Analysis: The underlying logic of China’s logistics development has undergone a fundamental shift.

Assessment of the overall logistics scale: China’s logistics operations are far larger in scale than the real economy.

Over the past two to three years, in my presentations at various conferences and in several internal training sessions, I have frequently emphasized: At present, the underlying logic of China’s logistics sector has undergone a major shift: the large-scale expansion of goods has moved from a phase of rapid growth to one of saturation, marking a historic inflection point. The author It is argued that this fundamental shift in underlying logic will not only shape the trajectory of China’s logistics sector over the coming decades, but also lie at the root of the country’s current economic challenges. Although I have repeatedly underscored this point, I sense that many still fail to grasp its significance and gravity. Today, I am devoting an article to reiterate this issue, hoping to draw widespread attention.

01  Overall assessment: China’s real economy has long held the top position worldwide.

From the perspective of physical‑goods growth directly linked to China’s economic development and its logistics sector, China has long been a major global power in the real economy. According to World Bank data, In 2023, China’s total manufacturing output surpassed the combined manufacturing output of the nine countries ranked second through tenth globally—namely the United States, Japan, Germany, South Korea, India, and others—and also exceeded the aggregate manufacturing output of all European and North American nations.

Specifically, in each field, China holds a leading position in numerous sectors, including automobiles, televisions, metallurgy, home appliances, mobile phones, robotics, apparel, shipbuilding, chemicals, and construction. In several key manufacturing industries—such as metallurgy, home appliances, mobile phones, robotics, apparel, and shipbuilding—China accounts for more than half of global output; in these areas, the value of China’s manufacturing alone equals the combined output of the rest of the world. Take the television industry as an example: Chinese manufacturing accounts for a significant share of the global market. 90%—the output of televisions in China is equivalent to that of the other nine major producers worldwide combined. Taking container manufacturing, a sector well-known in the logistics industry, as an example, China… CIMC Group Container manufacturing accounts for nearly half of the global market, with one company’s output approaching the total production of the entire world—excluding China. China’s manufactured containers account for a share of the global market. At 95%, China’s output is roughly equivalent to that of the rest of the world combined—excluding China itself. China’s standing in global manufacturing is not only reflected in its sheer scale and production capacity, but also in its rapid advances and innovations in high‑tech and equipment‑manufacturing sectors, which have exerted a profound impact on global supply chains and economic development.

From the perspective of commercial circulation, At present, China has become the world’s largest trading nation. In 2023, China’s total value of goods trade—imports and exports—reached RMB 41.76 trillion, maintaining its position as the world’s largest for many years. Online retail sales of physical goods exceeded RMB 15.4 trillion, ranking first globally for the 11th consecutive year. In terms of the volume of physical goods traded, China continues to hold the top spot worldwide. Basic assessment: China’s real‑economy sector remains the largest in the world, and the Chinese economy has already moved beyond the phase of quantitative expansion. With growth in output nearing its ceiling, it has entered a mature, saturation‑driven stage of industrial cycles. Consequently, China’s economic development must—and will—shift to a new phase focused on improving quality and boosting efficiency.

If China’s economy continues to rely on a growth model driven by scale and develops a path dependency on such expansion, then, after reaching saturation and maturity, the real economy will inevitably enter a downturn—a scenario we decidedly do not wish to see. To break free from this path dependency and reverse the severe involution in the real economy, the only viable approach is to rely on technological innovation to disrupt the cycle of involution. Before a downturn sets in, if we leverage technological breakthroughs in the real economy to usher in a new industrial cycle characterized by innovation and enhanced quality and efficiency, we can once again embark on a period of rapid, transformative growth, as illustrated below.

02  Assessment of the overall logistics scale: China’s logistics operations are far larger in scale than the real economy.

