Post by HardTimeTrucker on Apr 29, 2011 19:56:38 GMT -5
www.nytimes.com/2011/04/29/business/global/29truckers.html?_r=1&partner=rss&emc=rss
China’s Exports Perch on Uncertain Truck System
By DAVID BARBOZA
SHANGHAI — For years, China’s export juggernaut has been fed by highly efficient factories, low-cost labor and a fleet of container ships capable of transporting huge volumes of toys, textiles, electronics and other goods to every corner of the world.
But there is a surprisingly weak link in the Made in China chain.
Moving those goods from the factory floor to one of China’s enormous seaports — often a drive of less than two hours — typically means relying on an independent trucking company. And as vital as trucking is to China’s mighty export machine, the government seems to be ignoring the drawbacks of what analysts say is an increasingly disorganized, inefficient and even costly way to transport factory goods to seaports.
Trucking’s tenuous status has been underscored by recent protests and demonstrations by drivers. Last week, in an unusually bold display of public anger, 2,000 truckers went on strike in Shanghai to complain about the rising cost of fuel and unfair government transportation fees. Some protestors hurled rocks, tried to overturn police cars and smashed the windshields of truck drivers who refused to join the strike.
The Shanghai municipal government eventually ended the three-day strike by arresting protestors and threatening strike organizers, while also promising to lower some fees that trucking companies must pay to use the roads and seaport.
But the challenges that trucking pose to China’s $1.5 trillion a year in exports are still in place — and could become even greater, now that huge factories have begun relocating to poorer, inland regions to save on labor costs.
“Our concern is that as these factories move away from the coast, the service standards won’t keep pace,” said Ken Glenn, an executive at APL, a transportation services company. “Rail and barge are even less developed.”
Within China, thousands of small trucking companies, many of them family-owned, compete by promising low-cost delivery. Then they overload their 18-wheelers in dangerous ways, pay bribes to ward off highway inspectors and hope to eke out tiny profits.
Now, though, with global oil prices sending the cost of fuel soaring, many truckers say they are heading toward bankruptcy.
“We’re paying a lot more money for fuel than we did three years ago, but what we get paid for freight has stayed the same,” said Qi Zhenwei, a truck owner stationed at a dusty trucking depot near one of Shanghai’s busiest ports. “How am I supposed to survive?”
Mark Millar, a China logistics expert at M Power Associates in Hong Kong, sees Chinese trucking as “a seriously fragmented and brutally competitive industry.”
“Most of the drivers are owner-operators, and in order to make money, they carry more cargo than the truck is supposed to hold,” Mr. Millar said. “This is obviously not a healthy model.”
Not all trucking in China is such a seat-of-the-pants affair. Some global companies transport goods by truck in sealed shipping containers from factory to dock, sometimes accompanied by security escorts.
But more often, goods destined for export are delivered to seaports by small trucking companies — usually hired by logistics firms that bargain to get the lowest possible shipping price. To scrape by, many of the small trucking firms violate the law, pay bribes to avoid heavy fines and transportation restrictions, and even force drivers to sleep in the trucks overnight, sometimes in insecure parking lots.
These rigors might seem to contradict the heavy investment in infrastructure and expressways that China has made to make its transportation network more efficient.
But many of this country’s modern roadways are expensive toll roads. And the government has placed tough regulations on many aspects of the transportation industry, which analysts say have burdened companies with heavy taxes, insurance and government fees. As a result, transporting goods by truck in China is relatively more expensive than doing so in the United States.
According to the American Trucking Associations, moving goods by truck in the United States costs about $1.75 per mile. That includes driver salaries, truck leases, insurance, tolls and many other related costs.
By comparison, trucking costs in China’s two biggest export regions — the Yangtze River Delta region near Shanghai and the Pearl River Delta around Hong Kong — are $2.50 to $3 a mile. That is despite low pay to Chinese drivers, who might earn only 25 cents an hour, versus about $17 an hour in the United States.
Corruption is also a major problem. Chinese truck drivers say highway and port inspectors routinely demand payoffs or bribes. Drivers who refuse to pay may find themselves hit by large fines for even the smallest infraction. (That many of the trucks are overweight makes them ripe for sanctions.) Some regions even operate illegal toll booths.
Rachel Katz, a Fulbright research fellow from the United States who is spending a year in China traveling with long-haul truck drivers, says the drivers are constantly harassed by highway officials.
“There’s every kind of fine you can imagine,” she said in a telephone interview from Chengdu, in southwest China. “There are many different people regulating the roads and finding a way to tax the truckers. I can’t believe the system operates this way.”
