China - Chongqing

Logistics development is currently a priority for both Canada and China. China has added urgency to the development of its trade logistics sector during the downturn by declaring it a national priority, and on February 27, 2009 approving a plan to upgrade the logistics sector. It positions logistics as one of the ten industries targeted for national strategies and recovery measures.

The economic downturn has had significant negative effects on transportation volumes but the outlook for SW China remains bright. China´s coastal regions have been hard hit and much of the industry has been forced to consolidate, reduce costs or shut down. SW China has many factors helping prop up its own economy in this time of crisis. Many coastal operations are moving westward to take advantage of lower costs. Central government stimulus package is disproportionately targeted at logistic development of the western regions. Infrastructure has been the biggest hurdle in the development of China´s vast western regions, but with the completion of the Three Gorges Dam the west is now in the midst of a radical change. The Yangtze is now capable of supporting consistent year round river shipping, allowing incoming and outgoing goods a cheaper and faster direct route to/from both domestic and international markets.

Looking past the Three Gorges Dam, China continues to develop ambitious plans for improving transportation infrastructure include massive investments in railways, airports, ports and intermodal facilities which are opening SW China to the world. High speed trains are connecting the regions two major cities and both Chongqing and Chengdu continue to invest heavily in urban transportation infrastructure as well. Every year new rail lines are connecting increasing numbers of outlaying areas to the region´s transportation network and beyond. There is a new focus in SW China towards broader Asian supply chain integration. Increasingly efficient routes are connecting SW China through to SE Asia and Eastern Europe. Chongqing and Sichuan are being positioned as China's gateway into these future drivers of economic growth.

As the focal point of China´s Western Development strategy, Chongqing is the best example of the current scale of development flowing from the regions rising economic fortunes. China recently granted Chongqing the first free trade port area in inland China. It is the first of its kind in China with the inclusion of both a port on the Yangtze river and international airport integrated into the free trade zone. The airport is being designed to handle an annual passenger throughput of 70 million passengers and annual cargo capacity of 2.5 million tons, a massive increase from the 11.2 million passengers and 160,00 tons cargo capacity in 2008. The final phase of the Chongqing port project is expected to be completed by 2011 at which time it will be capable of handling 2 million TEU - 4 times the designed capacity of the Prince Rupert Container Terminal.

Global Value Chains: The developments mentioned above have profound implications for Canadian industry. Development on this scale is drawing both new investment and existing production from other regions on a massive scale. Global value chains are increasingly flowing through the region as multinationals search out the next low cost production base - compelled to move even faster by an economic downturn and sinking profits. Intel recently announced the transfer of two thousand positions from Shanghai to it´s operations in Chengdu. HP unveiled plans for the production of laptops for both the Asian and European markets in Chongqing. Even the automotive industry with it well publicized problems looks confident in the region with new plants slated for FAW -VW joint venture in Chengdu and Changan-Ford in Chongqing (the latter admittedly delaying construction amidst the current economic backdrop).

Multinationals draw supply chains with them when they make large investments in new regions and we have begun to witness the phenomenon in the Southwest. Companies like Magna are exploring potential investments in SW China as they aim to serve existing clients with growing local footprints from a facility in the region. Our challenge will be to ensure Canadian SME´s with innovative products and technologies are both aware of the movement of global value chains and are positioned to benefit from the new opportunities they afford.

Rail freight will be important,
High speed rail (Shanghai, Wuhan, Chongqing, Chegdu) expected completion in 2012.
Expected to be major hub – largest rail freight in Asia covering 200-300,000 containers per year.
Ambitious metro-light rail system. 6 lines, 1 circular). 150BN
Major Events: Ontario Infrastructure trade mission to China àto access infrastructure market.
China International Construction, building materials & Urban Services from June 18-20 Beijing.
To learn about CuntanPort, look at Kansas City.