Sinotrans, the Chinese state logistics, freight forwarding and express operator that recently floated on the Hong Kong stock exchange, has announced robust profits for 2002. Sinotrans is likely to remain an important partner and investment for several European and US operators competing for a share of the Chinese market.
Delivering its 2002 results two months after its heavily-oversubscribed Hong Kong IPO, Sinotrans has announced a 22.6% increase in revenue, to E1,525 million. Profits increased 26.5% to E64.4 million, a figure that matched the company's own earnings forecast but fell slightly short of market expectations.
Continuing rapid economic growth in China, and the related strong development of its transport and logistics sector, provided a highly favorable environment for the company during 2002, as trade volumes and manufacturing output increased.
Since the 1980s Sinotrans has been involved in joint ventures with foreign logistics and express companies wishing to have a presence in China. It has express partnerships with DHL and UPS, who respectively took 5% and 3% shares in Sinotrans when it floated earlier this year. British logistics company Exel bought a E9.3 million stake.
Sinotrans' established service network and logistics infrastructure has the ability to reach throughout China, making it a highly desirable partner for foreign companies wishing to tap the large and ever-growing Chinese market for logistics and express services. Foreign ownership regulations, which are now beginning to be relaxed under the terms of China's accession to the WTO, have long required foreign companies to operate through joint ventures with Chinese companies, and have made Sinotrans an even more important partner.
Even when these foreign ownership regulations are fully relaxed in 2006, it is likely that Sinotrans will remain a key partner for foreign operators. The expense of setting up their own networks means they will still need access to Sinotrans' comprehensive service network. As China increasingly becomes the factory of the world, its logistics and express industries will assume greater importance than ever. It is vital that foreign companies chasing a share find the right local partners.
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