China’s expenditures on logistical services totaled 3.7 trillion yuan ($570 billion) in the first half of 2011, an increase of 18.5 percent year-on-year, statistics showed.

The spending accounted for 18 percent of the country’s gross domestic product (GDP), the China Federation of Logistics and Purchasing and the China Logistics Information Center said in a report published on their websites.

The report attributed the growing spending to rising costs for raw materials, fuel, labor and loans, as well as inefficient capital by logistics companies.

China saw its consumer price index, a main gauge of inflation, reach a three-year high of 6.4 percent in June.

The central bank has raised the benchmark interest rates three times this year and increased reserve requirement ratio six times to keep price hikes under check.

“Overall demand for logistical services has remained high, as the country is still industrializing and urbanizing at a rapid rate,” said the report.

The total value of goods moved in the first half of 2011 rose 13.7 percent year-on-year to 74.7 trillion yuan, but the growth rate declined 4.7 percentage points from the same period of last year, according to the figures.

China expects to see the total value of goods moved grow by about 14 percent this year, the report said.

Despite industry expansion, major logistics companies have had to deal with relatively small profit margins because of higher delivery costs and fierce competition.

In the January-May period, major logistics businesses realized a year-on-year profit growth of 4.2 percent, down 33.2 percentage points from the same period of last year, said the report.

According to a report on China’s logistics from the KPMG, a global accounting firm, the country’s ratio of logistics spending in GDP is well above the average level in developed countries, where it is typically lower than 10 percent, as inefficient operation and inadequate transportation capacity have troubled China’s logistics development.

Source: China Daily

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