The scale of logistics still differs significantly from that of the real economy, as China’s logistics industry chain is long, with numerous transshipments and substantial inefficiencies. Even in terms of value, China’s logistics sector represents an enormous magnitude. According to statistics, In 2023, the total social logistics volume reached RMB 355 trillion, equivalent to 2.8 times China’s GDP. Historically, China’s total logistics volume has been roughly three times its GDP; however, in the past two years, as the logistics sector has improved in quality and efficiency and the national economy has undergone structural adjustments, the ratio of total logistics volume to GDP has declined slightly. From the perspective of physical logistics scale, Considering that, despite continuous breakthroughs in high‑tech products, China’s real economy remains dominated by mid‑ and low‑end goods from a stock‑based perspective, and that the Chinese renminbi is also significantly undervalued against the U.S. dollar and other currencies when measured using purchasing power parity, these factors suggest that, although China’s manufacturing output accounts for… Thirty-five percent is already a staggering figure—already quite high—but when translated into physical volumes, China’s share of the global total would be even greater. And it is precisely these physical volumes that reflect the true scale of logistics operations. By a rough estimate, the physical throughput handled by China’s manufacturing supply chain likely approaches nearly half of the world’s total—effectively making China equivalent to the rest of the world combined. This underscores the sheer magnitude of China’s logistics footprint, far surpassing the value‑based size of its real economy as measured in monetary terms. Taking my area of expertise as an example, Chinese forklift When the author first entered this field, annual production and sales were less than 20,000 units; by 2023, production and sales had reached 1.17 million units. Adding nearly 200,000 OEM forklifts also manufactured in China, the total number of forklifts produced in China exceeded 1.37 million—more than a 68-fold increase over two decades. Take China’s express delivery parcels as an example, Twenty years ago, China handled just 200 million parcels for the entire year; by 2023, that figure had surged to 132.1 billion—more than a 660-fold increase. Over the past few years, in terms of incremental growth, China’s parcel volume has expanded by an amount equivalent to the total annual parcel volume of the rest of the world in less than three years. This is the underlying logic behind the logistics industry in China, which for nearly two decades has relied on scale expansion to achieve breakneck growth—and also the rationale behind the rapid, often unregulated, expansion of countless Chinese logistics firms over the same period. However, this fundamental logic has now undergone a complete transformation.

In the future, there will be little room for substantial growth in the physical scale of logistics; the era of hyper‑rapid expansion—where China’s logistics operations once grew by dozens, even hundreds of times, and in certain sectors by nearly a thousandfold—has come to an end. Take express parcel delivery as an example: it is neither imaginable nor feasible that, going forward, the volume of express parcels could… In 2020, the industry would have grown more than 660-fold compared to today’s baseline. Thus, China’s logistics sector has already moved beyond the stage of pure scale‑driven expansion. If companies in the industry fail to recognize this and continue to rely on path dependence—seeking growth through sheer scale and engaging in cutthroat price competition—they are headed for a dead end. In 2023, total revenue in China’s logistics industry reached RMB 12.8 trillion, with total logistics costs accounting for 14.5% of GDP. Yet many self‑proclaimed “logistics experts,” often operating under the mistaken assumption that China’s logistics costs are far higher than those in developed countries like the United States—where logistics costs typically hover around 9% of GDP—persist in this narrative. This is one of the most puzzling misconceptions in the Chinese logistics community, reflecting a fundamental failure to grasp the underlying realities. It’s hard to say how much water has been poured into these experts’ heads, given that they routinely assess logistics costs without factoring in the sheer scale of operations. According to data from the National Bureau of Statistics, in 2023 China’s total freight volume exceeded 55.7 billion tons, while freight turnover reached 22 trillion ton‑kilometers—far surpassing levels in the United States and other advanced economies. Combining this with figures from the U.S. Department of Transportation, when measured as freight volume per unit of GDP, China’s 2023 figure was 4.3 times that of the United States. Moreover, taking into account China’s unique manufacturing‑and‑supply‑chain dynamics—long logistics chains and substantial inefficiencies—I estimate that China’s logistics scale per unit of GDP is at least five times that of the U.S. Meanwhile, China’s logistics cost as a share of GDP remains less than twice the U.S. level; in fact, its actual logistics costs are less than one‑third of those in the United States.

