Toowoomba to China: Cold chains and
premium food exports by air freight
The Australian Centre for Sustainable
Business and Development (ACSBD) is a
research centre of the University of
Southern Queensland, Toowoomba,
Queensland, Australia. The Agricultural
value chains and food systems team is
led by Professor Alice Woodhead.
This report is part of a series on
‘Exporting food to China’ and is also
aligned to the report ‘Quilpie to Brisbane,
moving cattle by rail freight: The regular
reliable and responsive services
challenge’ where efficiencies and
challenges of livestock transport by train
to processing sites in south east
Queensland are examined.
The agricultural value chain and food
systems team works with local and
national industries to better understand
critical infrastructure, product
development and agricultural export
opportunities, risks, pathways and
business relationships. The research is
founded in systems thinking. This
enables the team to make sense of the
complexity and emerging issues that
define our agricultural and food systems
and export markets. The team works
with a broad range of stakeholders with
the aim of developing targeted and
practical strategies and decision support
material.
The project ‘Facilitating the
transformation of Queensland’s
agricultural value chains’ is funded by
Queensland Government and University
of Southern Queensland. The steering
committee members include Prof. Steven
Raine, Prof. Julie Cotter, Malcolm Letts,
Elton Miller, Richard Routley, Russell
Hoelzl, and Prof. Alice Woodhead.
Authors: Shane Zhang and Alice
Woodhead
Editorial Team: Michelle Griffiths and
Barbara Harmes
Study participants
Hao Cai, General Manager, Shanghai
Pudong International Airport Cargo
Terminal. Simon Gong, Passenger Services
Manager, Pudong, Shanghai International
Airport Services. Wanwei Guo, Zhengzhou
Airport Economy Zone (ZAEZ).
Frank Lee, Route Development Manager,
Schenker China. Wen Liu, Business
Development Manager, Toowoomba
Surat Basin Enterprise. Jack Lo, Cargo
Product and Marking Manager, Cathay
Pacific Airways. Ben Lyons, Chief
Executive Officer, Toowoomba Surat
Basin Enterprise. Jiehua Ma, Vice
Director, Strategy Development
Department, Shanghai International
Airport. Chris Pienaar, National Product
Development Manager, Perishables,
Schenker Australia. Jezi Ji, Director,
Business Development/Account
Management/Solution, Greater China,
Toll Group. Di Wang, Human Resources
Manager, Shanghai International Airport
Services. Charlie Yin, Sai Cheng
Logistics International, Shanghai.
Disclaimer: Subject to relevant legislation,
USQ disclaims all warranties of any kind,
whether express, implied, statutory or
otherwise, including without limitation any
warranties of merchantability or fitness for a
particular purpose, safety, absence of errors,
accuracy, completeness of results, the
prospects or likelihood of success (financial or
otherwise) of the project or the validity,
scope or non-infringement of any intellectual
property. Any decision regarding safety,
applicability, effectiveness for any purpose,
or other use or disposition of said research
outcome shall be the sole responsibility of the
party making that decision.
Contents
Executive Summary .................................................................................. 2
Introduction ............................................................................................. 3
Hong Kong as an export destination and transit hub ...................................... 6
Cross-border e-commerce as a new model of international trade ................... 16
China’s cold chain logistics and potential solutions for importers .................... 20
Opportunities and implications .................................................................. 26
Conclusion ............................................................................................. 28
References ............................................................................................. 30
Table of figures and tables
Figure
Figure
Figure
Figure
Figure
Table
Table
Table
Table
Table
1:
2:
3:
4:
5:
1:
2:
3:
4:
5:
Zhengzhou, China .....................................................................
Four expansive development sites at ZAEA....................................
Process of cold chain logistics in wholesale circulation channel .........
Process of cold chain logistics in supermarket circulation channel .....
Process of cold chain logistics in E-commerce circulation channel .....
11
14
22
22
23
Movements of passenger and freight at Hong Kong Airport 2004-2015. 7
Food and live animals imports (HKD million) ..................................... 8
Percentage share of air cargo value ................................................. 8
Passengers and freight handled at Zhengzhou Airport 2004-2015 ...... 11
E-commerce enterprises and cold chain distribution mode ................ 25
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
1
Executive Summary
The Darling Downs region where Toowoomba is situated is the largest agricultural
producing area in Queensland and the second largest in Australia. The opening of
Brisbane West Wellcamp Airport (BWWA) presents new market access opportunities for
agricultural businesses and related industries in Toowoomba and its surrounding areas.
Exporting perishable products through BWWA is expected to provide steady job
opportunities and economic growth to this region. However, exporting agricultural
products requires a seamless supply chain, particularly for premium perishable food
where the cold chain needs to be carefully managed and monitored from the origin in
Australia to the destination in Asia.
This report discusses the possible flow channels for Australian agricultural products
from Toowoomba’s Wellcamp Airport to China and assesses the role of cross-border ecommerce and cold chain system in facilitating the export of perishable goods to China.
Key points:




Zhengzhou, China has been identified as an ideal import and export port and
distribution centre, for perishable products because of its strategic location,
excellent transport connectivity, supportive customs and quarantine policies, and
reliable infrastructures being constructed.
Cross-border e-commerce has become increasingly popular in China and could serve
as an effective platform, to distribute perishable food products and represent a new
mode of international trade. However, the Chinese government is set to regulate the
cross-border e-commerce, and could therefore, be prepared to respond to any new
changes and regulations imposed on this sector by adjusting their export strategies
accordingly.
The construction of massive cold chain infrastructures in China presents enormous
opportunity for Australian cold chain industry to export designing and engineering
services. The participation of Australian logistics firms with their experiences and
expertise will benefit not only Australian food exporters in terms of mitigating the
possibility of disruptions in food supply chain, but also other Australian businesses in
China such as restaurant operators that rely on reliable cold chain services.
To capitalise on the opportunities in Zhengzhou and across Asia and to ensure the
consistent production of safe, quality premium agricultural produce, Toowoomba and
Southern Queensland need state of the art cold chain and food processing facilities.
It is recommended that along with cold-chain networks, a food processing cluster be
developed around the Toowoomba airport. This will enable greater value creation of
premium branded and chilled produce from Southern Queensland to Asia.
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
2
Introduction
Toowoomba’s Brisbane West Wellcamp Airport (BWWA) is Australia’s first privately
funded public airport with a 2.87km runway that can accommodate jet aircraft as
large as Boeing 747. The airport was put into commercial use in November 2014,
and is currently serviced by QantasLink, Air North and Regional Express to
destinations of Sydney, Melbourne, Cairns and some remote towns in Western
Queensland.
Toowoomba is the largest city and commercial centre of the Darling Downs that
include Balonne Shire Council, Goondiwindi Regional Council, Maranoa Regional
Council, Southern Downs Regional council, Toowoomba Regional Council and
Western Downs Regional Council. Toowoomba is 120km west of Brisbane and
serves as a gateway from Brisbane, the Gold Coast and the Sunshine Coast to the
Darling Downs area and West Queensland as well as Northern New South Wales.
The catchment for BWWA goes from the Lockyer Valley west to Miles, south to
Warwick and north to Kingaroy. These areas combined have a population of
344,000 people which makes BWWA one of the largest regional airport catchments
in Australia. However, the catchment area for air freight is much larger than for
passengers (Boonekamp and Burghouwt 2016). European Commission (2008)
indicates that freight airports are substitutable within a range of 800 km or a 12
hour truck range, whereas passengers tend to use airports within a range of 100
km. This means that the air freight catchment of BWWA could include all the
Darlings Downs area, Wide Bay, Southeast Queensland region and Northern New
South Wales.
Toowoomba is the largest non-capital inland city in Australia. It is at the junction of
several national highways (Warrego, Gore, New England and Cunningham) and with
linkages to the current Western Rail line and the proposed Inland Rail alignment,
providing it with it the opportunity to become a major hub for freight moving
between Northern New South Wales, West Queensland and the Port of Brisbane.
