【正文】 etc. They are matured customers of logistics services and less price sensitive. On the other hand, to get the deals from them usually needs to involve high level negociation ? Large panies in Shanghai and nearby areas are mainly JVs of automobile and consumer electronics industry, which have high product value and lower price sensitivity Source: . Kearney field interviews and analysis 8 Point/Final Version/Logistics Industry Outlook final/ 23 Demand Size Sichuan (Chengdu) ? Have the 3rd largest distribution center in China, the largest population, and important heavy industry base ? The logistics industry there has already attracted interest of foreign large shippers like Ikea and investors including Hutchison Whampoa ? Located in mountain areas, road transport infrastructure is inconvenient, so highly relying on rail transport Chongqing 2 ? Agricultural products, metal products and motor cycles, which totally account for over 80% of the export volume, are all lowvalue products, price sensitive and have flat growth ? Underdeveloped infrastructure, esp. road and rail transportation have limited foreign investments in this region. Cargoes usually transported by barges, which is the cheapest mode Province In inland China, the largest demand potential is in Sichuan and the Hubei/Yangtze river region Logistics Demand – Selected Provinces in Inland China Yunnan 2 Demand Growth Remarks ? Most important export industry is tobacco, which has high profit margin, high quality requirement for logistics services, and not very price sensitive ? Exports for wood, wooden materials and furniture, which accounted for over 30% of export volume before, are largely reduced due to newly imposed government sanction on cutting trees High Low Strong Weak Source: . Kearney field interviews and analysis Hubei, Yangtze River Region 3 ? Exports are lowvalue products including tobacco, cotton, chemicals and steel materials ? Many imports are material for JVs (. Citreon and Dongfeng Cummins), of which decisions are usually made overseas ? Market is very fragmented and shippers generally have small scale/volume ? No warehouses/piling centers with modern container handling capacity and advanced IT structure are available, can be a potential development area 3 8 Point/Final Version/Logistics Industry Outlook final/ 24 Growth in the logistics services industry in China will mainly be driven by continued macro economic growth and increased propensity to outsource logistics Growth Driver Implication The Chinese economy is expected to grow at CAGR 7% over the next five years. Increased international and domestic trade will drive demand for logistics services Public policy and spending supports improvements in China‘s logistics infrastructure, providing opportunities for further expansion of logistics service providers. Capable foreign service providers are limited in business scope by regulation, and their full entry after WTO will drive the industry toward international best practices There is increasing interest among Chinabased enterprises in outsourcing for logistics services. Overseas businesses are extending their supply chains deeper into China The fast growing market in online B2B transactions provides an additional market segment for logistics services Favorable Growth Outlook for the China Logistics Services Industry Favorable Macro Economic Outlook Public Policy and Spending Increasing Interest in Outsourcing for Logistics Needs Growing IT and EBusiness 1 2 3 4 Source: . Kearney Analysis 8 Point/Final Version/Logistics Industry Outlook final/ 25 The Chinese economy is expected to grow at CAGR 7% over the next five years Source: Chinainfobank, . Kearney Analysis 2023E 2023EProjection of China’s GDP Growth and Structure (RMB, Bn) ? Continuous growth in GDP indicates a robust and fast growing macro economy, providing opportunities for sophisticated logistics service providers ? The economic structure will be continuously optimized and upgraded ? Logistics is directly correlated with the manufacturing industry, therefore growth of secondary industries will lead to the growth of logistics services ? Improved services industries will also have a positive impact on the logistics sector — Improved supportive services such as legal, accounting, etc. — Improved telemunication capabilities Remarks Secondary: 7% Tertiary: 9% CAGR (0106) Total: 7% Primary: 3% 13,367 9,560 Favorable Macro Economic Outlook 1 8 Point/Final Version/Logistics Industry Outlook final/ 26 Demand for logistics services es from both international and domestic trade Source: Hong Kong Trade Development Council Research。 Chinainfobank。 . Kearney Analysis Logistics Outsourcing Market in Asia Gross Revenue (US$ Bn) 1541128260423123161999 2023 2023E 2023E 2023E 2023E 2023E 2023E8 Point/Final Version/Logistics Industry Outlook final/ 14 The greatest opportunities for outsourcing are in transport, warehousing, and transport management Transport Warehousing Transport Management IT Supplementary Logistic Services Purchase Order Management Logistics Management 30% 47% 48% 85% 20% 40% 39% 76% 23% 2% 5% 16% % of respondents outsourcing 1998 % of respondents planed outsourcing 2023 13% 8% Outsourcing by Function Resource require ments Complexity Note: The percentage may not add up to 100% due to rounding Source: Based on several . Kearney studies, including: Worldwide study prising 280 participants (automotive 19%, electronics 25%, retail 27%, chemicals 29%) European study prising 500 participants (retail 26%, food beverage 26%, modities 22%, machinery 12%, automotive 7%, electronics hight