On January 18, China’s State Council released the 14th five-year plan to improve its transportation system. The document lays out the means to build and strengthen roads, railways, ports and waterways, as well as the technology and human capital involved in the transport industry. After the COVID-19 pandemic ends, supply chain bottlenecks will ease as new infrastructure responds to pre-pandemic constraints.
China’s transportation infrastructure has been a focus throughout the development process. Currently, China has eight “vertical” (north-south) and eight “horizontal” (east-west) high-speed railways and has eliminated bottlenecks in regular-speed railways. Ports were modernized and improvements were made to inland river waterway networks. Highways and bridges were built, connecting cities across the country.
China is grappling with some logistics problems, including the poor condition of warehouses and transportation equipment, urban traffic congestion and shortage of talent in the logistics industry. The plan addresses these issues by promoting the development of smart warehousing and distribution facilities, improving the standardization of equipment, emphasizing the reduction of congestion on urban and national highways, and devoting an entire section to building talent and innovation. The plan will also improve commuter rail infrastructure, multimodal freight transport and specialized transport services. The nation aims to go further by also developing smart transport technologies and low-carbon transport.
The 14th Five-Year Transport Plan will complement increases in urbanization and consumer demand, in addition to shifts in factor supply. The government has raised the goal of increasing domestic demand for nearly a decade as China moves up the development ladder. Additionally, customers are increasingly ordering goods online, increasing the need for specialized and express transportation services. As demand grows, existing transmission infrastructure must provide greater capacity. Accordingly, emphasis will be placed on improving internal and external land bridges, including those providing connectivity between Beijing-Shanghai, Shanghai-Kunming, Guangzhou-Kunming, Beijing-Hong Kong-Macau, Heihe-Hong Kong- Macao, Ejin-Canton, Qingdao-Lhasa and Xiamen-Kashgar. This will ensure that demand is met not only in large urban areas, but also in sparser and more inland provinces.
The plan also focuses on improving the logistics functions of key manufacturing industries, expanding transport support for smart and flexible manufacturing. This is in line with China’s goal of driving innovation and implementing new technologies across the economy. Emphasis has been placed not only on developing new technologies for new industries, but also on introducing new technologies into existing industries, such as manufacturing and now logistics. The overall goal is to reduce logistics costs and increase efficiency. Costs should be reduced by ensuring more flexible adjustment mechanisms for rail freight prices, reducing port shipping costs and lowering taxes and logistics costs.
There is also a focus on improving international logistics, including cooperation with ASEAN and Maritime Silk Road countries, with a special call to increase logistics information connectivity. This aspect of the transport development plan is part of the design of the Belt and Road Initiative, which aims to build infrastructure on several continents.
China’s continued efforts to develop its transportation infrastructure and logistics sector make it even more difficult for multinationals considering shifting production to other Asian countries due to geopolitical conflict to leave China. Companies have found Vietnam and Indonesia to be at a severe disadvantage in terms of infrastructure development. As China strengthens its ability to meet multimodal and specialized transportation needs, its transportation infrastructure is reaching world-class levels.
Despite China’s vast transportation infrastructure, the country has faced severe supply chain bottlenecks during COVID-19 due to its zero-tolerance COVID policy. Bottlenecks emerged due to production and transportation shutdowns, followed by an increase in demand as the pandemic lessened in severity in China and other countries. Some of the bottlenecks have been resolved through greater use of technology, particularly autonomous drones, which have been used to transport goods and passengers to and from quarantine areas. The pandemic has also shifted preferred modes of transportation to some extent from public to private, leading to increased use of motorized vehicles and bicycles.
Post-pandemic transportation will adjust to normal, as supply and demand in this sector calibrates to pre-pandemic or higher levels. China’s infrastructure will continue to be a selling point for multinationals producing and doing business overseas.