This hub status is further strengthened with the opening of BWWA as the new
airport can act as a gateway through which the freight, especially the agricultural
produce, can go directly to many new domestic and international markets. The
Darling Downs region, where Toowoomba is situated, is the largest agricultural
productive area in Queensland and accounts for about a quarter of the state’s
agricultural production.
One of the moves towards a freight and logistics hub for Toowoomba is the
construction of the Toowoomba Enterprise Hub, which brings together air, road and
rail connectivity into one strategic location for regional and Queensland businesses
(TSBE 2016). The Toowoomba Enterprise Hub includes three major facilities: the
Wellcamp Airport and Wellcamp Business Park, InterLinkSQ, and Witmack Industry
Park. Wellcamp Business Park situates adjacent to the Wellcamp Airport and can be
used for aviation maintenance, aviation training and support industries, aviation
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
3
and training logistics, warehousing and distribution, manufacturing, commodity
processing and factory outlets. The proposed InterLinkSQ aims to cater for general
and cold-store warehousing, transport depots, and food manufacturing facilities,
and provides the logistics industry with the opportunity to access key road and rail
links and domestic and international markets. The Witmack Industry Park is one of
Toowoomba’s largest industrial land developments and offers industrial land parcels
from 2 to 5 hectares to tenants and owners.
Dunne, et al. (2015) pointed out that as the Toowoomba region is the second most
productive agriculture region in Australia and is connected to the nearby Western
Downs and Lockyer Valley agricultural zones, it is a natural food bowl that can play
an important role in supplying the growing demand from Asia for safe, fresh produce.
The combination of intermodal transport and logistics infrastructure, rich agricultural
soils and safe food production capacity provides Toowoomba with the potential to
become a major air freight export hub. Dunne, et al. (2015) also suggest that
Singapore, Hong Kong and Middle East destinations such as UAE, Bahrain and Qatar
are the main export markets for Australian horticulture and meat products. However,
China and Hong Kong would be the most likely sources of back loading consignment
for cargo flights operating out of BWWA. Therefore, it is logical to target the Hong
Kong and China market first at the initial stage. Ongoing discussions are being held
with several airlines to secure regular international freight services out of
Toowoomba.
On November 23, 2015, the first international freight flight of Cathay Pacific took off
from BWWA with about 75 tonnes of cargo including chilled beef, organic chicken,
mangoes, pecan nuts, lettuce, grains and some heavy machinery bound for Hong
Kong and beyond. Although it was a one-off freight flight, Cathay Pacific has shown
a strong interest to operate regular freight flights between Toowoomba and Hong
Kong and China in the near future.
There is a strong relationship between air connectivity and regional economic
development. It is a widely held view that as an input into many economic activities
including tourism, trade and investment, air transport has been an important
component in achieving economic development and welfare enhancement (Zhang
and Findlay 2014). Air transport is particularly important to distant and remote
regions where there is no close substitute for this transport mode due to the tyranny
of distance. In some parts of the world, air transport is the only viable means of
transportation for both goods and people due to geographic or climate constraints
(Pagliari 2010). A large volume of literature has reported the causality relationship
between airport infrastructure and local economy, which suggests that air
accessibility has a significant impact on GDP, employment, regional development and
foreign direct investment (FDI) (Brueckner 2003; Basile, et al. 2006; Banno and
Redondi 2014). Tanaka (2016 ) noted that despite the advances in information and
communication technology that have reduced the barriers to acquiring codified and
explicit information on foreign market, in-person meetings are still crucial for building
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
4
business relationships and managing production activities. Air services contribute to
face-to face interactions and thus promote globalisation and economic integration.
Banno and Redondi (2014) argued that the introduction of a new route would lead to
a reduction in transport costs and facilitate knowledge flow and thereby increase the
likelihood of FDI exchange between newly connected areas. Cristea (2011) provided
evidence for the importance of in-person business meetings in international trade,
and pointed out that interactions among trade partners generate relationship capital,
which adds bilateral specific value to the traded products. More importantly, air
transport plays a key role in just-in-time global manufacturing production and in
speeding fresh produce from agricultural areas to other parts of the world, which is
particularly important for Toowoomba’s agricultural industry.
The imminent freight flights from BWWA to Hong Kong and outwards present
opportunities for perishable food producers in Australia. There is no doubt that
China is a prominent and promising destination for Australian agricultural food
exports, given its large population and strong economic growth. The establishment
of large volume, long term export markets for beef, dairy, vegetables and other
food products is essential for the long-term stability and prosperity of Toowoomba’s
agricultural industry and related sectors. However, exporting agricultural products
requires a seamless supply chain, particularly for premium perishable food where
the cold chain needs to be carefully managed and monitored. It is not uncommon
for the normal flow of perishable products to be disrupted due to unplanned and
unexpected events when the temperature-sensitive goods are sent to emerging
countries. In most cases, farmers and exporters have little control over the
handling of their products after the point of delivery even if they have fully followed
the instructions and requirements of their customers at the company level. The
main causes of disruptions along the food supply chain include but not limited to
inadequate infrastructure, complexity of interaction of chain members, long
transport distances, transport mode changes, fluctuations in demand, lack of
standardisation of traceability systems, ineffective transport/storage technologies,
absence of refrigerated facilities, lack of managerial skills, ignorant handlers,
unskilled staff and misunderstandings, cultural differences, and so forth (Hülsmann
and Brenner 2011; Brenner 2015). Exporting agricultural products to China suffers
most, if not all of these problems. Solutions to these disruptions need to be worked
out by closely working with all cold chain participants including suppliers,
consumers, logistics firms, air and sea transport operators, government agencies,
etc.
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
5
This paper aims to assess the distribution channels of Australian agricultural
products in China and the associated issues, as well as the role of cold chain
logistics. The structure of this paper is as follows. Section 2 will briefly introduce
Hong Kong as an export destination for agricultural products and a transit hub to
China and Asia. Section 3 will discuss the city of Zhengzhou as a distribution centre
in China, followed by a discussion of the emergence of cross-border e-commerce as
a means of distributing perishable food products (Section 4). Section 5 examines
the development of cold chain logistics in China and its potential impact on
Australian food exporters. The last section concludes.
Hong Kong as an export destination and transit
hub
Hong Kong is home to 7.3 million people and within 5 flying hours from half of the
world’s population. Its GDP per capita was recorded at US $36,117 in 2015. Hong
Kong is one of the key international financial and logistics centres. Hong Kong
Airport is one of the busiest airport in terms of passengers and cargo throughput.
Zhang (2003) noted that the geographical location of Hong Kong within East and
Southeast Asia makes it an ideal location as a regional ‘fulfilment centre’ and more
generally, a logistics services hub, especially for Mainland China and Taiwan. Its
hub status is further strengthened by the presence of the Hong Kong-based Cathay
Pacific, one of the world’s competitive airlines, and its subsidiary Cathay Dragon
through their extensive international network. Cathay Pacific has been the home
carrier of Hong Kong for 70 years and made a significant contribution to the local
economy in facilitating the flow of goods and people in and out of Hong Kong. Table
1 reports the movements of passengers and freight at Hong Kong Airport from
2004 to 2015.
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
6
Table 2 reports the value of food and live animals imported into Hong Kong in the
first half of 2015 and 2016. It can be seen that Hong Kong is a large consumption
market for perishable food products. In fact, according to the Hong Kong
Government (2016), the daily fresh food consumptions by Hong Kong’s population
include 869 tonnes of rice, 2,258 tonnes of vegetables, 4,573 head of pigs, 49 head
of cattle and 23 tons of poultry in 2015. More than 90% of these products are
imported.
Table 1: Movements of passenger and freight at Hong Kong Airport 2004-2015.
