China boom drives Sinotrans, FedEx revenues
The growth potential of the Chinese logistics market has been demonstrated by the latest results from two of the largest companies present in the market, one Chinese, one American. Sinotrans. one of the largest indigenous operators, increased its revenues in 2003 by 28% to Yuan 17.43bn (€1.7bn), whilst at the same time increasing its net profit by 23% to Yuan 705m (€69m). The company has joint ventures in place with a number of foreign owned logistics and some of its major investors include UPS, DHL and Exel.
Meanwhile FedEx has revealed that in its latest operating quarter, revenues generated in China leapt by 40%. FedEx is expanding its network by adding another 100 locations to its network in the country.
International operators have benefited from the strong growth of the Chinese economy and the internationalization of its manufacturing and retailing industries. However at present they are required by law to work with local players, and can only offer international services. Once the market is de-regulated in line with the commitments which the Chinese government has made to the World Trade Organisation, there is no doubt that the domestic market will offer the greatest growth potential for these companies.
However in the meantime western logistics operators will benefit from the sourcing strategies of many of the multinational manufacturers that are establishing factories in the country. A large proportion of companies investing in the region do so to take advantage of the cheap labour on offer in order to assemble components which are produced elsewhere. A recent survey has identified that most Japanese manufacturers source 20% or less from local suppliers. This has fuelled the air and sea freight boom for imports as well as for the export of finished goods.
