In Depth: Chinese Merchants Plow Cash Into Overseas Warehouses Amid Global E-Commerce Boom

Chinese e-commerce merchants are increasingly investing in overseas warehouses to meet the demands of growing cross-border trade, aiming for more efficient deliveries [para. 1]. The strong global demand has made building or leasing these warehouses a crucial part of logistics strategies for Chinese businesses and e-commerce platforms, offering significant opportunities for third-party warehousing providers [para. 2]. China’s cross-border e-commerce exports rose 15.2% year-on-year, reaching 1.48 trillion yuan ($202.1 billion) in the first three quarters of 2024. The U.S. was the largest recipient of these exports, commanding 34.2% of the volume, followed by the combined 18.8% share to the U.K., Germany, and France [para. 3]. By June 2024, Chinese companies established over 2,500 overseas warehouses, with more than 1,800 serving cross-border e-commerce needs [para. 4]. This expansion is bolstered by Chinese governmental support, recognizing these warehouses as critical infrastructure for foreign trade [para. 5]. Moreover, changes in international duty-free policies for small shipments are pushing businesses to seek new strategies [para. 6].

Nearly half of the overseas warehouses serving Chinese merchants are located in the U.S., particularly on the West Coast, but the costs of establishment are rapidly increasing. In Los Angeles, the cost for a standard warehouse escalated from $12 million in 2019 to over $30 million. Companies like Loctek Ergonomic Technology Corp. are responding by automating warehouse operations to manage these rising costs [para. 7][para. 8][para. 9]. Europe also remains a critical market, with nations linked by logistics to China playing vital roles [para. 10]. Cross-border e-commerce giant Shein recently leased 600,000 square meters of warehouse space in Poland, leveraging the China Railway Express to serve as a distribution hub for Europe [para. 11][para. 12]. Shein offers a "full-consignment model," which streamlines various sales tasks and reduces delivery times significantly [para. 13]. However, operating warehouses is more complex in Europe due to varying national standards and regulations, posing challenges to uniform operations [para. 14].

China’s exports to Belt and Road Initiative countries amounted to 10.52 trillion yuan in the first 11 months of 2024, representing nearly half of its total exports, up from about 30% in 2018 [para. 15]. Coastal provinces in China are investing in overseas warehouses to serve cross-border e-commerce and traditional exporters [para. 16][para. 17]. However, the return on investment in these regions, particularly developing areas, remains uncertain due to consumer preferences for physical retail and underdeveloped e-commerce infrastructure [para. 18][para. 19][para. 20]. Particularly in Africa, where internet and e-commerce infrastructures lag, Chinese businesses face challenges like skepticism from wholesalers and limited network coverage, deterring immediate returns from cross-border e-commerce sales [para. 21][para. 22][para. 23]. Despite these challenges, the Belt and Road Initiative continues to expand its influence, with more than 50 African countries participating since 2013 [para. 24].