Year
Passengers
(person)
Annual
growth
freight
(tonne)
Annual
growth
2004
36 286 642
3 089 911
2005
39 799 595
9.7%
3 402 250
10.1%
2006
43 273 670
8.7%
3 580 348
5.2%
2007
46 296 563
7.0%
3 742 037
4.5%
2008
47 138 492
1.8%
3 627 249
-3.1%
2009
44 995 787
-4.5%
3 347 246
-7.7%
2010
49 775 152
10.6%
4 128 171
23.3%
2011
52 752 718
6.0%
3 938 025
-4.6%
2012
55 655 683
5.5%
4 025 350
2.2%
2013
59 273 527
6.5%
4 127 113
2.5%
2014
62 901 024
6.1%
4 376 349
6.0%
2015
68 071 282
8.2%
4 380 139
0.1%
Source: Civil Aviation Department, the Government of Hong Kong SAR.
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
7
Table 2: Food and live animals imports (HKD million)
Item
Jan-Jun 2016
Jan-Jun 2015
Live animals
2 213.2
2 303.2
Meat and meat preparations
25 019.3
26 884.2
Dairy products and birds’ eggs
7 567.2
8 088.5
Fish, Crustaceans, Molluscs and aquatic
invertebrates and preparations thereof
14 015.7
12 756.1
Cereals and cereal preparations
4 242.5
4 174.7
Vegetables and fruit
20 428.5
19 966.5
Sugars, Sugar preparations and honey
1 306.2
1 430.9
Coffee, tea, cocoa, spices and manufactures
thereof
2 598.1
2 234.6
Source: Hong Kong external merchandise trade, Census and Statistics Department.
Table 3 shows that air transport plays an important role in Hong Kong’s
international trade. About 37.5% of Hong Kong’s exports and 41.2% of Hong
Kong’s imports were transported by air in 2015 while in 1980, these two figures
were 26% and 19%, respectively. Tsui (2016) claimed that Hong Kong’s efficiency
in customs clearance and its status as a free port are the key contributors to this
increase. In 2015, Hong Kong’s total exports by air reached HK$ 1,352,948.1 and
imports HK$1,666,695. Mainland China, the US, India, Japan, Korea, and Taiwan
were Hong Kong’s top 5 export destinations in 2015 measured by the value of air
freight. Mainland China, Taiwan, Singapore, the US, Japan were the main source
markets of imports.
Table 3: Percentage share of air cargo value
2013
2014
2015
Total export
35.2%
36.5%
37.5%
Domestic export
27.4%
28.7%
26.9%
Re-export
35.4%
36.6%
37.7%
Import
39.4%
40.8%
41.2%
Source: Hong Kong external merchandise trade, Census and Statistics Department.
According to Tsui (2016), all cargo terminals at Hong Kong Airport are privately-run
with the largest one being the SuperTerminal 1 (ST1), and the second being Asia
Airfreight Terminal (AAT). ST1 is one of the most advanced and largest air cargo
facilities in the world and has the capacity to handle 3.5 million tonnes of cargo.
The third cargo terminal belongs to Cathay Pacific, which can handle 2.6 million
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
8
tonnes of cargo. In addition to the cargo terminals, there is an air freight
forwarding centre at Hong Kong Airport, which provides space for warehousing,
loading platforms, truck parking bays and offices. Cathay Pacific has developed a
range of special services for its customers including Wine LIFT, Pharma LIFT,
Priority LIFT, Dangerous Goods LIFT, Fresh LIFT, Live Animal LIFT, Secure LIFT,
Courier LIFT, and Expert LIFT. The airline has handled numerous perishable goods
and other products that require special temperature control. An example is the
Pharma LIFT service, which provides clients with professional cold chain logistics for
the life sciences market.
Hong Kong is famous for its restaurants and unique cuisine, which has made it one
of the main export destinations for Australian agricultural food products. This place,
as well as its adjacent cities in South China has developed a culture of eating out
with family or friends for breakfast and dinner. The quick pace of living means that
eating at fast food restaurants has been a popular choice in the last few decades,
which has resulted in the development of an efficient cold chain distribution system
within Hong Kong. Most logistics companies in Hong Kong have extensive
experience in cold chain logistics management, and have adopted new-generation
information technology in their daily operations. Due to the similarity in culture and
geographical adjacency, Hong Kong cold chain logistics firms have tremendous
advantages in providing cold chain services from Hong Kong to China and ensuing
compliance of Hong Kong and China customs requirements. Therefore, Australian
exporters could consider working with them to send the fresh produce not only to
the local market, but also to the whole Zhu Jiang Delta Area in South China.
Zhengzhou, airport city, export destination and distribution centre.
Traditionally, airports were regarded as places where aircraft operate, including
runways, control towers, terminals, hangers and other facilities providing services
for the movement people and goods (Kasarda 2008). However, globalisation and
economic integration in the new century imply that an airport of a city is no longer
just a facility which people travel through. It can also be an economic hub that
people travel to and a place where people can live, work and shop. An airport is
usually 15-40 kilometres away from the city centre and can be developed into a
multi-functional airport city as a good complement to the existing city centre. A
new understanding of the airport has led to the emergence of the airport city
concept. Guller and Guller (2003, 70) defined the airport city as ‘the more or less
dense cluster of operational, airport-related activities, plus other commercial and
business concerns, on and around the airport platform.’ This new airport concept is
based on the fact that in addition to their core aeronautical infrastructure and
services, major airports have developed significant non-aeronautical facilities,
services and revenue streams, and extended their commercial reach and economic
impact well beyond airport boundaries (Kasarda 2008). Airport cities could have
the following development directions: shopping malls concentrated on the
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
9
terminals; commercial offices; air cargo facilities; and tourism, leisure, and health
facilities (Schaafsma, Amkreutz and Guller 2008).
In a series of studies, Kasarda extended the airport city concept and proposed the
‘aerotropolis’ idea (Kasarda 2008, p.13):
With the airport itself serving as a region-wide multi-modal transportation and
commercial nexus, strings and clusters of airport-linked business parks, information
and communications technology complexes, retail, hotel and entertainment centres,
industrial parks, logistics parks, wholesale merchandise marts and residential
developments are forming along airport arteries up to 20 miles outward.
Historically, extensive land needs, noise considerations and the marginal role of air
travel in daily living in earlier decades pushed airports far from city centres.
However, large cities such as Hong Kong and Shanghai have been quickly
expanding outwards with new residences being developed and new employment
being emerged at the urban fringe, many once-distant airport sites are no long
remote (Appold and Kasarda 2012). In the US, the airport area grew in
employment at more than twice the rate of the CBDs. Even during economic
downturn, the airport employment slowed less than other areas.
Some large airports have been national economic powerhouse (York Aviation
2004). For example, 31% of companies relocating to the Munich Airport area
claimed that the airport was the main factor for the location decision. 80% of the
manufacturers around the Hamburg area regarded air service connections as an
important factor in attracting customers to look at their products. York Aviation
(2004) also reports that airports and their hinterlands are a powerful factor in
company location decisions as evidenced by Paris CDG, Copenhagen and Nice
Airports.
The Amsterdam Airport Schiphol is one of the world leading airports. The airport
and the Rotterdam seaport have long played an important role in growing the
economy of the Netherlands. However, in the past decades, the aviation sector
experienced much higher growth than the seaport. Makhloufi (2012) noted that
since the early 2000s, Schiphol has changed its growth strategy from being a hub
airport to an airport city. The home carrier KLM has made a significant contribution
to the growth of Schiphol Airport through the development of the hub and spoke
system. Schiphol airport and its direct surroundings act as a magnet for a broad
range of economic activities, especially logistics and distribution activities, large
international companies, leisure hotels, business and financial services and
telecommunications industries (Makhloufi 2012). The airport city strategy has
transformed the airport into a business centre like a typical city centre. Over 1000
international companies are located in the greater Amsterdam region thanks to the
airport and the air services provided.
