China Law Blog

So maybe spending three days with the in-laws in rural Central (a/k/a downstate) Illinois has diminished my faculties a bit (certainly having to use dial-up AOL did affect my mood), but what I saw there, along with my conversations with fellow blogger, Steve Dickinson, who just returned from Wuhan, China, have convinced me that Wuhan is the next Central Illinois.

First a bit about Central Illinois.

I was mostly in Peru, IL, population <10,000. Peru was a typical Midwestern US industrial town. Its largest employer had been Westclox, whose closure in the 1970s devastated the local economy. Nothing had really replaced it. As I near Peru, I always tell everyone to set their watches back twenty years.

But this time, things were very different. Peru is in the midst of remaking itself.

Peru is located on I-80, which links the West Coast to the East Coast. If one were to weight each mile of I-80 based strictly on population, I am guessing Peru would fall pretty close to the middle. It is also very close to countless other major highways, close to O'Hare airport (the second busiest US airport), near various train stations, on the Illinois River, and right in the heart of US industry. In other words, it is perfectly located in terms of logistics.

Peru is now taking advantage of its central location, along with its relatively low labor costs, and it (and the entire area surrounding it) are becoming distribution centers for countless mega-retailers and manufacturers.

Wuhan, sometimes referred to as "the Chicago of China," is doing the same thing. As Rich Brubaker of All Roads Lead to China points out in his recent post, "Building Out Wuhan to Its Fullest Geographic Potential," Wuhan, has a lot of "advantages" relating to logistics:

-- It is logistically in a great place with air, rail, national highway, and river transport options all intersecting - in a single location. -- It has a strong history of industry -- It has access to a lot of locally sourced raw materials

My firm represents a number of freight forwarders and they are always telling me of how easy it is to move product into and out of China through its major cities, as compared to moving product within China. This makes sense as China has for the last thirty years emphasized its export sector. However, even before the global slowdown and China's recently announced stimulus package, China had begun to increase its emphasis on boosting its domestic economy. Now, with an obviously more pressing need to drive its own economy, and with the announcement of an economic stimulus package that calls for greatly increased spending on infrastructure, we should expect to see cities like Wuhan increasingly come to the fore. Wuhan is perfectly positioned to take advantage of both China's increased infrastructure spending and its slow conversion to a less export reliant economy.

And it already has high speed internet....

UPDATE: I see that Asia Logistics Wrap just did a post on China's increased infrastructure spending, entitled, "China's Bailout: Accelerating Logistics Infrastructure Investment." The post has an interesting graph comparing the cost of moving goods as share of GDP as between China and the United States.