follow us on: RVCF Facebook RVCF1 Twitter RVCF LinkedIn RVCF Google+ RVCF LIVE Link Podcast

Upcoming Events

Retailer Open Forum
Conference Call

Supplier Open Forum
Conference Call


2014 Spring Conference
Sanibel Harbour Marriott Resort & Spa

2014 Fall Conference
Camelback Inn Resort & Spa


RVCF Compliance Clearinghouse


Yusen, We Have a Problem!

China: The World's Factory - Still Focused on Growth!
Ronald M. Marotta, Yusen Logistics (Americas) Inc.

The U.S. was China's second-largest trade partner and the country's top export market last year. Bilateral trade is up 8.5% year-on-year to the U.S.'s $484 billion, accounting for 12.5% of China's overall trade. In 2012, the GDP growth in the Western region was much faster than in the Eastern and Central parts of China and even 2.16% more than the national average. In 2012, the Western region's GDP accounted for 19.75% of China's total, up 0.38% from a year earlier.

In just five years, China surpassed the U.S. as the leading trading partner in the world with 124 countries considering China their largest trading partner and only 76 having that relationship with the U.S. The Asian country's influence is on the rise. In 2006, the U.S. was the larger trading partner for 127 countries, while China dominated 70. In 2011, the numbers reversed, with China dominating trade among 124 countries and the U.S. being the top trade partner for only 76.

The Chinese Government is now creating incentives for a greater production inland to support continued growth. By doing so, cargo may have longer (and perhaps by different mode) transits to the ocean ports for export and visibility of cargo may become more important throughout the longer Supply Chain.

Recently, soaring costs in China's traditional manufacturing clusters, including land prices, tightening environmental regulations, and wage overheads, have been posing challenges for manufacturers. The Chinese government is apparently shifting from creating preferential policies for foreign investors towards, instead, favoring its local labor pool due to the country's widening income gap. In addition, wage hikes will boost domestic consumption to keep the country's economy expanding while overseas markets remain weak. To that end, China's Ministry of Human Resources and Social Security revealed the latest minimum wage levels across China in a press conference last month. The table below shows that most provinces and cities have set up minimum wage levels of more than RMB 1,000.


The minimum wage levels of each province, municipality, and autonomous region are set in accordance with each region's local conditions. Under the Minimum Wage Law of the PRC, provinces should revise the minimum wage levels on an annual basis, but some provinces, such as Hainan and Tibet, have not changed their minimum wage levels since July 2010. Last year, the Ministry of Human Resources and Social Security reported that as of December 2011, 24 provinces and cities had raised minimum wage levels at an average growth rate of 22 percent. Sources say that Hainan and Tibet are in the process of revising their minimum wage levels as well. The following news story highlights this:

China sets target of average 13 percent annual minimum wage rise
| Wed Feb 8, 2012 (Reuters)1 - The annual average growth of China's minimum wages should be at least 13 percent in the five years to 2015, according to a government job market plan for the period published on Wednesday.

Raising pay is key to the jobs blueprint, part of Beijing's 12th five-year economic plan, which aims to boost employment in the world's No.2 economy.

Minimum wages in China range from 1,500 yuan ($240) per month in Shenzhen to 870 yuan in Chongqing. The government wants minimum wages to be 40 percent of average local salaries by 2015, according to the plan posted on its website (

Labour shortages are a problem in China's main export manufacturing bases, requiring millions of migrant laborers to fill the gaps. But the government said it expected pressure from an overall labor oversupply to increase in coming years.

"Every year there are 25 million urban residents needing jobs and there are still significant amounts of excess rural labor needing to find jobs," the plan said.

The Chinese government has always been sensitive to employment due to concerns about social unrest, and Beijing, which did not recognize the existence of unemployment until the late 1990s, does not publish a national jobless rate.

The only official jobless rate complied by the labor ministry covers permanent urban residents and the quarterly indicator is widely regarded by investment bank economists as irrelevant.

"All levels of governments making fiscal, financial and industrial policies must consider the impacts on employment and pay close attention to unemployment risks," the plan said.