Other examples of airport city include Hong Kong’s Sky City, a massive retail,
exhibition, office, hotel and entertainment centre, and Korea’s Songdo International
Business District near Incheon International Airport.
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
10
Zhengzhou—A rising airport city in Central China
Zhengzhou is the capital city of Henan Province which is traditionally regarded as
the geographical centre of China, see Error! Reference source not found.. There
is a population of 420 million within its 500 kilometres’ catchment area, accounting
for 30% of China’s population and 27% of GDP. The area within its 1000 kilometres
covers 57% of China’s population and 51% of GDP. Zhengzhou is an inland
transport hub with two trunk railway lines,
Longhai Railway from east to west, and BeijingGuangzhou, from north to south meeting here. It
is also at the junction of Lianhuo Highway and
Beijing-Hong Kong-Macau Highway. BeijingGuangzhou and Xuzhou-Xian high speed railways
(HRS) meet at Zhengzhou and have been in
operation. Several HRS lines linking ZhengzhouChongqing, Zhengzhou-Hefei, ZhengzhouTaiyuan, Zhengzhou-Jinan and ZhengzhouLanzhou are being constructed or soon to be constructed. Eventually, Zhengzhou
will be a crisscross base of an HRS network. Two cargo-rail lines to Europe cross
through Zhengzhou with one going north to Russia and the other going west
through Kazakhstan.
Figure 1 Zhengzhou, China
Zhengzhou Airport
Zhengzhou Airport is one of the eight hub airports in China. More than 30 airlines
are operating passenger flight services to 55 domestic cities and 18 international
cities. The airport is also linked to 10 domestic cities and 27 international cities with
cargo flights. The growth of both passenger and cargo traffic at Zhengzhou Airport
is phenomenal. Between 2004 and 2015, cargo and mail volume in and out of
Zhengzhou Airport increased from 27,600 tonnes to 403,339 tonnes, representing a
ten-fold increase, while passenger throughput increased by 570% during this period
(see Table 4).
Table 4 Passengers and freight handled at Zhengzhou Airport 2004-2015
Year
Passengers
(person)
Annual
growth
Cargo and mails
(tonne)
Annual
growth
2004
2 572 679
27 600
2005
2 969 318
15.42% 44 714
62.01%
2006
3 879 949
30.67% 508 24
13.66%
2007
5 002 102
28.92% 65 600
29.07%
2008
5 887 598
17.70% 64 655
-1.44%
2009
7 342 427
24.71% 70 533
9.09%
2010
8 707 873
18.60% 85 798
21.64%
University of Southern Queensland | Toowoomba to China: Cold chains
and premium food exports by air freight
11
2011
10 150 075
16.56% 102 802
19.82%
2012
11 673 612
15.01% 151 193
47.07%
2013
13 139 994
12.56% 255 713
69.13%
2014
15 805 443
20.29% 370 421
44.86%
2015
17300 000
9.46% 403 339
8.89%
Source: Statistical Data on Civil Aviation of China
Zhengzhou airport is the base for Henan Airlines and the second base for China
Southern and Shenzhen Airlines. It is also a second hub for Cargolux, a cargo
airline headquartered at Luxembourg Findel Airport, under its ‘Dual Hub
Development Strategy’. In 2014, Cargolux sold 35% of its stake to China’s Henan
Civil Aviation & Investment Co (HNCA) controlled by Henan provincial government,
and commenced its cargo service between Luxembourg and Zhengzhou. In 2015,
Cargolux introduced its transpacific service between Zhengzhou and Chicago. In
2016, Cargolux and HNCA have decided to launch a joint-venture cargo airline,
Cargolux China, based in Zhengzhou, which is expected to take off in 2017. Merely
two years after commencing cargo flights between Luxembourg and Zhengzhou,
the cargo volume on this route surpassed 100,000 tonnes.
Zhengzhou Airport Economy Zone (ZAEZ)
Zhengzhou government aims to create an international freight and logistics hub at
Zhengzhou Airport by taking the advantage of its strategic location and large
population base as well as its extensive highway network and high-speed rail links.
They also aims to develop surrounding clusters of high-end manufacturing and
high-value business services, supported by well-designed urban centres and green
recreation areas (Kasarda 2015). The Zhengzhou Airport Economy Zone (ZAEZ)
evolving around Zhengzhou Airport lies 25km southeast of the downtown area. The
415 square kilometre ZAEZ is the first and only state-level airport economic zone in
China approved by the State Council in March 2013. The aim of setting up the ZAEZ
is to develop the aviation economy and promote the integration of road, rail and air
transportation systems. The core of the ZAEZ is Zhengzhou Airport integrated with
the comprehensive bonded area in Zhengzhou Xinzheng Free Trade Zone and
various industrial parks. The ZAEZ has set out the specific targets:1
1. Developing the ZAEZ into an international aviation logistics and distribution
centre;
2. Promoting the development of industrial cluster and forming an important
node in the global production and consumption supply chain;
3. Constructing an open economic system and developing the ZAEZ into an
open portal to the outside world;
4. Developing ZAEZ into a modern aviation city;
1
See http://english.zzhkgq.gov.cn/overview.jhtml
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5. Developing ZAEZ into an economic engine serving Zhengzhou and
surrounding area.
The ZAEZ consists of four expansive development sites (Kasarda 2015) as
suggested in Figure 2:
1. A 160 square kilometre Aerial Port that consists Zhengzhou Airport and its
immediate surrounding areas. The ZAEZ’s bonded zone is located in this
district as well as aviation-dependent industries, including time-critical
manufacturing and distribution, aircraft components production, and a 300acre cool-chain logistics park that hosts a meat port, fresh flower port, and a
pharmaceutical/biomeds port. This district also contains more than 50 freight
forwarders, third-party logistics, and express service providers such as China
Post, DHL, Prologis, TNT-Sinotrans, and UPS. An e-commerce cross-border
trade platform and a major convention and exhibition complex are also being
constructed in the Airport District. This district is the core of the planned
Zhengzhou aerotropolis.
2. A 155 square kilometre High-End Manufacturing Concentrated Area is located
to the south of the airport. This district mainly consists of functions of highend manufacturing, aviation logistics, productive services and living areas.
The 11th China Zhengzhou International Garden Expo is scheduled to open in
September 2017 in this district. The exhibition park is currently being
constructed and will host horticultural and related commercial functions in the
future.
3. A 100 square kilometre Urban Comprehensive Services Area is located to the
north of the airport. According to Kasarda (2015), this area will be the
location for modern business services, such as aviation leasing and finance,
scientific and knowledge-intensive functions, such as software engineering
and cloud computing, cultural, leisure, education and medical facilities; and
mixed-used commercial/residential areas and industrial parks.
4. A trading area of Port Trade fair to the east of the airport comprises functions
of aviation exhibition, high-end trade, technical research and development,
aviation logistics and innovation industry.
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Figure 2: Four expansive development sites at ZAEA
Source: ZAEZ.
Although labelled as ‘Apple City’ due to the manufacturing of Apple products by
Foxconn plant which hires more than 250000 workers, there have been many
other smartphones producers including Coolpad, Tianyu and Zhongxing that
have set up their plants in Zhengzhou. Together they produced more than 140
million smartphones a year, accounting for 13% of the global production
(Shepard 2016), marking the ZAEZ the world’s largest single site for smartphone
production.
John D. Kasarda, the founder of the aerotropolis concept, is Chief Advisor to the
ZAEZ. Kasarda (2015) noted that previously industrial development areas were
dominated by factories producing toys, shows apparel and furniture whereas the
21st century zones are dominated by aerospace, biomedicine, software engineering,
telecommunications and advanced business services industries. Kasarda is quite
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confident about the ZAEZ’s bright future as its air connectivity continues to expand,
its multimodal surface transportation infrastructure deepens and widens, especially
when critical business investment and urban support services accrue (Kasarda,
2015).
Customs and quarantine policies are not always implemented consistently across
Chinese seaports and airports and thus the clearance time could differ significantly.
