APL Logistics (APLL), the logistics arm of the Singapore-based NOL Group, a global transportation and logistics company engaged in shipping, signed a shareholding agreement with Legend Group Holdings Co on Monday to create a joint venture in Beijing.
The new enterprise will provide supply chain services to all IT manufacturing and sourcing companies which wish to establish and expand their capabilities in China now that it has joined the World Trade Organization (WTO).
"The joint venture will be a significant third party logistics provider in China," said Flemming Jacobs, president and chief executive officer of NOL Group.
In the first stage, APL will invest US$6.5 million in the new company.
"It will specialize in servicing the complex needs of China's domestic IT industry, which is projected to have a growth rate of 20 percent a year," he said.
According to the agreement, the scope of the business will include domestic and international oceans, land, inland, waterways and air transportation, freight forwarding, warehousing and customer house brokerage.
Jacobs said the local supply chain is fragmented, disadvantaging local business. The logistics cost is estimated to be 20 percent of China's gross domestic product (GDP) -- double that of the United States.
"To compete on a global stage, companies in China need a strong and supportive supply chain infrastructure," he said.
Analysts said no company provides specialist logistics support to the IT sector in China.
"So the partnership with APLL provides a unique opportunity for the two companies to grab the market niche," said Li Qin, executive vice-president of Legend Group Holdings. "By combining our companies' expertise, we will provide for the first time a seamless supply chain for IT products, which will offer a significant competitive advantage to China's IT business."
A recent Morgan Stanley report showed that China has become one of the world's fastest growing and most dynamic IT markets. It represents one third of sales in the Asia Pacific region (excluding Japan).
(China Daily June 25, 2002)