CHINA is probing the excessive costs of logistics service which total 18 per cent of the GDP against half that in the rich countries of the OECD bloc, reports Economic Information Daily.

The Ministry of Commerce is leading inter-departmental initiative to find out what's wrong and how to fix it, looking at tax reductions and standardisation of facilities to gain cost-cutting efficiencies.

A previous survey of the China Logistics Association revealed that Beijing's "last mile" costs in vegetable delivery from a local wholesale market to retail stores were four times the cost of moving produce from Shandong province.

Chili from distant Hainan sold at the farm gate price of CNY13.8 (US$2.26) per kilogramme and marked up to CNY16 per kilo at the Beijing wholesale market, but rocketed up to CNY30 per kilo at the retail level.

Experts point out that the "last mile" transport cost, which means cost of moving cargo in urban areas, has taken up over 30 per cent of the collective logistics cost of the whole industry.

China's cost is still higher than other BRICS nations. India is five percentage points lower, while Brazil is seven percentage points lower.

Since 1991, China's average logistics cost growth has been at 14.8 per cent, obviously faster than the GDP growth of 10.7 per cent.

Experts explain that China's poor organisation, low professionalism and lack of application of information technologies are the direct causes of the high "last mile" transport cost.

Expanding urban areas are increasing transport demand, requiring more trucks. But the lack of public supply-demand information sharing platform has resulted in shortages of available trucks and truckers who cannot find freight to move.

Ministry of Commerce statistics show that Shanghai's empty running trucks took up 37 per cent of the city's entire truck fleet in 2011, which is three times of that in Europe and America. Guangdong is also suffering from too many empty running trucks, which generates a cost of CNY37 billion per year.

Higher costs also come from manufacturers' reluctance to use third-party logistics services, preferring their own trucks. China's third-party logistics service accounts for less than 25 per cent in the market, compared to over 70 per cent in developed countries.

Toll charges and fines have also been marked as a cause of the high logistics costs. Shippers and forwarders claimed that toll charges and fines took up more than one third of their logistics cost.

Kieran Ring, CEO of Global Institute of Logistics, noted that most of China's expressways are toll roads while in the US, only 8.8 per cent are. A survey shows that 70 per cent of the world's toll roads are in China, and the Chinese pay the highest tolls.

The pilot tax reform scheme in major cities, which replaces business tax with value-added tax and has hence induced a 11 per cent value-added tax to the transport and logistics industry, has added up to the heavy burden the industry already bears.

Wang Xuanqing, an official from the Ministry of Commerce, said lowering logistics cost will be the next focus of the government. He disclosed that the Ministry of Commerce is studying policies to facilitate logistics with other government departments like the inspection and quarantine authority and the Ministry of Finance.

He said that the government is also studying standardising logistics facilities and expected to complete standardisation in three years.

For example, many shippers are still using their own pallets instead of standard ones. This slows loading, unloading and shelving and warehouse throughputs, Mr Wang noted.

The Ministry of Commerce is also considering ways to reduce higher tax for the logistics industry caused by the tax pilot scheme of replacing business tax with value-added tax, including offsetting toll fees against tax, and offering concessions to the industry in the use of land, water and electricity.

Promotion of application of information technologies in the logistics industry is also an item on the Ministry of Commerce's agenda.