beyondthemba

A Truism to Live By...

Here is a truism I just read from the Winter edition of "In The Vanguard" (published by Vanguard funds):

"If China makes it, the price goes down. If China wants it, the price goes up"

Oh how true especially as it relates to commodities.

China Logistics Infrastructure

One of the items that really allowed the growth of United States Logistics was the Government and private industry investment in infrastructure. The railroads first and then the interstate highway system really connected key "nodes" in the supply chain. This allowed for fast movement of goods and reduced logistics costs dramatically.

However, the United States now is experiencing a crisis of infrastructure as the collapse of the I-35 bridge in Minnesota so tragically reminded us. Drive on I80/90 through Chicago and you will see the difficulty of truck and goods movement.

While the United States appears to not be investing a lot in the infrastructure, China, on the other hand, has decided to invest a lot. As the this article in China Logistics states:

"China’s fixed-asset investments in logistics-related sectors hit US$126 billion in the first three quarters of the year, up 18.8%. All of the figures are up and all of them are somewhat mind-boggling. Indeed, some are so large it is difficult to get a handle on them.

This is another competitive advantage for China. As they build out their infrastructure commerce will rise dramatically and more and more resources will be used for China domestic logistics.

I believe while the genesis for logistics and supply chain operations was to get the product out of the Country, it very quickly is turning into a very large domestic Chinese industry