Physical infrastructures and necessary equipment used to handle perishable goods
are not readily available at all ports. The degree of support from local government
for international trade also varies substantially from place to place. It is important
for Australian agricultural food exporters to choose the right Chinese port to export
and distribute their products. The benefits of using Zhengzhou as an ideal import
and export port can be summarised as follows.
1. One of the key strategies used to attract businesses into the ZAEZ is to cut red
tape and simplify procedures. Zhengzhou Airport uses an electronic customs
clearance system and single-window declaration for freight import and export.
The relevant government agencies offer express inspections for quarantine and
customs clearance.
2. All economic activities depend on access to labour, input materials
(infrastructure) and customers. China has seen more and more manufacturing
companies moving their plants to or establishing new plants in the inland area
from coastal provinces as labour cost has kept rising in the last decade. The
population in Henan province has exceeded 107 million while its neighbouring
province Shandong has a population of 98 million. This creates a large and
varied labour force and consumer market. This is one of the reasons for Foxconn
and many other manufacturing and logistics firms chose to set up new
companies in Zhengzhou.
3. Better transport connectivity in the forms of highways, high speed rail and air
services is key to the development local economy. Zhengzhou Airport is
connected by seamless transportation network including major highways,
intercity railways, high-speed railways and subways. National and provincial
roads serving the ZAEZ have been upgraded and expanded, efficiently linking all
ZAEZ business sites to central China and beyond (Kasarda 2015). Kasarda
pointed out that Zhengzhou possesses China’s fastest, and broadest rail
systems.
4. Henan province issued 20 policies supporting the development of aviation
logistics in 2012 including providing financial subsidies and incentives for setting
up new airlines at Zhengzhou Airport and operating new routes. Logistics firms
conducting businesses at Zhengzhou Airport such as bringing in and distributing
cargo will also receive subsidies from the government. This has encouraged
surface transportation companies and manufacturing firms to use air freight
services at Zhengzhou Airport. Sometimes the manufacturing goods are even
trucked for more than 10 hours from South China to Zhengzhou Airport as a
result of the subsidy incentives, which has ensured the freight load factor for
flights out of Zhengzhou Airport.
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5. Zhengzhou is one of 12 cities approved to carry out pilot program for crossborder e-commerce services. Henan Bonded Logistics Centre boasts an
operation area of 207,000 square metres, a storage yard of 30,000 square
metres, and a bonded warehouse of 60,000 square metres. It serves as a
platform for bonded businesses such as storage, international trade, logistics
distribution, packaging and sorting as well as non-boned businesses. The Centre
is located in Zhengzhou National Economic and Technological Development Zone
(ZNETDZ), which is a significant part of the ZAEZ. The Centre has attracted
major logistic and express companies such as DHL, EMS, FERCAM, APEX, UFL,
BONDEX, STOP express, SF express, and key e-commerce enterprises including
Alibaba, Tmall, Amazon China, Jumei global, Xiaohongshu, etc. In January
2016, the e-commerce platform recorded 4.8 million transactions, an increase of
4.2 times from the same period in previous year. The speed of customs
clearance has reduced from several days to seconds (electronically). A new
record was reached in March 2016 when 84.3 items were cleared by the Henan
Bonded Logistics Centre Customs Clearance Service Platform in one second.
Cross-border e-commerce as a new model of
international trade
The emergence of cross-border e-commerce in China
China has been the largest e-commerce market in the world. A growing number of
Chinese online shoppers are buying globally, most of whom are young and well
educated. The goods purchased include dairy and food products, vitamins,
supplements and natural heath products, which are unavailable or too expensive in
China.
The government has issued various policies to support cross-border e-commerce
including policies on customs clearance, quarantine inspection, duties and foreign
exchange. In 2014, seven cities including Shanghai, Chongqing, Hangzhou, Ningbo,
Zhengzhou, Guangzhou, and Shenzhen were chosen as import e-commerce pilot
zones, which means that imported products can be stored in bonded warehouses
without going through customs clearance until they are sold and ready for delivery.
The expansion of free-trade zones (FTZs) has also facilitated the online shopping
for foreign products as it cut much of the red tape associated with importing
products from other countries and made buying fresh food from Australia and other
countries much easier. The first trail zone opened in Shanghai in 2014, followed by
four in significant coastal cities in 2015 and many other versions of FTZs in inland
cities in 2016 and beyond. Hall (2016) reported that China has about 361 million
online shoppers and this number increases at a rate of 19.7%. In 2013, the size of
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China’s retail import market was worth 77 billion yuan. The value of the retail
import market was doubled in 2014, while in 2015, the value increased to 259
billion (Hall 2016). It is expected that this figure will reach 432 billion in 2016.
In January 2016, the State Council formally approved the establishment of 12
Cross-border e-commerce comprehensive pilot areas. The 12 cities are Tianjin,
Shanghai, Chongqing, Hefei, Zhengzhou, Guangzhou, Chengdu, Dalian, Ningbo,
Qingdao, Shenzhen and Suzhou. For a long time, the cross border e-commerce has
been a special import channel which allows products to be sold directly to
consumers (B2C). However, these pilot areas are tasked with building experiences
in setting technical standards, business process, regulatory modes, information
construction and other aspects related to the business-to-business (B2B) model for
cross-border e-commerce. Currently, many overseas products are sold to Chinese
consumers directly (B2C, or via a ‘proxy’ which is kind of C2C) via international
express from overseas, which is associated with some potential risks including fake
goods provided by the overseas company (or proxy), delivery delays, and
documentation and tax issues during customs clearance (Wang 2015). By
establishing the cross-border e-commerce comprehensive pilot areas, the Chinese
government hopes to bring the cross-border transactions under control. It is
expected that the B2B mode in the pilot areas will be supported as a new mode of
international trade and partly replace the traditional international trade model
which is subject to lengthy and tedious procedures and regulations. It is also hoped
that this model will facilitate small enterprises’ participation in export and import,
making it a new point of trade growth. For example, small retailers can directly deal
with foreign brands and act as a local agent.
Major e-commerce platforms such as Alibaba’s Tmall and China’s largest direct-toconsumer e-retailer JD.com have responded quickly to get involved in the cross
border e-commerce businesses. Both have vowed to win two billion new crossborder customers and committed to deliver the goods to and from any part of the
world in two to three days in an affordable manner (Hall 2016). They worked with
foreign retailers and opened online shops on their platforms. A large volume of
consumption goods such as baby formula, diapers, vitamin pills and cosmetics are
imported and stored in bonded warehouses. The products are then retailed to
customer online and delivered individually. Chinese consumers can now purchase
online at Amazon’s websites in the US and other countries and expect to receive
shipments in 7-10 days. Wang (2015) reported that based on historical data.
Amazon can forecast orders and send goods in advance by sea to Shanghai FTZ
bonded warehouses. Amazon then sends the items from the warehouse after a
consumer places an order.
Online platform as a promising distribution channel for fresh food
Chen (2016a) suggests that the transaction scale of China’s fresh food e-commerce
has reached RMB56 billion yuan (AUD 11.2 billion) in 2015 and this value will reach
RMB 128.3 billion (AUD25.7 billion) in 2018.
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Australian companies have noticed the booming cross-border e-commerce sector in
China, a new trade model that has attracted more and more Chinese consumers.
Bellamy’s has benefited from the strong growth in cross-border e-commerce and
high demand from Chinese consumers. They have set up online flagship stores via
Tmall.com, Jd.com and VIP.com. All these distribution channels have seen
substantial growth for its products. Its net profit grew by 326% to AUD 38.3 million
in the 2015-16 financial year thanks to the soaring demand from China for infant
formula products (Thumm 2016).
For most small or medium-sized Australian food exporters, it would be costly to
create their own e-commerce platform. It is most realistic to work with the
established Chinese cross-border e-commerce platforms, and use their existing
distribution channels, which will substantially decrease their market entry costs and
effectively gain market share in a short time period.
