China's booming manufacturing sector threatened by country's poor trucking industry  Analysts have taken to referring to China as the world's factory as it has become an increasingly important manufacturer of goods that consumers throughout the globe buy. Though China's factories function like well-oiled machines, they are but one part of a complex supply chain that relies on private companies to transport those products.

The problem, however, is that moving goods from the factory to a Chinese seaport is an incredibly difficult task for a lot of companies, the New York Times reports. Even though the trucking industry is exceedingly important to the China's long-term growth prospects, analysts contend the Chinese government is neglecting to overhaul the industry, resulting in slower delivery times and increased business costs.

The country's dilapidated trucking industry was on full display last week when over 2,000 truck drivers went on strike in Shanghai to complain about soaring energy costs and what they deem to be unfair transportation fees levied on them by the government.

Amidst surging commodity prices, China has moved to prevent unrest by forcing price controls on companies and lowering some taxes. For its part, China is very wary of civil unrest as the last major outburst by Chinese citizens resulted in the Tiananmen Square massacre when the government cracked down on the nonviolent dissent, killing thousands.

Conducting matters in a manner consistent with its normal behavior, the Chinese government similarly cracked down on the striking truck drivers this past weekend, arresting protesters and threatening strike organizers. Nonetheless, the government said it would lower some fees that trucking companies must pay to use roads and seaports.

As coastal cities in the country become increasingly industrialized, though, factory construction has started to move inward, which could lead to even more disruptions in transportation as the inland manufacturing plants are located farther from the seaports. China's $1.5 billion export machine is at risk of suffering from supply chain disruptions, and consumers around the globe could be affected.

"Our concern is that as these factories move away from the coast, the service standards won't keep pace," affirmed Ken Glenn, an executive at transportation services company APL. "Rail and barge are even less developed."

The largely unregulated trucking industry in China is dominated by small, family-owned businesses. These companies function by promising to deliver goods at cheaper rates than their competitors; to accomplish that, they often overload their trucks and routinely pay out bribes to inspectors to squeeze profits any way they can.

As energy costs soar, the trucking companies are struggling to stay afloat. "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," truck owner Qi Zhenwei told the Times. "How am I supposed to survive?" 

Because of policies enacted by the Chinese government, transporting goods in China is actually more expensive than in the U.S. - surprising given the relative bargain rates businesses pay to manufacture goods in the country.

The average cost of moving goods in the U.S. stands at about $1.75 per mile, according to the American Trucking Associations; in China, trucking costs in the Yangtze River Delta and the Pearl River Delta - the two biggest export regions in the country - reach $2.50 to $3 per mile. That figure is especially high considering Chinese truck drivers earn roughly 25 cents an hour, far lower than the $17 an hour rate of their American counterparts.

U.S. Fulbright Research fellow Rachel Katz is living in China while she studies long-haul truck drivers. She asserts that drivers are constantly hit up for fees by corrupt government officials. "There's every kind of fine you can imagine," she said. "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." 
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  1. "Because of policies enacted by the Chinese government, transporting goods in China is actually more expensive than in the U.S."

    Shocking and sad, but very true. It's going to take some strong minded people to clear up the fees and corruption.

    Associate, Product Sourcing