As logistics increases in importance in China so it becomes more and more a game for the big players. As a result small logistics operators are being squeezed by expansion-minded multinationals. When an industry is predicted to grow by 15 to 20 percent a year until after 2010 it will attract the major players.

Consolidation has been in full swing since China opened up its logistics sector on December 11 last year under World Trade Organisation agreements. Now multinationals have seized the opportunity to enter the market. They and the big Chinese domestic firms are taking over small mainland companies in a contest for the major prizes.

Cai Jin, director of the China Logistics Information Centre said that in the coming years, ‘there will definitely be fewer but stronger players in the logistics market. Many will have to pull down their shutters or merge with rivals.’

According to the Chinese Federation of Logistics and Purchasing there are now more than 700,000 logistics enterprises registered on the mainland, mostly small and medium-sized operators. Most of them lack strategic planning, trained personnel and systematic management.

Since the opening of the logistics market:

Schenker has set up a logistics centre near Beijing’s airport.

STX Panocean of Korea launched a joint venture in Qingdao.

US multimode operator Burlington Northern Santa Fe Corporation set up an office in Shanghai.

Prologis and Wurth plan to expand their logistics park in Shanghai.

Container service provider Scoular settled down in Guangdong.

FedEx, which entered into a 50-50 joint venture with Datian in 1999 after leaving another partner, paid the company $400 million to purchase the other 50 percent early this year.

TNT offered $135 million for 100 percent control of Huayu Logistics, the biggest truck operator on the mainland, based in Heilongjiang Province.

Earlier, UPS agreed to pay $100 million to break free from a joint venture with Sinotrans.

A source at the Chinese Federation of Logistics and Purchasing said if Chinese operators specialise in specific areas in which they hold the upper hand they could get stronger, despite the flood of foreign capital.