Ms. Katz recalls one driver telling her: “In the U.S., you issue tickets in order to control traffic. In China, we control traffic in order to issue tickets.”
Truck drivers do not get much sympathy from their clients — factory bosses who are also struggling to cope with inflation. With labor and raw material and energy prices soaring here, factories are reluctant to pay higher fees to move goods to the major ports.
Besides, many of the factory bosses seem to recognize that there is an oversupply of small trucking companies desperate for cargo.
“They face a situation of absolutely cutthroat competition, and many of them are not well educated,” said Tyrrell Duncan, a transportation director at the Asian Development Bank. “There aren’t programs to train them.”
Qi Zhenwei, who is 35, and his 31-year-old brother, Qi Erwei, are typical trucking bosses working in Shanghai’s bustling Baoshan port district.
Despite fears of government reprisals, they agreed to talk this week in the rusted metal container that now serves as a lounge at their dusty truck depot, amid engine parts and a bucket filled with cigarette butts. Between phone calls and dashes in and out of the makeshift lounge to talk to colleagues, they told their story.
Until about seven years ago, they were peasant farmers struggling to make a living in Henan Province, one of the country’s poorest regions. Neither of them had finished high school.
They traveled more than 500 miles east to Shanghai and found work as truck drivers. (“I once went 24 consecutive days without sleeping in a bed,” Qi Zhenwei said.) Eventually, they earned enough to combine their savings with $100,000 they borrowed from some friends and relatives to buy their own fleet of five new and used Chinese-made trucks.
But shortly after they invested in some of their most expensive vehicles, the global financial crisis struck. Exports plummeted, devastating their container hauling business. A year later, in 2009, when China’s exports began to rebound, so did inflation and fuel prices. And now, the brothers are faced with greater competition from a growing number of small trucking companies.
“So far, I didn’t make any money,” Qi Zhenwei complained.
The brothers refused to talk about the recent strike here, saying the government had been visiting all truckers in the area. But they freely discussed their costs: tire fees, insurance, driver salaries, road use fees, oil changes, repairs and even fees that trucks pay to enter the city.
“If I had a chance to sell the truck, I’d get out of the business,” the older brother said, dejectedly smoking a cigarette. “I’d go back to my hometown. Now, people there are planting crops for Chinese medicine. And they’re making good money.”
China’s Exports Perch on Uncertain Truck System
By DAVID BARBOZA
SHANGHAI — For years, China’s export juggernaut has been fed by highly efficient factories, low-cost labor and a fleet of container ships capable of transporting huge volumes of toys, textiles, electronics and other goods to every corner of the world.
But there is a surprisingly weak link in the Made in China chain.
Moving those goods from the factory floor to one of China’s enormous seaports — often a drive of less than two hours — typically means relying on an independent trucking company. And as vital as trucking is to China’s mighty export machine, the government seems to be ignoring the drawbacks of what analysts say is an increasingly disorganized, inefficient and even costly way to transport factory goods to seaports.
Trucking’s tenuous status has been underscored by recent protests and demonstrations by drivers. Last week, in an unusually bold display of public anger, 2,000 truckers went on strike in Shanghai to complain about the rising cost of fuel and unfair government transportation fees. Some protestors hurled rocks, tried to overturn police cars and smashed the windshields of truck drivers who refused to join the strike.
The Shanghai municipal government eventually ended the three-day strike by arresting protestors and threatening strike organizers, while also promising to lower some fees that trucking companies must pay to use the roads and seaport.
But the challenges that trucking pose to China’s $1.5 trillion a year in exports are still in place — and could become even greater, now that huge factories have begun relocating to poorer, inland regions to save on labor costs.
“Our concern is that as these factories move away from the coast, the service standards won’t keep pace,” said Ken Glenn, an executive at APL, a transportation services company. “Rail and barge are even less developed.”
Within China, thousands of small trucking companies, many of them family-owned, compete by promising low-cost delivery. Then they overload their 18-wheelers in dangerous ways, pay bribes to ward off highway inspectors and hope to eke out tiny profits.
Now, though, with global oil prices sending the cost of fuel soaring, many truckers say they are heading toward bankruptcy.
“We’re paying a lot more money for fuel than we did three years ago, but what we get paid for freight has stayed the same,” said Qi Zhenwei, a truck owner stationed at a dusty trucking depot near one of Shanghai’s busiest ports. “How am I supposed to survive?”
