pportunities, still the intense competition exists, especially after 2001. The logistics industry reported an annual growth rate of 31% in 1999, 35% in 2000, and 55% in 2001, and was expected to continue to expand rapidly in the future (Business knowledge on demand, 2007). According to Exhibit 1, the average annual growth rate of the logistics industry in China was 22.2%, and logistics expenditures accounted for about 21.8% of the GDP between 1992 and 2004 (business knowledge on demand, 2007). This sector has been developed in a physically sound way under improved infrastructure and external environment. According to Asia consulting, Added value has reached to RMB 1.4 trillion in 2006 up 13.9% over 2005. The transportation fee has been RMB 2.1 trillion increasing 12.1 %. The increase can be seen in inventory and delivery service along with 16.7% of warehousing fees. It is expected that China's logistics market value will reach RMB1.1972 trillion, and will continue to maintain an annual growth of 20% in 2010.
1.2 Total Logistics Market Size
The GDP of China is above RMB 10 trillion by the first time in 2002 that achieved a real growth of 8%. In the 10th Five-year Plan, the government is forecasting an average growth rate 7% per annum in 2002-2007. According to the forecasts by State Development Planning Commission (SDPC), the GDP will be quadruple, about US$4.3 Trillion by 2020. The price level will be stable because of higher price pressure within the economy. In a detailed survey by the China Federation of Logistics and Purchasing (CFLP), the total logistics market was estimated at RMB1, 788 billion, 20% of the GDP in 2000. In 2002, it was estimated that the total logistics market of China were about RMB 2 trillion. Though the economy was expanding in 7%, logistics expenses were going to increase in a slower rate. It was because there is sufficient supply of logistics capacity such as trucks, warehouses and other fixed assets. Government registration shows 700,000 logistics service providers are operating. On the other hand, improving logistics efficiency also reduces its proportion to the GDP. A moderate rate of 4.0%-4.9% growth is estimated in the coming five years. According to HK Trade Development Council, leading logistics companies in China such as UPS, FedEx and DHL-Sinotrans have all recorded annual growths in over 30% on operations in China and there are more outsourcing contributes to the growth of professional logistics firms. Moreover, as competition increases, it is expected that market share is shifting from local companies to foreign invested enterprises (FIEs) or local giants, who can offer more efficient services in lower fees.(LI & FUNG, 2003)
1.3 Players in the China Logistics Market
China's logistics market is fragmented, characterized by tens of thousands of logistics companies and many of them are small, poorly organized with fundamental infrastructure and technology. A vast majority of the players are lack of nationwide capabilities and serve a narrow customer base; and mainly focus on simple transportation and storage functions. Competition is fierce, particularly in the low-end market. Traditionally, China's logistics market is dominated by the state-owned enterprises (SOEs) which provide 90% of the logistics services, but none of these has a market share over 2%.
1.31 State-Owned Players
There are many state-owned players in China logistics market. Prior to 1980, under economic conditions in that time, China's l
