China’s rapid economic growth is occurring alongside a trend that, while receiving far less publicity, could have equally significant ramifications. This trend is the speed in which Chinese people are urbanising.
According to a report by the McKinsey Global Institute, China’s urban population will swell by 350m people by the year 2025. That figure is greater than the present population of the entire United States. By 2030, the number of Chinese living in cities is expected to surpass 1bn for the first time, and an estimated 221 cities will have populations of 1m or greater.
Urbanisation is likely to present both opportunities and challenges to the logistics industry. The growth of second and third-tier cities will create new distribution channels within China, particularly if these cities assume a hub-and-spoke relationship with the country’s largest metropolitan centres.
Food distribution will also be affected. As the proportion of Chinese citizens who practice subsistence farming dwindles, food supply chain networks will only grow in importance. Far more people in China will rely on better refrigeration networks to access staple food items. Urban residents also typically consume greater quantities of processed goods, implying another area of potential market growth.
Can China’s infrastructure development keep pace with the rate of urbanisation? Congestion in cities like Shanghai have led to enormous transport inefficiencies, as traffic snarls have slowed the movement of goods into and out of the major cities. One major challenge for China’s city planners is to organise infrastructure development in a way that accommodates increasing numbers of residents.
Finally, there are environmental concerns. Water and food contamination have led to well-publicised scandals in China, and as more people move away from the source these issues could only become worse. In addition, the rise in the standard of living that accompanies urbanisation leads to more consumption, more sewage, and more waste – thereby leading to massive growth in the waste logistics market. China has tackled these issues with enthusiasm over the past few years, but will have to redouble its efforts to cope with upcoming population pressures.
