Logistics and economic development: Experience from China

Based on the most updated available data on Chinese logistics and economy, we use the dynamic structural model to test the relationship between logistics development and economic growth in both the short and long run from a total output, demand and disaggregate output perspective. The joint short and long-run causality test shows that economic growth Granger-causes logistics output, implying that economic development causes more demand for logistics services and hence leads to logistics development. Land transport infrastructure Granger-causes the economic growth with a feedback effect. Another interesting finding is that railway transport unidirectionally Granger-causes the development of roadway and waterway transport, implying that the railway plays a key role in the transport network in China thus far. However, this trend may not continue in the future as the administrative functions of the Ministry of Railway were merged into Ministry of Communications in early 2013. The policy implications are given at the end of the paper.