Returning Cross-border Logistics to Normal

The reopening of Ruili, a city on the border of China and Myanmar, signals that cross-border trade between the two countries is poised to recover  

By Huang Jiangqin

After closing for 1,012 days due to the COVID-19 pandemic, the Jiegao border gate in Ruili City, south China’s Yunnan Province, reopened on January 8, 2023. On January 14, traffic between Ruili and Muse in Myanmar resumed at the Ruili- Kyalgaung border crossing and the Sino- Myanmar Friendship Street crossing. Still, the Border Gate crossing remains closed. Preparations for its reopening are ongoing in accordance with the border trade rules of both countries.

“It’s good news for us,” said Zhang Fangfang, a provider of cross-border logistics, who had been looking forward to the reopening. To prepare for the reopening, her company drew up plans for transportation pricing, warehousing, and goods supply.

Over the last three years, contrasting most of the other Chinese cities that have gradually resumed normal business operations, Jiegao has experienced more than a dozen lockdowns, the longest lasting 35 days.

A border checkpoint between China and Myanmar in Ruili, Yunnan Province, January 14, 2023. (NOEL CELIS)

Bitter Winter

Ruili Jiegao Border Trade Zone is the only border trade special zone in China that enjoys a special management mode with preferential policies. Before the outbreak of the pandemic, it was the busiest and most convenient trade port, facilitating the greatest trade volume between China and Myanmar of any port.

Official data shows that in 2019, the year before the pandemic outbreak, the volume of import and export freight going through Ruili Port exceeded 17.46 million tons valued at nearly 100 billion yuan (US$14.9 billion), accounting for 80 percent of Yunnan Province’s trade with Myanmar. That year, Ruili Port led all the land ports in Yunnan in terms of volume of import and export freight.

On March 31, 2020, facing huge risks of inbound infection, Ruili officially suspended inspection and release of entry-exit personnel and goods. All equipment was shut down and traffic diverted. In March 2021, the Jiegao Border Gate Community was locked down. No passengers or vehicles were allowed to cross the Jiegao Bridge.

All cross-border trade activities came to a standstill, leaving logistics companies with a dilemma. Since the Jiegao port was completely shut down, logistics companies had to divert to the Wanding and Qingshuihe ports, which added to costs and hurt efficiency. Many shippers were unhappy with the situation. Pang, a cargo dealer with Yunnan Hongfan Freight Company, reported that his company had to divert from Ruili to Guangdong Province to get its cargo to Yangon by sea. “We had to ignore the high cost,” said Pang. “We cared most about timely delivery of our goods. Delays at the border would cost us hundreds of thousands.”

As a measure to prevent the spread of the virus, “relay trips” were enforced during lockdowns. Wang, a cargo dealer with Ruili Lingyun Freight Company, explained how they worked. Generally speaking, truck drivers can cross the border after being cleared by customs. During the lockdown period, however, a truck from China to Myanmar would be driven by a Chinese driver to Jiegao Bridge before being handed over to another driver through a closed loop to the Border Gate. After being cleared by customs, it would be driven by a Myanmar driver to a designated location for disinfection before being handed over to another driver bound for the final destination. Relay trips inevitably added much to costs.

Wang estimated that his company has lost over 300,000 yuan (US$44,700) in the last three years. Six of eight cargo dealers were laid off. “Over the last three years, our company has taken out more than 1 million yuan (US$149,000) in loans,” said Wang. “Our new trucks are still new with barely 1,000 kilometers on the odometers. However, we have to pay the high costs of offices, warehouses, depreciating vehicles, salaries, and everything else.”

Some logistics companies didn’t make it through the bitter winter. Many firms still registered as logistics providers are no longer involved with it. Due to the pandemic, Ruili’s fiscal revenue decreased by more than 20 percent year on year in 2020.

Beginning of Spring

On December 27, 2022, China’s Ministry of Transport released a work plan to gradually and effectively resume international road passenger transport, which stated that starting from January 8, 2023, policies would be adjusted to gradually resume the entry and exit of passenger transport through water and land ports in an orderly manner with the reopening of the ports.

At 8 a.m. on January 8, the national flag of China was raised at Jiegao Border Gate Square, marking the full reopening of Ruili Port. That day, a banner was displayed at the checkpoint to Jiegao, welcoming stakeholders to return to the region to resume operations. However, on January 8, Myanmar did not reopen Muse, the land port on the other side.

A vendor offers various merchandise at a shop in Ruili, Yunnan Province, on January 13, 2023. The city is slowly crawling back to life. (NOEL CELIS)

On January 2, the Ruili Foreign Affairs Office reportedly sent a letter to the Myanmar Muse Trade Office informing it about plans to reopen Ruili Port on January 8. The Myanmar side did not offer a positive response to the information.

“There were some communication problems between our policy department and foreign affairs department,” commented Liu Jinxin, chairman of the China Kunming South Asia & Southeast Asia International Logistic Research Institute. A Myanmar media outlet reported on January 11 that the lockdown and reopening of the land ports on the border required both sides’ interests be addressed. Myanmar apparently wanted early notice to get better prepared for the move.

On January 13 and 14, Myanmar reopened the Ruili-Kyalgaung border crossing and the Sino-Myanmar Friendship Street crossing for motorcycles and pickup trucks. U Aisotan, director of the Muse Publicity and Public Relations Bureau, reported that so far, Myanmar only allows the exit-entry of freight trucks with single drivers, and the trucks have to be below 16 tons, according to the policy during lockdowns. Now, Ruili Port has been opened to freight only, not yet to passengers.

