Regional dedicated line: Why has the Southeast Asian market become the main battlefield for China’s low-cost logistics?

The Southeast Asian market has become the main battlefield for competition among China’s low-cost logistics companies. Behind this are objective conditions such as geographical proximity and cost structure advantages, as well as strategic considerations for Chinese companies to actively deploy. The following analysis is conducted from two aspects: logistics cost advantages and Chinese companies’ strategies:

1. Logistics cost advantages of the Southeast Asian market
   Geographic location and trade convenience

Short-distance transportation: Southeast Asia is connected to China by land and sea, and the China-Vietnam, China-Laos railways and sea routes (such as the Guangzhou-Ho Chi Minh City route, which takes only 3 days) greatly reduce transportation time and fuel costs.

Tariff concessions: The China-ASEAN Free Trade Area (CAFTA) covers more than 90% of goods with zero tariffs, and RCEP further simplifies customs clearance procedures and reduces compliance costs.

Chinese business network: The proportion of Chinese communities in Southeast Asia is high (such as 75% in Singapore and 23% in Malaysia), and there is less resistance to localized operations.

Labor and infrastructure cost depression

Labor cost: The monthly salary of warehouse workers in Southeast Asia is only 1/3-1/2 of that in China (about 200-300 US dollars in Vietnam and 500-800 US dollars in China).

Land rent: Warehousing rents in Indonesia and the Philippines are 30%-50% lower than those in China’s second-tier cities.

Policy subsidies: For example, the Eastern Economic Corridor (EEC) in Thailand provides logistics companies with 5-8 years of corporate income tax exemption.

The explosive growth of e-commerce drives demand

The growth rate of e-commerce in Southeast Asia is the highest in the world (GMV will increase by 18% in 2023, reaching 230 billion US dollars), but logistics costs account for as high as 15%-25% (8%-10% in China), and there is a significant market space for low-cost logistics.

2. Layout strategy of Chinese logistics companies
   Capital first: rapid localization of mergers and acquisitions and joint ventures

J&T entered the market by acquiring GSE, a local Thai company, and covered seven countries in Southeast Asia within 3 years.

Cainiao and Lazada jointly build a “China-Southeast Asia 72-hour delivery” network and invest in the Kuala Lumpur eWTP hub.

Infrastructure sinking: seize the “last mile”

ZTO has established a sorting center in Vietnam (with an average daily processing volume of 500,000 pieces), and Yunda has deployed 2,000 terminal outlets in Indonesia.

SF Express uses drone technology to break through the logistics bottleneck of the Indonesian archipelago (such as the Jakarta-Bali route).

Price war and differentiated services

Low-price competition: Chinese companies’ Southeast Asian express delivery unit price is reduced to US$0.5-1.5 per piece (local companies are about US$1.5-3).

Service innovation: Best launched a customized solution in Thailand with “COD accounting for more than 70%”, which is in line with local cash payment habits.

Policy coordination: connecting the “Belt and Road” nodes

After the opening of the China-Laos Railway, JD Logistics reduced the transportation cost from Vientiane to Kunming by 40% and shortened the time to 24 hours.

With the help of RCEP rules, Sinotrans established a transit hub in Port Klang, Malaysia, radiating the Indian Ocean market.

III. Challenges and future trends
Intensified local competition: Regional enterprises such as GrabExpress and Ninja Van have enhanced their financing capabilities (Ninja Van has raised more than US$500 million in total).

Compliance risks: Indonesia’s new regulations in 2023 require foreign logistics companies to cooperate with local companies.

Next stage focus: Chinese companies may turn to a “low price + digitalization” combination (such as Jitu’s launch of an AI routing planning system) and explore the connection between China-Europe trains and Southeast Asian networks.

Conclusion
Southeast Asia has become the main battlefield for China’s low-cost logistics, which is essentially a triple superposition of “low-cost infrastructure + high-growth demand + policy dividends”. Chinese companies have quickly occupied the market through the three-dimensional offensive of capital, technology, and price, but in the long run, they need to balance the low-price strategy with sustainable profitability and respond to the deep challenges of localized operations.