November 02, 2005

WTO Impact on China Logistics Business

Many Multinational Logistics Firms Seek to Gain Full Control in China

By December 2005, under WTO, key transportation sectors including freight fowarding, courier express, road transportation, shipping agency, and warehousing will be opened to 100% foreign ownership.

M&A activity in China in on the rise. As overviewd in the China Logistics M&A Update by Latitude Capital Group, factors driving the increased activity include:

Industry Consolidation
WTO Impact
Increased Valuation Multiples for Logistics Deals
Middle-Market Businesses Exit through M&A Market
Aggressive Strategic Buyers

China Logisitcs Business Lines Overview and WTO Impact

Business	No. of Firms	Competitive Landscape	Current Foreign Stake Limit	Foreign Stake Limit 12/05
Storage & Warehousing	500,000	Basic transport & warehousing - highly fragmented Price competitive with thin margins	Majority	100%
Freight Forwarding	3,000 licensed for international business	Major sea FF: COSCO & China Shipping. Major air FF: EAS Sinotrans (has 10% share of both)	75%	100%
Domestic Express	Fragmented	Low barriers. Key Firms: China Post EMS, China Air Express, China Railway Express and Datian	0%	100%
Int'l Express	Concentrated	RMB 8B in 2003 5 firms have 95% of market: -DHL Sinotrans (38%) -EMS (30%) -FedEx Datian (16%) -UPS-Sinotrans (10%) -TNT-Marchplus (6%)	Minority	100%

Topic Tags: China logistics, China M&A, China mergers, china shipping, china sourcing, china supply chain, china transportation, global supply chain, M&A China, supply chain

by Dustin Mattison

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