China is a major player in the real economy, and its robust growth has been underpinned by remarkably low logistics costs. Without such cost efficiency, the real economy would struggle to thrive. China’s logistics expenses are significantly lower than those in developed countries, a key factor driving the rapid expansion of its logistics sector. During the phase of rapid growth in both physical scale and the logistics industry’s overall size, meeting the increased workload necessitates compromising on service quality, which naturally results in extremely low logistics costs. The objective of logistics cost management is to minimize total system costs while maintaining a specified level of service; to make the horse run, it must eat more grass. Once the phase of rapid growth in the real economy has come to an end, As the logistics industry enters a phase of quality improvement and efficiency enhancement, the trend in logistics costs is bound to be upward, rather than downward. Therefore, the primary challenge facing the logistics industry today is not cost reduction and efficiency improvement, but rather combating involution and raising logistics service prices. The recent call by the State Post Bureau to counter involution represents a sound policy. China’s express delivery and logistics costs are only a fraction of those in developed countries; continuing to rely on involution—by sacrificing service quality, cutting courier benefits, and suppressing industry profitability—can no longer be sustained. Key conclusion: China’s manufacturing output accounts for a significant share of the global total. At 35%, when accounting for exchange-rate effects and the relatively high share of low- and mid‑range products in China’s output, the corresponding physical volume of logistics operations is estimated to approach nearly half of the global total—already an imposing scale. Going forward, there is limited room for substantial growth in the sheer volume of physical logistics activities. China’s logistics sector has moved beyond the stage of rapid expansion and entered a phase of high‑quality development focused on improving quality and efficiency. This represents a fundamental shift in the underlying logic of the industry’s evolution and warrants close attention.

03  Key point: China’s real economy has entered a full-fledged era of overcapacity.

Overproduction: As previously noted, China is a major player in the real economy, with its manufacturing output surpassing that of the United States, Japan, Germany, South Korea, India, and other countries. The combined share of the top two to ten positions accounts for 35% of the global total, a figure that becomes even more striking when viewed in terms of physical output. Many traditional sectors have long been grappling with overcapacity, with domestic production in numerous industries exceeding half of the world’s total. Moreover, the manufacture of many low‑end products leaves environmental pollution within China, placing immense pressure on both the environment and natural resources. The central government recognized this issue early on and launched supply-side structural reforms several years ago; however, to be frank, the results have been modest.

Latest trend: With breakthroughs in China’s high‑tech sector, the country’s high‑end products are not facing overcapacity and remain amid a period of rapid market demand growth. If the world were to compete on a level playing field, the demand for China’s high‑tech products would be enormous. However, China’s industrial capital is overwhelmingly in surplus. When an industry is identified as experiencing rapid growth, this excess capital rushes in, aggressively expanding and investing—resulting in new‑industry capacity doubling year after year, only to plunge into overcapacity within a few years. At that point, many investments have barely been made and have not yet recouped their costs when the market already becomes oversupplied. This frenzied rush of investment—even in sectors where demand outstrips supply—is a phenomenon rarely seen worldwide, leading to a paradoxical situation: even the fastest‑growing firms at the top of such industries struggle to turn a profit. Historically, once an industry enters a phase of rapid growth, it typically enjoys a golden period—characterized by substantial profits and aggressive expansion. Yet in China, the combination of excess industrial capital and reckless investment has effectively extinguished this most favorable stage, an outcome that is truly extraordinary. Examples include China’s current express‑delivery sector, the new‑energy industry, the electric‑vehicle market, and the robotics manufacturing field. Meanwhile, key real‑economy sectors—such as construction and infrastructure development—are also beginning to feel the impact of overcapacity. Capital from these industries is shifting toward other manufacturing segments and beyond; given the sheer scale of this capital, if it flows into relatively small‑scale manufacturing niches, it could quickly overwhelm those firms and stifle entire industries.

