INDUSTRY
COMMENT
CHINESE WHISPERS
Stanley Chao of All In Consulting
comments on the latest situation in the
US-China trade war and the impact for
the Chinese logistics industry.
It appears the US-China trade
war is coming to an end. The
two countries plan on signing
a Phase 1 deal, after which
everything will return to the
“good ol’ days.”
Not so fast. This spat has
put the two countries in an
ongoing battle for economic
and geopolitical supremacy.
That battle will have deep
ramifi cations, especially for
companies caught in the
middle. Let’s look at how USChina
geopolitics will affect
the air logistics industry – for
better or for worse?
A new world order
Even before the trade war,
we had signs that the US and
China were bifurcating the
world into two trading zones.
For the past ten years, China’s
Communist Party (CCP) has
been embarking on its One
This is doubly true for foreign air logistics companies.
Consider the recent incident when Huawei, the Chinese
telecommunications conglomerate, claimed that FedEx diverted
packages going from Japan to China to FedEx’s US headquarters
instead. It’s a sure thing that neither Huawei nor any other
Chinese high-tech company will be using a US-based courier in
the future.
Look local
To look and feel Chinese, foreign companies will have to buy
out some of China’s domestic air and ground carriers. That
won’t be an easy task, given the CCP’s heavy hand in the
logistics industry. But China’s logistics industry is ripe for
an overhaul, which may spur the CCP to open up its market
to a few experienced, cash-rich and savvy international
players. The industry is fragmented – the over 700,000
registered ground handlers often cannot deliver packages
to other regions because of local regulations. Further, these
mom-and-pop shops lack the expertise to accept and transfer
international packages to the big air freighters.
What might persuade the CCP to allow opportunities for
foreign players is a sizeable investment in infrastructure and
human resources, a concerted effort to acquire some of these
fragmented players and the establishment of a larger, local
presence. We are already seeing this occur in other markets.
Just this year, the Chinese permitted Tesla to set up the
country’s fi rst, fully owned foreign factory in Shanghai after
Tesla’s CEO, Elon Musk, pledged to invest US$5bn and hire
over 200 local hardware and software engineers. The upcoming
Phase 1 deal is expected to allow foreign investment banks like
JP Morgan and Citibank to operate independently in China.
I believe a Phase 2 or Phase 3 deal may incorporate language
that will free up opportunities for the pharmaceutical and
entertainment industries. Air logistics should soon follow.
Belt One Road initiative
(OBOR) to economically,
politically and physically
connect over 100 countries
— through roads, railways
and ports. These countries
accounted for US$29trn in
GDP and US$6trn worth of
trade with China between
2014 and 2017.
But the ongoing confl ict
has not only intensifi ed the
division, it has also broadened
the scope of trade competition.
The US and China will
continue to fi ght for
supremacy in such areas as AI,
robotics, telecommunications,
aerospace and the IoT.
What does this mean for
foreign companies that want
to do business in China?
You’d better be a Chinese
company or at least be
perceived to be promoting the
policies of the CCP.
26 December 2019 www.airlogisticsinternational.com
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