It is important for Australian exporters to understand that on the one hand, Chinese
government is issuing new policies supporting the development of cross-border ecommerce, while on the other hand, Chinese government has started to promulgate
rules to regulate this new mode of trade international trade. On 8 April 2016, the
Circular on Tax Policy for Cross-border E-commerce Retail Imports was issued,
which immediately had a significantly impact on both exporters and importers as
well as consumers participating in cross-border e-commerce. One of the major
changes is that the new rule put an annual limit of RMB20,000 on the total
transactions beyond which standard import duties applies. In addition, the current
parcel tax ranging from 10% to 50% depending on the product categories would be
replaced by the standard VAT rates. Another major change is the creation of a
positive list of 1142 product categories that can be traded via cross-border ecommerce without a need for licenses, registrations or documents. Products not
listed are subject to usual registration requirements when imported into China.
Before the change, there was a negative list which specified the goods that cannot
be traded via cross-border e-commerce. The impact of the new regulation was
strong and immediate. The cross border e-commerce orders in Zhengzhou, Ningbo,
Hangzhou and Shenzhen immediately dropped by 70%, 62%, 65% and 61% in one
week, respectively. It has been reported that the sales of some Kiwi products
including Comvita honey and the Trilogy skincare range declined by 20 to 30%
immediately after the new policy.
Luckily, the Chinese government realised the damaging effect of the new regulation
to the cross-border e-commerce and has adjusted part of the policy. Some
requirements that affected the cross-border e-commerce such as customs clearance
certificates were delayed for one year. It is expected that further adjustment of the
new policy is quite possible until the Chinese government has found the best
approach to regulate the cross-border e-commerce without producing damaging
effects on its development. However, the message of the new policy is clear as
noted by Frank Lavin in Chen (2016b):
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If you are serious about the Chinese market, you've got to move into the Chinese
market. Put your warehouse in China, put your goods into China legally, and set up
your e-commerce stores and offline stores appropriately.
BOC and UKTI (2016) listed several factors that foreign firms should consider when
using the cross-border e-commerce platforms:
1. Enterprises should consider the sales costs associated with use of ecommerce platforms including post-transaction commission, membership and
listing fees. For example, Tmall Global requires a fixed amount of US$25,000
as security deposit for each foreign user and charges an annual fee of
$US5,000 for Category One products including food, cosmetics and
household appliances and US$10,000 for Category Two products such as
clothing and jewelleries. There are also two categories of transaction
commission fee, 5% or 6%, depending on the types of goods traded.
2. Enterprises need to consider whether the e-commerce platform has a good
reputation and brand image, and whether the platform has attracted other
famous enterprises and a large number of consumers. It is important for the
foreign enterprises to keep control of the brand and brand image, the prices,
and the communications with customers.
3. The logos and brand images of the enterprises should be clearly displayed on
the platform. It is important to check whether the overall design and
functionality of the e-commerce platform will enable and facilitate product
search and potential purchases.
4. Sufficient technical support should be provided by the platform to allow the
smooth running of the online business.
Although China is still in search of the best approach to regulate the cross-border ecommerce, it is clear that the new policy intends to guide the cross-border ecommerce enterprises to use the B2B mode and encourages foreign firms to set up
their own warehouses in China or use Chinese e-commerce platforms and Chinese
distributors or agents for their products. Australian enterprises should pay more
attention to the new policies and be prepared to respond to any new requirements
of the government by adjusting their export product and strategies accordingly. It
is necessary for Australian food exporters to find suitable distributors in China and
understand the development of China’s cold chain systems which are vital to the
proper distribution of their products as will be shown in the next section.
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China’s cold chain logistics and potential
solutions for importers
Development of China’s cold chain logistics
Chinese consumers have had a growing appetite for high-end meat, fruit and
vegetables imported from foreign countries as their disposable income grows. This
has led to an increasing demand for cold chain services in China. Cold chain
logistics is an integrated system and process that keep perishable products under
controlled cold environment from suppliers to end consumers. Many companies
have stepped into this sector and substantial investment has been pour into the
cold chain infrastructures. In 2008, China’s cold storage was about 15 million cubic
metres while in 2014 this number increased to 88.42. The number of refrigerated
vehicles was 4,290 in 2007 while in 2015 there were more than 50,000 in China. In
recent years, many local governments have accelerated the pace in building cold
chain logistics parks including the one at Zhengzhou Airport mentioned earlier. A
cold chain logistics park is the concentration of many cold chain enterprises
specialising in packaging, warehousing, transportation and distribution, wholesaling
and retailing, etc. Many cold chain parks are also multimodal transportation hubs
with well-connected rail, road and air systems. Roland Berger Strategy Consultants
(2014) predicts that the Chinese cold chain industry will grow at an annual rate of
25% in the next few years, driven by macroeconomic policies and market demand.
It is expected that this industry would be worth 470 billion yuan by 2017.
Despite the fast growth of China’s cold chain logistics, some problems still exist
which need addressing. First, compared with developed countries, the capacity of
refrigerated warehouses and the number of refrigerated trucks are still relatively
small, especially in Central and West China. This resulted in 90% of meat products,
80% of aquatic products, and the majority of dairy and bean products being
transported and sold without using any refrigerated equipment and outside the cold
chain system. In fact, the number of refrigerated trucks only accounts for 0.42% of
the total number of freight vehicles while in the US this figure is around 0.8-1%
and in Germany it is about 2-3% (Li 2016).
Second, many cold chain logistics firms are small in scale. Li (2016) pointed out
that most enterprises confine their cold chain distribution to a relatively small area,
whose businesses are limited to traditional transportation and storage service. Most
of them do not have the capability to provide high value-added businesses, such as
cold chain circulation and processing, whole-process cold chain control, and
temperature-controlled supply chain solutions. Because most of the firms only
provide basic homogeneous inventory management and transport services,
competition is strong which compresses the profit margins. In general, the net
return for surface transport industry is less than 7% and the return is even lower
for cold chain firms, around 3% (Zhang 2016). This has created disincentive for
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investment in advanced cold chain technologies such as real-time monitoring and
quality tracing of cold chain logistics products. Hou et al. (2015) have urged
companies to import cold storage technology and the warehouse management
system, vacuum freezing technology, non-destructive testing technology, and
automatic temperature control technology to modernise China’s cold chain industry.
They also called for the merger and acquisition between existing cold chain logistics
firms to achieve the economies of scale.
Third, there is a lack of knowledge of internationally recognised best practices, clear
regulations and enforcement in cold chain operations (Miller 2016). This has led
small logistics firms to cut corners and handle perishables without strictly following
the required procedure. Hansen (2015) reported that it is a common practice to use
open trucks and place baskets of produce on a bed of ice with a wet towel on top
when transporting agricultural products from farm to packing house or warehouse.
Mistrust thus arises between consumers and businesses, which acts as a barrier for
Australian perishable products entering the China market.
Finally, while China seems to have abundant labour supply, cold chain operators
may find a limited amount of trained workers available for operations (Miller 2016).
Compared with developed countries where education and training institutions have
been established to offer professional training programs in cold chain logistics,
there is a lack of such training bodies in China, resulting a shortage of skilled
professionals in the cold chain industry (Zhang 2016). This again acts as another
barrier and potential disruption for the food supply chain from Australia to China.
Cold chain circulation channels in China
Major operating links of cold chain logistics include pre-cooling, freezing/processing,
cold chain storage, cold chain transportation and distribution, and cold chain sales
by wholesalers and retailers (Li 2016). Li discussed three main circulation channels
of agricultural products in China including wholesale market, supermarket and ecommerce platform. The three cold chain circulation channels have different
processes which can be illustrated by Figures 3-5.
