Chinese domestic logistics companies should prepare for increasing competition and challenges from foreign rivals, experts said at the 2nd Logistics Industry Development Annual Conference held in Hong Kong.

As China is completely opening its logistics market to foreign firms this year in line with its commitments to the World Trade Organization (WTO), some foreign investors are expected to conduct more acquisitions in the sector, said Wu Jiahuang, a researcher with China Institute of the WTO.

He said foreign-invested companies would purchase some local companies to take advantage of their local network or infrastructures.

"That would be a crucial time for domestic companies, in particular the small and medium sized private ones."

Compared with their foreign rivals, many Chinese logistics companies are of high cost and low efficiency.

"It (foreign companies' acquisition) will not happen overnight but it is the trend in the logistics industry," he said.

China Logistics Association, the independent industrial association, is striving to help develop domestic logistics companies.

For example, it organized the recommendation of 100 outstanding logistics enterprises, expecting to introduce those with good performance to customers, both at home and abroad.

"We expect it will help build domestic logistics brands," said Xu Shouzhen, the secretary general with the association.

He said domestic companies enjoyed certain advantages in competition with multinational giants.

For example, some small and medium sized companies, which focus in a particular region, are likely to have steady customer relationships and high flexibility.

"Facing the competition from overseas rivals, they are forced to learn, to improve the efficiency and become adapted to globalization," Xu said.

He said domestic companies could survive the challenges from foreign companies as long as they can further sharpen their competitive edge, given the promising market in China.

As a strong manufacturing center in the world, China also demands a profound logistics network. The output of the Chinese logistics market is expected to reach 1,197 billion yuan (US$147.8 billion) in 2010.

"We hope that in five to 10 years, several Chinese logistics companies will develop into large-scale multinationals," Xu said.

In fact, some Chinese logistics companies have started to go abroad. Upon the need of their customers, some companies have established overseas branches and representative offices.

(China Daily January 8, 2006)