Imbalances, rising fuel costs, new Chinese labour laws, and different interpretations of Customs regulations are all challenges facing freight forwarders in China, noted Anthony Lau, executive chairman, of forwarders BALtrans Holdings, opening a sessionon “The Chinese Market Challenge”.
“Imbalance in trade has been a problem for the last 30 years and I believe it will continue to be for the next 20,” he said, adding that this in effect means exporters from China subsidised the freight costs of importers. However, he predicted that the import market would become more interesting in years to come, noting for example increased exports to China out of Western Europe recently.
Of the other challenges facing forwarders in China, he reckoned that the new security legislation recently passed in the US would be the most diffi cult one. “It will force passenger airlines to screen all cargo, but the trouble is that there is not the technology to handle this, and even if there was the technology, it would cost a lot of money to implement,” he said.
He also noted the effect of high fuel prices and added his voice to forwarder complaints that fuel surcharges were considered a non-commissionable item by airlines. “That is an irony, when fuel is a good part of the cost of air freight, and when sometimes on the way back to Europe or the US, airlines only charge the surcharge,” he told delegates.
Lau also speculated about the possible impact on Chinese manufacturing of new labour laws, due to be introduced next year, which would require written contracts and restrict the use of temporary workers, as well as making it “almost impossible” to lay off workers.
On the Customs front, he said it was Hong Kong’s effi cient service that had enabled it to become a major air freight hub. But in the PRC cargo had been held back by different interpretations of the law by different Customs offi cials, he suggested.
He also criticised so-called “dead freight” contracts by airlines, saying that they were bad for both airlines and forwarders. “At the end of the day, it is better to work with forwarders so that they support you year round,” he said. “Airlines should manage their space to avoid this rate dumping on the market.”
In particular, he warned that the peak season was less pronounced than it used to be and so advised airlines to be very alert in order to avoid offering too much capacity.
One fi nal challenge that Lau noted was the diffi culty of getting experienced staff in some places in China. An example was Shanghai, where BALtrans had been forced to increase salaries by a double digit percentage in the past few years. This was increasing costs and making Shanghai a more expensive place to be a logistics provider, he said.