Logistics Begins Slow Recovery as China Eases Covid Controls

Date: Thursday, December 8, 2022
Source: Caixing Global

Logistics services in China are recovering at a sluggish pace, despite the government relaxing its “zero-Covid” policy, as lingering restrictions and sporadic virus outbreaks continue to hinder the mobility of goods and people.

State-owned China Postal Express & Logistics Co. Ltd. — the logistics arm of the country’s official postal service — delivered 300 million packages on Tuesday, up from 259 million a week earlier, but still lower than the 375 million a month before, official data show.

Some truck freight firms have resumed operations at terminals and distribution centers in major cities after local governments eased large-scale Covid lockdowns.

On Monday, about 6.7 million trucks drove on China’s expressways, up from the daily average of 6.2 million last week, according to data from the Ministry of Transport.

But logistics service providers are operating far below capacity as many delivery terminals and distribution centers face lingering, though smaller, restrictions amid a spike in Covid cases. As a result, firms are dealing with numerous complaints about late deliveries.

By Monday, delivery services at 10,292 terminals in China were suspended, up from 7,125 on Nov. 24 and 3,228 on Nov. 1, according to lists a merchant based in Yiwu, Zhejiang province, sent to Caixin.

In the week through Dec. 4, China’s road freight volume index dropped 8.6% week-on-week to 76.5, after falling 12.5% the previous week, according to data from industry information provider G7. The index measures truck traffic volume and the quantity of goods processed in major logistics centers.

Logistics hubs generally remain subject to stricter Covid rules than many public places, which were told this week to stop checking visitors’ test results. By contrast, most logistics parks and distribution centers are still enforcing the rule, an industry insider said.

Also, with packages piling up in warehouses due to pandemic disruptions, it is taking more time than usual for delivery drivers to clear the inventory even if local restrictions have been eased, a delivery driver told Caixin.

China is making a broad shift away from its “zero-Covid” policy. On Wednesday, the State Council, China’s cabinet, issued 10 measures to further loosen restrictions on Covid testing, public transportation, and quarantine.

Economists at Nomura Holdings Inc. revised up their projection for China’s 2023 GDP growth to 4.8% from 4%, citing faster-than-expected first-stage reopening, according to a note published on Wednesday.

But they cautioned that “the road to the full reopening could still be gradual, painful and bumpy, the government and the people are not well prepared for a massive wave of Covid infections.”

The economists estimated that there will be potential supply disruptions because of a surge in cases during the early stages of reopening.

On Saturday, six economists jointly published an article urging the government to prioritize opening economic activity in transportation, office buildings, restaurants, hotels, logistics, shopping malls and other places.


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