Logistics companies have high expectations for the resumption of customs clearance. However, it will take some time for a full recovery to be seen. “This is the holiday season for Chinese people to return home for the Lunar New Year celebrations,” said Liu. “Additionally, after the release of the new policy, it will take time to resume contact with foreign customers and resources. The cross-border logistics market should recover to the previous level by April.”

Improving Business Environment

Logistics on the China-Myanmar border is a network system supported by many small and medium-sized enterprises. Most logistics companies operating in Ruili are relatively small in size with backward infrastructure and limited services. Transportation, distribution, packaging, and storage of short and medium distance freight are usually completed by different companies.

Helping cross-border logistics companies regain confidence is important. To achieve that goal, Liu Jinxin said that it’s critical to subsidize logistics companies with tax breaks and exemptions and meet their financing needs.

In 2022, the China Federation of Logistics and Purchasing released an investigative report on the operations of small and medium-sized logistics enterprises. Having investigated the current situation and needs of the enterprises in 2020-2021, the report stated that small and medium-sized logistics enterprises generally faced capital turnover and financing pressure, with higher pressure in 2021 than 2020.

China’s logistics industry, especially the road freight industry, has generally adopted an operational mode with cushion expenses, according to which the shipper does not pay freight charges or other service fees until well after the completion of a shipment, while logistics companies have to pay the truck drivers upon the completion of a task, or within one week. It’s impossible to ease the financial pressure on logistics companies. Under such circumstances, some logistics companies have been borrowing money to pay the necessary costs.

To apply for bank loans, they need collateral. He Shunhua, a business manager with Ruili City Lanxiang Freight Information Company, explained that logistics companies do not have fixed assets to use as collateral, but “invisible assets” such as delivery channels and stable business partners. The reluctance of upstream companies to authorize and the difficulties in obtaining bank credit become “obstacles” impeding access to financing.

To provide relief for the truck drivers and logistics companies grappling with the pandemic, the Yunnan Provincial Rural Credit Cooperative proactively offered to renew their loans. Qualified truck drivers and logistics companies could extend the repayment of principal and interest of their loans within 2022 in accordance with market principles.

To ease the burden of cushion expenses, the State Council issued a regulation on securing payments for small and medium-sized enterprises, which proved to be favorable for micro, small and medium-sized logistics companies. However, the logistics sector, especially road freight operations, often uses outsourcing. Government departments, institutions, and large-scale enterprises usually outsource their logistics business to large logistics companies, which in turn outsource the business to small and medium-sized logistics companies. “The procedures and formalities are quite complicated,” said He, “and we do not have enough qualified personnel to handle them all.”

To solve such problems, Liu Jinxin suggested that industry organizations play a bigger role. Chambers of commerce should lower the threshold for small and medium-sized enterprises to join and help them solve problems of lack of information and professional skills as well as offering them policy advice.

Meanwhile, the Yunnan provincial government should learn from its counterparts in Zhejiang, Fujian, and Guangdong provinces to fully implement relevant relief policies for enterprises in difficulties and minimize procedures and barriers to private enterprises and small and mediumsized enterprises applying for loans and policy subsidies, Liu added.

“In the post-pandemic era, the market should be liberalized to foster further development and vitality,” said Liu. “Government functions should be transformed to provide services for enterprises and improve the business environment. When enterprises are surviving, cross-border logistics will naturally get better.”

Building Logistics Parks

With abundant resources of land ports and an advantageous geographical location, how can Yunnan Province upgrade its cross-border logistics industry?

The Yunnan Provincial Development and Reform Commission released the Three-Year Action Plan for the Development of Modern Logistics Industry in Yunnan Province (2022- 2024), providing clear support for the province’s demonstration logistics parks to get bigger and stronger and become national demonstration logistics parks.

Liu Ling, associate professor at the School of Logistics of Yunnan University of Finance and Economics, explained that logistics parks provide distribution, storage, packaging, loading and unloading, circulation, processing and other comprehensive functions as well as conversion between different functions, which improves the efficiency of land port operations and facilitates the development of crossborder logistics.

Thanks to both policy and market incentives, all land ports have accelerated the layout, investment, and construction of logistics parks. Financial support from the government and preferential policies for land use have attracted many logistics enterprises.

But Liu Ling cautioned against blind investment in new logistics parks. Construction of logistics parks should match the industries of the land ports. Logistics parks can provide services according to the types of goods at the ports whether they are involved in cross-border e-commerce, agricultural cold chain, bulk commodities, generalpurpose goods, express delivery, or something else. But if many logistics parks are built at the same port, they need to have specifically defined roles to prevent repetitive construction and malicious competition.

Liu Jinxin thinks that construction of logistics parks should align with international standards. “Logistics parks with commercial value at land ports should be upgraded to international land ports as soon as possible,” he said. “Then, they will be overseen by common international transportation regulations, treaties and practices to realize the connectivity and efficiency of the functions of international freight documents processing, cargo inspection, loading and unloading, storage and distribution. That will promote unimpeded international logistics and trade development in the region.”

Today, the Myanmar Mandalay International Land Port, Yangon International Land Port, and the China Kunming Tengjun International Land Port are all important international port projects identified by the UN Intergovernmental Agreement on Dry Ports. Liu Jinxin considers operational connectivity cooperation between land ports a market-based implementation of the “UN Regional Action Program for Sustainable Transport Development in Asia and the Pacific,” which will help relevant enterprises cooperate to expand the market and provide a model for the two governments to formulate policies to support market-oriented development.

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