China establishes new logistics giant

China has established the new state-owned China Logistics Group (CLG), aiming to strengthen its position in international supply chains.

Two state bodies, the State Commission for Supervision and Management of Assets and the State Council, each hold a 38.9% stake in the shares. The remaining shares are held by state-owned China Eastern Airlines (10%), Cosco Shipping (6.3%) and China Merchants Group (4.9%).

Domestic logistics

Whether the new group will seriously compete with logistics giants such as K+N and DSV remains to be seen. For now, it seems to be mainly an attempt to streamline China’s domestic logistics. The state-owned newspaper Global Times pays extensive attention to the establishment of CLG. The newspaper quotes analysts who say that state-owned logistics companies do an excellent job of long-distance transport, but are less good at fast delivery of small shipments.

In CLG, the existing China Railway Materials Group will be merged with four subsidiaries of the China Chengtong Holdings Group. These include China National Materials Storage and Transportation Group, CTS International Logistics, China Logistics and the China National Packaging Corp.

The head of the State Commission for Asset Supervision and Management, Hao Peng, told the Global Times that the company should strive for “smooth flows of production factors and forge a safe, reliable and highly efficient modern logistics system”.

120 railway lines

Another senior party official, Li Hongchang, deputy director of China’s Transportation Economic Research Centre, said the move “demonstrates the highest level’s intention to restructure assets and capital of the state-owned logistics and transportation sector so as to improve competitiveness and vitality”. He pointed out that state-owned companies in the combined rail and sea freight sector now hold only 2.5% of the market.

According to the Global Times, CLG will have access to some 2,400 hectares of warehousing space, 120 railway lines and 42 distribution centres in 30 Chinese provinces and three million vehicles. Singapore’s Straits Times reports that the new group will have a registered capital of 30 billion yuan, the equivalent of over four billion euros.

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Author: Rob Mackor

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