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Seizing Opportunities in China’s Cold Chain Logistics

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By Yong Teng,Buran Chen

As the economy improves and household incomes rise, Chinese consumers have been demanding higher standards for safety, health, and quality of life. However, there is increasing concern regarding food and drug safety, especially with increasing popularity of purchasing fresh produce online.

Cold chain logistics form the foundation to supply perishable products—fresh fruits and vegetables, meat, dairy, aquaculture products, fresh flowers—and medical products—drugs, reagents, vaccines, biological products—that have strict temperature, humidity, and other environmental requirements.

The Chinese cold chain market has grown more than 20 percent over the past five years, increasing from 80 billion RMB in 2011 to 160 billion RMB in 2015.

Increasing demand for fresh food and drugs will continue to drive growth in the cold chain industry— L.E.K. Consulting forecasts that the cold chain industry will be valued at 400 billion RMB by 2020, with transportation making up 40 percent of the market, cold storage at 30 percent, and the remainder of the market will be other services.

Figure 1, China’s Cold Chain Logistics Market Size

Despite this remarkable growth, the development of China’s cold chain industry is still in its infancy. The market is extremely fragmented; the China Federation of Logistics and Purchasing Cold Chain Logistics Committee estimates that revenue from the top 100 cold chain logistics companies accounts for less than 10 percent of the overall market.

Figure 2, China’s Domestic Cold Chain Market Split by Market Share and Top Ten Players

Although the market is rapidly growing, the unreliability and “breakage” of the cold chain remains a serious problem. As ownership of each stage of the cold chain—warehousing, ground transportation, airfreight, airports, distribution and other services—is fragmented, the lack of an end-to-end process control results in widespread mismanagement of logistics. Additionally, the use of temperature monitoring technology, information systems, and other forms of technical assistance is still very immature. As a result, the rate of cargo damage to fresh product within the cold chain is as much  as 20-30 percent—much higher than the average 5-10 percent in developed countries.

In recent years, the Chinese government has worked with industrial associations to jointly introduce a series of standards and policies to regulate and promote the development of the cold chain logistics market. With regards to industry standards, the General Administration of Quality Supervision, Inspection and Quarantine and Standardization Administration of China jointly issued the first Operation Specifications for drug cold chain…

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