The Case for China Logistics

China’s logistics sector is anchored by the country’s large population and economic base, and its domestic long-term fundamental growth drivers, despite the rise of global trade protectionism.

China’s economy is expected to grow at a slower pace going forward. This reflects the expected trend of slower growth rates as a country’s economy matures, and is the most likely scenario, despite the threat of the U.S.-China trade war. Even if China’s GDP only grows at 5-6% per annum, it would still be one of the fastest growing large economies in the world. China is the largest economy in Asia Pacific and the second largest economy in the world. Based on LaSalle’s estimate, the incremental GDP value that China is projected to create from the end of 2018 to 2019 is equivalent to the overall GDP of Australia, if the Chinese economy grows by 6% in 2019; and twice of Sweden’s GDP if the Chinese economy grows by 5% in 2019. In other words, China will be adding the equivalent of one Australia or two Swedens from the end of 2018 to 2019, if the economy grows by 5- 6% in 2019.

Domestic consumption is the dominant driver of economic growth, and this trend is expected to continue in the medium and long term. LaSalle believes that the solid domestic fundamentals and structural changes that are underway in China provide a favorable risk-adjusted return profile to invest in and develop modern warehouse facilities. Key themes for modern warehouse investment opportunities in China include the following:

• Domestic long-term growth drivers;
• Supportive government policy;
• Limited modern warehouse facilities; and
• Market selection