Figure 3 shows that in the wholesale market-based circulation channel, the product
is first pre-cooled and cold chain processed, then transported to wholesale markets
at all levels through cold chain transportation and refrigerated within cold storage
facilities in wholesale markets before being distributed to farm product fairs, hotels
and restaurants. This circulation channel usually involves a larger number of
participants (logistics links). The efficiency of this channel is relatively low and the
deterioration rate is relatively higher due to the underdeveloped cold chain
infrastructure at this stage. Figure 4 shows the supermarket circulation channel.
After pre-cooling and processing, the food products are sent to the supermarket
terminals directly or through distribution centres of cold chain logistics. This process
involves fewer logistics links and thus can reduce product deterioration rate along
the cold chain (Li 2016). Figure 5 represents the process of the e-commerce
channel; the products are sold to consumers directly through e-commerce
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platforms. Fresh food producers can use this channel to sell the products directly to
consumers. The third-party logistics services are normally used for the delivery
from suppliers to consumers. Quite often, some e-commerce providers are able to
extend their operation upstream and downstream along the cold supply chain
(vertical e-commerce), and engage in food product procurement from suppliers and
participate in delivery services.
Figure 3: Process of cold chain logistics in wholesale circulation channel
Source: Adapted from Li (2016)
Figure 4: Process of cold chain logistics in supermarket circulation channel
Source: Adapted from Li (2016)
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Figure 5: Process of cold chain logistics in E-commerce circulation channel
Source: adapted from Li (2016)
Third-party cold chain logistics
Third-party cold chain logistics operators are important players in the cold chain
systems. Many firms rely on third-party logistics companies that provide
professional and integrated warehousing and transportation services to allow them
to focus on their core businesses. The third-party logistics services range from air,
rail, maritime, and truck transportation services, warehousing and distribution, to
brokerage and customs services, and can be customised as required by clients
(Miller 2016).
Li (2016) classified the existing third-party cold chain firms in China into several
groups. The first group is the transportation-type cold chain logistics enterprises
which mainly engage in cold chain transportation and regional distribution
businesses. For example, Rokin Logistics began cold chain transportation in 2004
and now owns more than 450 refrigerated vehicles. It provided regular cold chain
transportation services between major cities including Beijing, Shanghai,
Guangzhou, Qingdao, Suzhou, Wuhan and Chengdu. In recent years, it has also
built cold storage warehouses in several big cities although its main business is still
cold chain transportation. The second type of cold chain logistics enterprises mainly
engage in cold chain storage and the business of rendering low-temperature cargo
storage, safekeeping, transfer and other services to clients. The cool centre of
Shanghai Pudong International Airport Cargo Terminal Co., Ltd. (PACTL) is a typical
example. Pudong Airport’s new cool centre covers 3,500 square metres and is
capable of handling over 100,000 tons of temperature-sensitive goods annually.
The cold storage facilities include modern freezers (+8 to -18 degrees Celsius),
coolers (+2 to +25 degrees Celsius) and an ambient climate zone (+15 to +25
degrees Celsius). The third type of cold chain logistics enterprises engage in
integrated businesses of the first two types including cold chain storage, truck
transportation and urban distribution. Shanghai Zheng Ming logistics was
established in May 2011, transformed from a road transport company. It has 40
branches across the countries and services 90% of the capital and major cities. It
owns a fleet of more than 600 refrigerated vehicles, 50 container transport vehicles
and more than 300 vans and other types of trucks. All the vehicles are equipped
with GDP tracking system. The company has two warehouses in Shanghai and
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different temperature range can be achieved at each warehouse. The company can
provide long-distance transportation services using large refrigerated trucks that
can enter cold storage warehouse for loading/uploading and repacking. It uses
small refrigerated vehicles for the last mile delivery.
Li (2006) also mentioned another category of cold chain logistics enterprises, which
only offer urban distribution services at certain regions, with a relatively small
service scope. They may provide integrated services of both cold chain storage and
distribution. Examples of this type include Sinotrans Shanghai Cold-chain Logistics
and Shenzhen Shuguang Logistics.
Although some large enterprises have the capital to construct their own cold chain
infrastructures and run the cold chain distribution systems such as Henan Topin
Group that has established 10 cold chain logistics centres at the production origins
and 15 cold chain logistics centres at the marketing sites, most firms will have to
rely on the services of third-party cold chain logistics providers. As firms move into
foreign markets and globalise their supply chains, the use of third-party logistics
has been increasingly popular. However, many Chinese third-party cold chain
enterprises are suffering many of the problems discussed earlier in this Section.
Therefore, Australian companies need to carefully select cold chain partners when
expanding their business into China.
Cold chain logistics in supporting e-commerce enterprises for fresh
products
According to Research Report on Cold Chain Logistics (2014), not many ecommerce enterprises of fresh food directly invest in equipment of cold chain
logistics due to the high cost. However, the rapid growth of the demand for fresh
food has accelerated the development of the distribution network of cold chain
logistics. The home delivery service of enterprises using the e-commerce platform
JD.com and Tmall.com mainly depends on third-party enterprises of cold chain
logistics due to the lack of mature storage and logistics distribution system. For
example, Li (2016) noted that Tmall normally choose trustable cold chain logistics
enterprises in the cities within its business scope as the designated cold chain
service providers. In many cases two-stage cold chain distribution is needed: the
fresh products are first carried to the destination city using refrigerated trucks
through B2B mode, and the B2C home delivery in the last kilometre is then
conducted at normal temperature or with a refrigerated box (Li 2016).
Some e-commerce enterprises selling fresh products may choose to build their own
cold chain system or a mixed model of self-built system plus third-party system.
This offers them the flexibility in cold chain operations and improves the quality and
efficiency of the cold chain services (Li 2016). Tootoo.cn is a good example that
used its own logistics fleet for the delivery when it was first established. However,
as its business expands, now it has started to use the third-party logistics
enterprises for delivery.
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Table 5: E-commerce enterprises and cold chain distribution mode
Enterprise
name
Business mode and
product category
Cold chain
logistics mode
Distribution
scope of cold
chain
Tmall.com
Open platform for all eligible
firms; fresh products include
aquatic products, meat, fruits
and vegetables.
Cooperate with thirdparty logistics
enterprises; use B2C
or B2B+B2C
distribution mode.
More than 300
domestics cities
Jd.com
Open platform; food products
include seafood products,
fruits, vegetables, eggs, fresh
meat.
Cooperate with thirdparty logistics
enterprises.
120 domestic cities
Suning.com
Open platform; sell seafood
products, quick-frozen foods,
processed meat, eggs, etc.
Cooperate with thirdparty logistics
enterprises
complemented by
self-built cold chain
warehouses and
logistics distribution
system.
Shanghai, Hangzhou
Yhd.com
Self-run No.1 fresh food
platform; sell fruits,
vegetables, chilled food, etc.
Use its parent
company Wal-Mart’s
cold chain
distribution system
or third-party
logistics.
120 cities after
Jd.com acquired
Yhd.com in 2016.
Womai.com
E-commerce enterprise
selling food products
including fruits, live poultries,
eggs, etc.
Use both self-built
logistics system and
third-party logistics.
335 domestic cities
Benlai.cn
E-commerce enterprise
selling food products
including fruits and
vegetables, meat, poultry and
eggs, dairy products and
imported food, etc.
Use self-built
warehouse and
cooperate with thirdparty logistics
enterprise for
distribution.
22 domestic cities
Sfbest.com
E-commerce enterprise
selling food products
including meat, seafood and
aquatic products, dairy
products, fruits and
vegetables, etc.
Use self-built cooling
and refrigerated
warehouse and SF
Express cold chain
distribution network.
105 domestic cities
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Source: Updated by the authors based on Li (2016)
As a growing number of e-enterprises set up their own cold chain systems due to
the concern that a third-party logistics service supplier cannot offer quality service
in the last kilometre, competition has increased and the profit margins in this sector
are eroded. This forced some logistics enterprises to step into e-commerce
businesses. For example, SF Express decided to set up its own online food shopping
store called Sfbest.com that sells global high-end quality food with 70% of them
being imported foods. The online store of this kind has unique advantage in
ensuring on-time delivery.
