entire economy. At this year’s National People’s Congress, the Government Work Report further proposed launching an initiative to lower logistics costs.

In fact, as early as 2020, the National Development and Reform Commission and the Ministry of Transport jointly issued the “Opinions on Further Reducing Logistics Costs,” outlining 24 measures across six areas—reducing institutional, factor, tax and fee, and overall logistics costs. So, what does it mean to lower society-wide logistics costs? And under the new circumstances, what are the pathways for achieving such cost reductions?

CCTV reporter of China Central Television Wang Shantao: At its fourth meeting, the Central Financial and Economic Commission called for effectively reducing logistics costs across the entire economy, emphasizing that lowering these costs is a crucial measure for enhancing economic efficiency. Compared with previous similar statements, the most significant change lies in highlighting the two key terms “effectively” and “across the entire economy,” thereby setting new, higher‑level requirements for cutting logistics expenses.

As an indicator of economic efficiency, a decline in logistics costs as a share of GDP is undoubtedly a key sign of improved productivity. However, compared with the 7% to 8% levels observed in developed economies such as the United States and Japan, this ratio remains relatively high.

Vice President of the China Federation of Logistics and Purchasing He Dengcai: In terms of industrial structure, the share of the secondary sector—particularly traditional industries—is relatively high. Similarly, in our commodity mix, coal and steel account for a significant proportion, while higher‑value‑added goods make up a smaller share. Moreover, given our vast land area, practices such as transporting grain from north to south and coal from west to east inevitably drive up costs. Therefore, restructuring and deepening reform are crucial steps for reducing overall social logistics costs.

According to statistical data, logistics costs account for more than 80% of total manufacturing output in China, and in most industries and sectors, logistics expenses represent a significant share of overall costs. However, current pricing trends in the logistics sector reveal that the road freight rate index has remained persistently low; since the beginning of this year, the Yangtze River dry bulk composite freight rate index has consistently stayed at its lowest level in the past three years; and the logistics services price index within China’s Logistics Prosperity Index has remained below the 50% threshold—indicating contraction—since January last year.

Professor, Department of Logistics Engineering, School of Traffic and Transportation, Beijing Jiaotong University Wang Xifu: (Reporter: Does reducing social logistics costs and improving logistics‑transport efficiency mean that the lower the logistics prices, the better?) In fact, this is a misconception. At present, taking the transportation stage as an example—whether it’s road, rail, or waterway transport—many claim there’s no profit to be made; in reality, their cost‑cutting efforts have already brought expenses down to quite low levels.

Director of the China Logistics Information Center Liu Yuhang: The cost of logistics services has been steadily declining, and from the industry’s perspective, logistics costs have now reached a relatively low threshold.

Reduce logistics costs Strengthening “shift from road to rail” and “shift from road to water,” experts note that, with logistics service prices already at a low level, the primary means of further reducing logistics costs lies in restructuring and advancing reforms—optimizing the transport mix and bolstering the shift from road to rail and from road to water.

The so‑called “shift from road to rail” and “shift from road to water” refer to transferring a portion of freight transport from road to rail or to waterway.

Professor, Department of Logistics Engineering, School of Traffic and Transportation, Beijing Jiaotong University Wang Xifu: From the perspective of an integrated transportation system, I believe that prioritizing increases in rail freight volume and waterway freight volume is the most effective way to reduce costs. According to our estimates, for every one-percentage-point increase in rail freight volume, overall logistics costs could decline by 0.2 to 0.5 percentage points.

For example, transporting chromite ore from Tianjin Port to the Baotou region—over a distance of approximately 800 kilometers—costs about RMB 90 per ton by road, whereas rail transport is only RMB 80 per ton. Similarly, shipping manganese ore from Tianjin Port to the Ningxia region—covering roughly 1,200 kilometers—incurs a road freight rate of RMB 140 per ton, compared with RMB 120 per ton by rail. Clearly, the longer the haul, the more pronounced the cost advantage of rail transport.

Furthermore, statistical data indicate that accelerating the restructuring of the transport mix has yielded tangible improvements in logistics efficiency. In 2023, intermodal container transport by rail and water increased by more than 15% year on year, the share of multimodal transport continued to rise steadily, and both the average freight‑transport distance and the ratio of transport costs to GDP registered slight declines.

Director of the China Logistics Information Center Liu Yuhang: Over the past two years, initiatives to promote multimodal transport have yielded positive results. However, from an infrastructure perspective, significant gaps remain—particularly in the seamless integration between rail networks and ports. Currently, this integration relies on short-haul shuttle services, which lead to inefficient loading, unloading, and turnaround operations.

Experts point out that the root cause of high logistics costs lies in the inefficiency of the overall economic system, a problem closely tied to China’s current industrial and transportation structures. Addressing this requires further deepening reforms of the integrated transport system to foster a unified, efficient, and orderly competitive logistics market.

CCTV reporter of China Central Television Wang Shantao stated: “Effectively reducing society-wide logistics costs” must not be narrowly interpreted as merely lowering service prices charged by logistics enterprises. Instead, it should be approached from the perspective of overall economic development and the entire modern logistics value chain, placing cost reduction and efficiency enhancement at a more prominent position. We must intensify efforts to cut costs through institutional, structural, managerial, and technological measures, thereby creating an upgraded framework for lowering logistics expenses, further strengthening the core competitiveness of industries, and improving the efficiency of economic operations.

Key Takeaway: How can logistics companies effectively reduce overall societal logistics costs?

Promote the “Three Integrations” and accelerate efforts to address shortcomings in smart transportation.

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