Why has logistics business in China been growing so quickly?

As nature abhors a vacuum, so have global private equity firms been moving quickly to take advantage of the demand for logistics in China, such that the industry now receives 2.8 percent of all FDI into China. During China’s accession to the World Trade Organization (WTO), a clear timeframe was agreed upon for allowing wholly foreign-owned enterprises (WFOEs) in logistics services, including freight transport by road, storage and warehousing, courier services, freight forwarding, freight transport by rail, maritime transport related services and maritime agency services. Since 2005, foreign investment has been permitted in most sectors of China’s logistics and transport services industry, excluding certain basic services such as mail.

In 2013, total investment in warehouse and distribution centers in China rose 38.8 percent year-on-year to RMB 3.2 billion. Global Logistic Properties Ltd (GLP) has already spent US$ 1.2 billion to build an incredible 280 warehouses in China in 2014. Other major deals include Mapletree Investment (US$ 1.4 billion), Carlyle and The Townsend Group (US$ 200 million), and Warburg Pincus. The latter has been a major investor (US$ 200 million) in Chinese warehousing developer and operator e-Shang, which in December was approved for a US$ 120 million pre-IPO loan and currently, owns over 1.5 million square meters of logistics space in China.