Mark Millar, a China logistics expert at M Power Associates in Hong Kong, sees Chinese trucking as “a seriously fragmented and brutally competitive industry.”
“Most of the drivers are owner-operators, and in order to make money, they carry more cargo than the truck is supposed to hold,” Mr. Millar said. “This is obviously not a healthy model.”
Not all trucking in China is such a seat-of-the-pants affair. Some global companies transport goods by truck in sealed shipping containers from factory to dock, sometimes accompanied by security escorts.
But more often, goods destined for export are delivered to seaports by small trucking companies — usually hired by logistics firms that bargain to get the lowest possible shipping price. To scrape by, many of the small trucking firms violate the law, pay bribes to avoid heavy fines and transportation restrictions, and even force drivers to sleep in the trucks overnight, sometimes in insecure parking lots.
These rigors might seem to contradict the heavy investment in infrastructure and expressways that China has made to make its transportation network more efficient.
But many of this country’s modern roadways are expensive toll roads. And the government has placed tough regulations on many aspects of the transportation industry, which analysts say have burdened companies with heavy taxes, insurance and government fees. As a result, transporting goods by truck in China is relatively more expensive than doing so in the United States.
According to the American Trucking Associations, moving goods by truck in the United States costs about $1.75 per mile. That includes driver salaries, truck leases, insurance, tolls and many other related costs.
By comparison, trucking costs in China’s two biggest export regions — the Yangtze River Delta region near Shanghai and the Pearl River Delta around Hong Kong — are $2.50 to $3 a mile. That is despite low pay to Chinese drivers, who might earn only 25 cents an hour, versus about $17 an hour in the United States.
Corruption is also a major problem. Chinese truck drivers say highway and port inspectors routinely demand payoffs or bribes. Drivers who refuse to pay may find themselves hit by large fines for even the smallest infraction. (That many of the trucks are overweight makes them ripe for sanctions.) Some regions even operate illegal toll booths.
Rachel Katz, a Fulbright research fellow from the United States who is spending a year in China traveling with long-haul truck drivers, says the drivers are constantly harassed by highway officials.
“There’s every kind of fine you can imagine,” she said in a telephone interview from Chengdu, in southwest China. “There are many different people regulating the roads and finding a way to tax the truckers. I can’t believe the system operates this way.”
Ms. Katz recalls one driver telling her: “In the U.S., you issue tickets in order to control traffic. In China, we control traffic in order to issue tickets.”
Truck drivers do not get much sympathy from their clients — factory bosses who are also struggling to cope with inflation. With labor and raw material and energy prices soaring here, factories are reluctant to pay higher fees to move goods to the major ports.
Besides, many of the factory bosses seem to recognize that there is an oversupply of small trucking companies desperate for cargo.
“They face a situation of absolutely cutthroat competition, and many of them are not well educated,” said Tyrrell Duncan, a transportation director at the Asian Development Bank. “There aren’t programs to train them.”
Qi Zhenwei, who is 35, and his 31-year-old brother, Qi Erwei, are typical trucking bosses working in Shanghai’s bustling Baoshan port district.
Despite fears of government reprisals, they agreed to talk this week in the rusted metal container that now serves as a lounge at their dusty truck depot, amid engine parts and a bucket filled with cigarette butts. Between phone calls and dashes in and out of the makeshift lounge to talk to colleagues, they told their story.
Until about seven years ago, they were peasant farmers struggling to make a living in Henan Province, one of the country’s poorest regions. Neither of them had finished high school.
They traveled more than 500 miles east to Shanghai and found work as truck drivers. (“I once went 24 consecutive days without sleeping in a bed,” Qi Zhenwei said.) Eventually, they earned enough to combine their savings with $100,000 they borrowed from some friends and relatives to buy their own fleet of five new and used Chinese-made trucks.
But shortly after they invested in some of their most expensive vehicles, the global financial crisis struck. Exports plummeted, devastating their container hauling business. A year later, in 2009, when China’s exports began to rebound, so did inflation and fuel prices. And now, the brothers are faced with greater competition from a growing number of small trucking companies.
“So far, I didn’t make any money,” Qi Zhenwei complained.
The brothers refused to talk about the recent strike here, saying the government had been visiting all truckers in the area. But they freely discussed their costs: tire fees, insurance, driver salaries, road use fees, oil changes, repairs and even fees that trucks pay to enter the city.
“If I had a chance to sell the truck, I’d get out of the business,” the older brother said, dejectedly smoking a cigarette. “I’d go back to my hometown. Now, people there are planting crops for Chinese medicine. And they’re making good money.”