Therefore, we must recognize that the current issue is no longer merely one of overproduction; it is a systemic problem stemming from an oversupply of investment capital. Vast pools of capital are unable to find commensurate investment opportunities, and the economy and society lack substantial reservoirs of funding. As a result, virtually any sector in which investment is directed fails to offer promising prospects, and even when such prospects do emerge, they quickly give way to intensifying competition and diminishing returns—a hallmark of what has become the latest—and most critical—trend in China’s economic development. Regrettably, a large number of Chinese economists either fail to recognize this trend or deliberately choose to ignore it, steering public discourse toward issues such as the business environment, the “state advances, private sector retreats” dynamic, and wealthy individuals emigrating. It is unclear whether this reflects sheer ignorance or ulterior motives. Through field research, I have found that the vast majority of multinational corporations that have left did so because they can no longer identify profitable investment opportunities in China—businesses are unable to turn a profit here, see no prospects for growth, and find their products increasingly unable to compete with those of Chinese firms. Of course, some companies have also departed due to the impact of U.S.–Western decoupling and supply-chain fragmentation. In a market economy, when profits dry up, firms naturally seek alternative locations and opportunities; when private enterprises can no longer envision lucrative investment avenues, their willingness to invest declines. This is an objective reality, independent of individual will—a challenge that all developed economies worldwide have confronted during their development. Today, multinational corporations are shifting substantial investments to Vietnam and India—not because these countries offer a better business climate than China, but because they present superior growth prospects and ample room for expansion. Meanwhile, China’s current public discourse, market‑oriented institutions, and business environment stand in stark contrast to those of the last century… It was much better in the 1990s.

Impact of Overcapacity: First, excess capacity leads to missed investment opportunities: firms fail to turn a profit and lose the incentive to invest further. This has been a major challenge for both private and state‑owned sectors in recent years, and it is also a key reason behind the withdrawal of some foreign‑invested enterprises. Second, infrastructure investment suffers from diminishing marginal returns; with capital oversupply across the board, viable outlets remain elusive. The massive infrastructure capacity accumulated by China’s “infrastructure‑driven” approach struggles to find effective utilization, while local governments’ land‑sale revenues have plummeted, leaving public finances severely strained. At present, the real estate sector has entered a contraction phase, with real estate investment shrinking for two consecutive years. Per‑capita housing space in China is approaching levels seen in developed economies—already twice that of Japan—and there is no longer much room for rapid growth in consumer demand. Achieving a soft landing in the real estate market poses an enormous challenge. Real estate is both a capital‑intensive and a demand‑driven industry; housing demand has long been a key driver of rapid expansion in other sectors. A decline in real estate consumption cannot be offset by surging demand in tourism, retail, or dining, and the resulting drop in land‑sale revenues further exacerbates local fiscal difficulties. Moreover, the downturn in the real estate market dampens demand across related value chains—steel, construction materials, home furnishings, construction services, furniture, household appliances, and everyday consumer goods—thereby exerting lasting downward pressure for years to come. Meanwhile, demographic trends carry even greater potential implications for the future.

Basic assessment: I think 2023 marks a pivotal turning point, signaling China’s entry into an era of comprehensive overcapacity. Future economic development will require a new wave of industrial transformation and innovation, the gradual elimination of outdated production capacity, and the exit of uncompetitive enterprises. As a result, the outlook for many years to come remains challenging. Most critically, logistics companies must recognize that the phase in which China’s real economy relied on rapid scale expansion has ended; it must now transition to a new stage of high‑quality development focused on quality improvement, efficiency gains, and technological innovation. The underlying logic of economic and social development has shifted, and the business model of logistics enterprises must adapt accordingly. 。 Corporate leaders must shift their mindset. They must avoid path dependency and, in step with the times, transition to a new development trajectory.