Li (2016) has a good summary of the cold chain delivery modes of some major ecommerce enterprises that sell fresh products (Table 5). Each business mode has
its own merits and demerits. Australian food exporters need to carefully examine
each of them as well as many other e-commerce platforms not listed here before
choosing the most suitable e-commerce and distribution mode.
Opportunities and implications
Many Australian logistics companies are experienced in cold chain logistics
management. They have adopted new-generation technologies to enhance
operational efficiency and perform rigorous monitoring and inspections throughout
the distribution process. Linfox is one of the successful Australian logistics
companies that quickly expand throughout Asia. Headquartered in Thailand, Linfox
has had a presence in China, Thailand, Vietnam, Malaysia, Singapore, Hong Kong,
and India. It has also commenced businesses with Cambodia and Laos. In fact,
two-thirds of its staff are based in Asia. Linfox carries out logistics activities in
Shanghai, Tianjin and Hong Kong and provides customised supply chain solutions to
many big companies. It has a dedicated supply chain solutions (SCS) team that
specialises in supply chain modelling, network and warehouse design, and freight
planning and management.
Australian food exporters can consider working with Australian logistics companies
when entering a new market to gain valuable knowledge and experience. Other
benefits will also result from the cooperation. For example, Australian logistics firms
such as Linfox are experienced in designing cold chain solutions for Australian
exporters from farm gate to end consumers in China. As cultural difference might
be a cause of cold chain disruption, working with an Australian logistics firm that
understands the cultures of both countries could mitigate such problem.
Zhang (2016) noted that China's third-party logistics has been underdeveloped and
few companies can provide properly integrated cold chain logistics services. This
was identified as one of main causes of cold chain disruptions, and has forced some
University of Southern Queensland | Toowoomba to China: Cold chains and
premium food exports by air freight
26
pharmaceutical and food companies to establish their own cold chain systems in
China. However, not all the firms have the capital to establish cold chain systems
for their own operations. Therefore, using Australian fully owned or partly owned
logistics enterprises is a natural choice for Australian companies doing business in
China. In general, Australian logistics enterprises have a better control and
monitoring system over their operations. They may also contract part of their
business to a local third-party logistics firm but, from what we observed, Australian
logistics enterprises have been very careful in selecting contract partners. They
would provide rigorous training to them and keep a close eye on the operations of
the contract partners with latest technologies, which is important to avoid cold
chain failures in distributing food products in China. Even though many logistics
companies claimed that they could provide a seamless and reliable cold chain from
source to destination, it might not be the case in reality. Deviations from the
required procedure and temperature may arise either for cost saving purposes or
merely for convenience by the irresponsible handlers. But with the new technology
such as fleet management systems, the positions of the contractor’s vehicles can be
tracked, the mileage and fuel consumption data can be gathered, and the drivers’
behaviours such as speeds, the use of brakes, and abusive gear shifting can be
monitored.
Each cold warehouse and storage system may cost millions of dollars to build. The
need to construct massive cold chain infrastructures in China presents enormous
opportunity for the Australian cold chain industry to export designing and
engineering services. Once a cold chain system is in place, regular maintenance
and repair services need to be performed by skilled professionals. Australian
logistics firms can provide the much needed cold chain management skills to
improve the overall efficiency and quality. Miller (2016) noted that managing and
coordinating the warehouse and transportation services to maintain proper product
temperatures need advanced logistics and warehouse IT and managing software.
This represents an opportunity for the technology companies to export computer
software, telecommunications and information services. As explained earlier,
insufficient equipment and non-standard packing are restricting China’s
development of cold chain logistics. Roland Berger Strategy Consultants (2014)
thus called for cooperation among equipment manufacturers, logistics providers,
distributors and even food manufacturers to address this issue. This again implies
new opportunities for Australian logistics enterprises.
University of Southern Queensland | Toowoomba to China: Cold chains
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27
Conclusion
The air freight industry is a major component of the global economy as it is the
main mode of transport for perishable goods, luxury goods and high-value products
(Boonekamp and Burghouwt 2016). In 2014, the share of air freight was 1% of all
the trade to and from the European Union, measured in tonnage, but it is 30%
measured in value (Eurostat 2015). ATAG (2016) noted that air transport has been
an important component of many industries’ global supply chains, and mainly used
for the transfer of time-sensitive goods.
The Toowoomba region is the
second most productive
agriculture region in Australia.
Zhengzhou has been identified as an
There is no doubt that the
ideal import and export port and
opening of BWWA presents
distribution centre for perishable
new market access
products because of its strategic
opportunities for agricultural
location, excellent transport connectivity,
business and related industries
supportive customs and quarantine
in Toowoomba and its
policies, and reliable infrastructures.
surrounding areas. Exporting
perishable products through
BWWA is expected to provide steady job opportunities and economic growth to this
region. This paper has discussed the possible flow channels for Australian
agricultural products from Wellcamp to China and assessed the role of cross-border
e-commerce and cold chain system in facilitating the export of perishable goods to
China.
China has been the largest e-commerce market in the world and the cross-border
e-commerce has become an effective means of distributing perishable food
products. Australian enterprises should understand that the Chinese government is
still looking for the best approach to regulate the cross-border e-commerce, and
therefore be prepared to respond to any new regulations imposed on this sector by
adjusting their export strategies accordingly.
Apart from the construction of cold storage facilities, China needs the participation
of foreign cold chain logistics firms to provide advanced and comprehensive cold
chain solutions to meet the increasing demand for higher quality food by Chinese
consumers (Chu 2015). This represents a good opportunity for Australian logistics
companies to expand their cold chain businesses in China by establishing
subsidiaries or joint ventures. The experiences and expertise of Australian logistics
firms will not only benefit the local fresh food producers and cold chain operators,
but also Australian food exporters and other Australian businesses such as
restaurant operators that rely on reliable cold chain services.
Zhengzhou has set a good example in terms of transforming a traditional transport
hub into an aerotropolis that include clusters of airport-linked business parks,
industrial parks, logistics parks, and multimodal transportation services.
University of Southern Queensland | Toowoomba to China: Cold chains and
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28
Toowoomba is well placed to follow suit and become a manufacturing centre, and a
freight and logistics hub due to the following advantages;



it is at the junction of road and rail transport routes from northern and
southern agricultural regions; the strategic location is further strengthened
by the opening of the new airport, which presents new export opportunities
for time-sensitive food products;
the construction of Toowoomba Enterprise Hub will provide necessary
facilities and space for development and attract new businesses including
manufacturing and
logistics firms;
Toowoomba has a range
It is recommended that along with
of educational institutions
that can help industry to
cold-chain infrastructure and
attract and train skilled
networks, a food processing cluster
workers; the high demand
be developed around the Toowoomba
for Australian premium
airport. This will enable greater value
food products makes it
possible to establish food
creation of premium branded and
processing centre at the
chilled produce from Southern
new airport and export
Queensland.
processed and valueadded agricultural
products.
However, government support is important. These advantages need to be
accompanied by appropriate industrial policy such as more liberal aviation policy
arrangement. Tax incentives are also very important, the Zhengzhou Government
has attracted international airlines, manufacturers, and logistics companies that
have established branch offices, warehouses and plants. Although the Darling
Downs region is well-known in Australia as a ‘food bowl’ for Queensland, Darling
Downs and Toowoomba are still relatively unknown in Asian countries. Advertising
promotions could be considered to help Toowoomba stand out as a unique place
with its own identity and image different from its global competitors. If the
environment is created for business to develop infrastructure and agricultural
products and services in the Darling Downs, Toowoomba can become a multi-modal
cold-chain network hub with strong trade links to Zhengzhou, and access to China
and Asia.
University of Southern Queensland | Toowoomba to China: Cold chains
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29
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