Rising shipping costs prompt Chinese exporters to establish warehouses overseas

Amid the escalation of shipping costs and container shortages, Chinese exporters have been establishing more overseas warehouses. Major international shipping firms, including Maersk, DHL and Mediterranean Shipping Co (MSC), announced price hikes for July, raising worries among Chinese foreign trade enterprises about the timely delivery of overseas orders. Effective from July 1, MSC has announced an increase in shipping rates on its European routes, with prices reaching up to USD9,800 per forty-foot equivalent unit. Similarly, Maersk has informed customers of a USD2,000 increase in shipping rates with prices potentially reaching up to USD9,400 per FEU. As the foreign trade sector grapples with the challenges posed by rising costs and container shortages, overseas warehouses have emerged as a solution to ensure logistics stability and enhance supply chain resilience.

Miracle Miles, a footwear and clothing firm based in Hunan province, has distributed its footwear brands to over 10 countries in North America, Europe and Asia, and it owes much of its success to its self-owned overseas warehouses located in Chicago and New Jersey in the United States, covering a total area of over 25,000 square meters. The proximity of the overseas warehouses to key markets facilitates faster order processing and lower shipping rates, especially in the face of a shortage of shipping capacity, said Ma Ning, Director of the company’s Government Affairs Department. Traditional shipping methods often involve a lengthy process of Customs declarations, clearances and international transport, which can take anywhere from five to 10 days for the delivery of goods after an overseas buyer places an order. However, a growing trend in direct fulfillment from overseas warehouses allows customers to receive their items within one to three days, Ma said.

The investment in overseas warehouses means having control over inventory storage and management, which enables the company to respond swiftly to changing market demands and fluctuations in customer preferences, said Wang Jingwen, Director of the Macro Research Center affiliated with the China Minsheng Bank Research Institute. This flexibility allows businesses to adapt product offerings and maintain a competitive edge in the global market, Wang said.

The number of Chinese overseas warehouses exceeds 2,500, covering a total area of over 30 million sq m. Among these, more than 1,800 are specifically dedicated to serving the needs of cross-border e-commerce, with a combined area surpassing 22 million sq m, data from the Ministry of Commerce (MOFCOM) showed in mid-June. The Ministry, along with other departments, rolled out policies in June to promote the construction of overseas warehouses in a market-driven approach, with emphasis placed on encouraging private sector participation in supporting businesses in the overseas warehouse sector.

“Expanding overseas warehouses is not without its challenges, and concerted efforts from government support and business participation are needed,” said Li Yi, Researcher at the Chinese Academy of International Trade and Economic Cooperation. Overseas warehouses require substantial upfront investment, regardless of whether they are built from scratch or leased from existing facilities. These expenses, coupled with ongoing operational costs, pose significant financial challenges for enterprises, Li said, adding that easier access to financial support on this front should be provided, the China Daily reports.