Demographic data from China's statistics agency shows that the Chinese population is ageing quickly and the rural labor pool shrinking, which many economists cite as the fundamental reason for the sharp wage rises in recent years.

The average monthly wage of China's 158 million migrant workers in 2011 surged 21.2 percent from 2010 to 2,049 yuan.

In the five-year period from 2006 to 2010, the average minimum wage in China increased 12.5 percent per year, official data showed.

($1 = 6.3049 yuan)

China - Retail Market
Fueled by rapid urbanization, Chinese policies aimed at raising income and increasing domestic consumption continues to improve. China is fast becoming a consumer nation as the quality of life improves and a middle class develops. This opens up opportunity for U.S. retailers in China. As a result, the interest from the Western based retail sector regarding expansion into China also continues.

China's apparel market also continues to grow at a rapid pace. Although inflation is a challenge (the Chinese Government stimulus intervention should keep this under control, however), a younger high-wage seeking population is driving consumer demand and focus. The "younger" consumer now looks to the online retail market and this is, of course, a growing retail sub-sector; approximately 30-40% of the Chinese population has access to the internet (about 500 million people).

China Approves $1 Trillion Infrastructure Spend
China has approved plans for RMB 1 trillion ($158 billion) in infrastructure spending, an investment push that analysts say will help support growth in the stuttering economy. In the announcements, the National Development and Reform Commission (NDRC), a top central planning agency, has approved twenty-five urban rail projects, thirteen highway construction projects, seven waterway projects and nine waste water treatment plants. The total cost of the projects is estimated to be about RMB 1 trillion or 2% of gross domestic product.

Projects spearheaded by the NDRC are seen by analysts as much more credible spending commitments than those announced by local governments in recent months. Local officials are keen to prop up growth, but they are struggling to find the means to do so because their tax and land sale revenues are flagging and they are, in effect, barred from borrowing money. By contrast, once projects have received the NDRC's stamp of approval, funding is usually a formality, with either banks providing the financing or the government arranging for bond issuances.

Some of the possible changes for logistics include changing TOS from FOB to FCA, exploring alternative means of transportation, creation of additional milestones in visibility, looking at export DC operations, setting up port QC operations, balancing centralization versus localization, and ensuring a stable workforce.

Hong Kong, Mainland Sign Accord to Ease Cross-Border Flow of Goods
Hong Kong's Commissioner of Customs & Excise, Clement Cheung, and General Administration of China Customs Vice Minister, Sun Yibiao, signed a mutual recognition arrangement to promote "a secure and seamless flow of goods across the Mainland-Hong Kong boundary."2 At the signing ceremony in Beijing, the measures will enable Hong Kong companies to tap into the mainland market, bringing more business opportunities for import, export and logistics industries. The accord mutually recognizes the Hong Kong's Authorized Economic Operator Program and the mainland's Measures on Classified Management of Enterprises. Under the arrangement, local companies accredited by Hong Kong as Authorized Economic Operators can enjoy prioritized clearance for their goods imported from or exported to the mainland.

China - Guangdong Customs Introduces Measures to Secure Export Growth
Customs of Guangdong has eased pressure on exporters to secure provincial export growth, speeding clearance by optimizing procedures. Customs has listed 114 major companies that will be the center of government support. Seventy-one are importers and exporters registered at the customs, whose trade value totaled $150 billion in 2012, some 20% of Guangdong's trade value.

We expect to see growth in Chinese exports through at least 2017 even though the expense to produce TEU's in China will continue to increase across China.


Ronald M. Marotta is the Vice President of Yusen Logistics (Americas) Inc., International Division, an NYK Group Company, responsible for the Origin Cargo Management Group and is based in Secaucus, NJ. Ron also serves as the NYK Group's Commercial Council Office Leader and works with all NYK Group Companies in their efforts to collaborate and provide integrated global logistics services to our mutual customers. Ron began his career at NYK almost twenty years ago as the General Manager of OCS of America, Inc. and helped to transform one of the original consolidators in Asia, into a modern consolidator and cargo logistics company.

Over the past 19 years, Yusen Logistics has grown their international business over 1,100% and extended their service reach throughout the globe. Ron can be contacted at (201) 553-3803.