Dutch mail group TNT has agreed with China's biggest shipping company to set up a joint venture in China with an aim to become the world's leader in logistics.

TNT signed a letter of intent yesterday in Beijing, with China Ocean Shipping Group Co (COSCO), to form a strategic partnership.

The initial business of the venture will include COSCO's home appliance logistics and TNT's materials handling business in Australia, company sources said.

The new venture, expected to be operational in 2006, will see the opening of 1 million square metres of warehouse space located in major ports of the country including Qingdao, East China's Shandong Province and some in South China's Guangdong Province, Wei Jiafu, CEO of COSCO yesterday told reporters.

The new COSCO-TNT venture is expected to require 1,000 employees.

Officials from both companies have confidence in the new business, with the belief that the two firms, already strong in the logistics market, will benefit from the resulting extended market network.

The partnership, as said in a joint announcement by TNT and COSCO, will enable the Chinese shipping company to further penetrate the Asia Pacific logistics market, and concurrently facilitate TNT's expansion in the fast-growing Chinese market.

"The pairing up of our experience and global position within the logistics market with COSCO's shipping strength and presence in China, is an excellent match that has potential to grow rapidly to become an industry leader within China and the world," said Peter Bakker, CEO of TNT.

The partnership with TNT, said COSCO's Wei, marks a significant step in the firms overseas expansion of its logistics business as "an important component of COSCO's strategic transformation from a global shipping carrier into a global logistics player."

Ma Zehua, executive vice-president of COSCO group, yesterday told China Daily, that the business portfolio of the new venture might extend beyond home appliance and materials handling, should co-operation with TNT proceed smoothly.

Wei yesterday said he would hold further talks with TNT to fix the total investment involved in the joint venture and the specific market share they expect to hold in the partnership.

In the first half of this year, the logistics market in China represented a total business of some 22.5 trillion yuan (US$2.8 trillion), an increase of 25.4 percent year-on-year.

The total fixed asset investment in logistics-related sectors was 344.7 billion yuan (US$42.5 billion), up 26.5 percent, industrial statistics showed.

TNT group, a global provider of mail, express and logistics services, employs over 161,000 people in 63 countries, and its sales revenue last year amounted to 12.6 billion euros (US$15.1 billion).

COSCO is a diversified trans-national enterprise group with shipping and logistics as its core business. Its logistics subsidiary has built up an extensive network covering 29 provinces with more than 300 business offices across the country, and has established overseas representative offices in South Korea, Japan, Singapore, Greece and Hong Kong.

(China Daily November 15, 2005)