China's logistics potential. Top trends and predictions for 2024

China's logistics sector exhibited an upward trend in Q1 2024. According to Xinhua news agency, the acceleration of production at industrial enterprises drove up demand for transportation services.

This is evidenced by the data of the China Federation of Logistics and Purchasing (CFLP). The agency's data suggest that the index of business activity in the Chinese logistics market in March amounted to 51.5%, marking a 4.4 p. p. increase from February. The warehousing index equaled 52.6% (8.1 p.p. growth vs. February).

China's logistics market giants - China Ocean Shipping Group Company (COSCO Group), Xiamen Xiangyu Group, S.F. Express, China Railway Material Company are setting the rules of the game for the whole world.

The first quarter cemented the trends that emerged in January and February. According to Xinhua News Agency, among the main drivers for the transportation service market were the recovery of transportation of industrial production enterprises' products, rapid growth in import logistics and consumer goods logistics. From January to February, total logistics volume rose by 5.9% year-on-year in comparable prices to 55.4 trillion yuan (about US$7.81 trillion).

According to Index1520 portal, logistics operations with China continue to break records. Last year, demand for cargo transportation between the PRC and Russia more than doubled compared to 2022.

It is worth considering that it is China's logistics companies that are also global trend-setters. In 2024, tougher transportation services market conditions will be instrumental in enhancing the role of multimodal transport solutions; demand for logistics outsourcing and turnkey transportation services to minimize sanctions risks is also predicted to go upwards.

Ports remain the main entry channel for Chinese imports into Russia. The bulk of cargo from China is transported by sea - 85%. At the same time, about 70% of goods from China are distributed through the ports of the Far East (Vladivostok and Nakhodka).

As for the development of trade turnover between Russia and China, in 2023, trade turnover with China increased by 26.3%, and imports of Chinese goods increased by 46.9%, reaching a record 240 billion dollars.

The inflow of investments and the construction of modern infrastructure facilities, such as the Nizhneleninskoye-Tongjiang bridge, will further boost the movement of cargo between Russia and China, with an increase in overall freight traffic on the railroad.

According to Forbes, the first two months of 2024 saw the bilateral trade turnover between Beijing and Moscow increase by 9.3% to a total of $37 billion; meanwhile China's exports to Russia grew by 12.5%. Russia became China's fifth largest trading partner in 2023. In January and February 2024, Russia maintained this position, only slightly conceding fifth place to Australia.

According to Tatiana Kulyabina, General Director of the Russian-Chinese multimodal and container transportation company Holding Finance Broker, the strengthening of rail and road transportation is becoming an important point in international logistics, and this trend is only expected to intensify. Earlier announcements that Russia plans to expand its rail network to China underscore its importance. It is predicted that cargo turnover between the countries will increase significantly in 2024, not only due to the increase in containerized cargo from China, but also thanks to the expansion of export opportunities for Russia.

According to He Hui'a, chief economist of the China Federation of Logistics and Purchasing, this year has given a good start to the development of the logistics sector. He noted that the logistics sector has seen improvements in total business, new orders and equipment utilization rates due to strong activity across the country's supply chain. In March, the total business volume index rose 4.4 p.p. to 51.5% and the new orders index rose 1.2 p.p. to 53.4%. The index of business expectations, in turn, amounted to 55.3%.