News Analysis: Better logistics management gives a leg up to China's economy

China has vowed more efforts to build an effective logistics system with the hope of facilitating consumption.

Calling modern logistics a "major industry" in the national economy, the State Council, China's cabinet, said during an executive meeting on Wednesday that measures would be taken to lower logistics cost, encourage competition and strengthen supervision.

The total cost of logistics in China is high. In 2014, logistics costed 10.6 trillion yuan (1.66 trillion U.S. dollars), or the equivalent of 16.6 percent of China's GDP. In the United States and Japan, the ratio of logistics cost to their GDP stood at around 8 percent last year.

China aims to bring down the ratio to 15.6 percent by 2020, the National Reform and Development Commission, China's top economic planning agency, said in a document released last week.

A lack of efficiency caused by low level application of information technology in transportation and warehouse management explains the high logistics cost, said Li Shaojun, an analyst with Minsheng Securities.

Last year, 76.1 percent of goods were transported by highway, beating railway, waterway, pipelines and air freight. Huge number of management staff and intermediary personnel are involved in the highway transport, which pushed up the cost and resulted in low efficiency.

The State Council said on Wednesday that it would strengthen oversight on goods that have "an important bearing on people's lives and health," including farm produce, food and pharmaceutical. A wider digital system which enables consumers to track the information of such goods on the market all the way back to their producer will be established.

China has made great progress in piloting the digital tracking system in recent years.

A tracking system for meat and vegetables was introduced to 58 cities, while 18 provinces and cities have a system to track traditional Chinese medicine (TCM).

The Ministry of Commerce said the system put 30,000 tonnes of meat and TCM on the radar of public scrutiny. China aims to achieve a nationwide implementation of such a tracking system.

The logistics industry connects production with consumption, and people are more willing to spend when they are assured the quality of the goods, analysts have said.

The State Council on Wednesday also encouraged Chinese manufacturing and logistics companies to "go global" by improving their marketing, payment settlement and logistics network abroad. It agreed to free controls on foreign investment in the logistics sector to allow them to establish purchase and distribution centers in China. Endi