China is HOT! -- UPS to Buy Out Partner's Share in Venture

Snides Remarks: It is obvious to me that China is fast becoming the first world's industrial engine...making everything from toys to tires, valves to vehicles and everything in between. I believe that within 30 years the majority of cars in the world will be Made in China. These shipping guys better hope the economy in the U.S. continues to grow so people here can afford to buy Chinese made goods.

SHANGHAI, China December 2, 2004; Elaine Kurtenbach writing for the AP reported that shipping carrier UPS Inc. will take direct control of a large share of its joint venture operations in China next year, the company said Thursday.

Atlanta-based UPS said it will pay $100 million to the China National Foreign Trade Transportation (Group) Corp., better known as Sinotrans Group, to take direct control of their joint venture operations in 23 locations covering 200 Chinese cities.

China has agreed to let foreign courier companies operate wholly owned international express mail businesses in the mainland from the end of next year as a condition of its membership in the World Trade Organization.

Foreign express mail operators are currently required to work with a Chinese partner. UPS has been working with state-owned Sinotrans, China's largest transport and logistics company, since it entered the China market in 1988.

``This agreement opens a wealth of opportunity for UPS customers seeking to do business with China,'' said David Abney, president of UPS International.

``UPS will have the flexibility it needs to expand operations and to invest in facilities, infrastructure, technology and employee development,'' Abney said.

Beginning in January, UPS will take direct control of operations in five locations: Shanghai, Guangzhou, Shenzhen, Tianjin and Qingdao. By the end of next year, it will assume control over express operations in 18 other places, it said.

UPS would not identify those locations, but it said the areas covered by the agreement account for 80 percent of China's economic activity.

The two companies will continue to work together in areas excluded from the agreement, UPS said.

China's export boom has boosted business for international express operators and shipments are expected to surge with the Jan. 1 lifting of import quotas on its textiles.

UPS' export volume in China more than doubled in the third quarter of this year compared with the same period of 2003. Exports for the year are up by more than 90 percent from last year, the company said.

All the major international shippers have been expanding their China operations.

Last month, UPS began the first of 12 new flights to China, tripling the company's earlier services from six to 18 flights a week. UPS also plans to start a nonstop service between the United States and Guangzhou next year and to establish a Shanghai air hub in 2007.

Rival DHL Express is spending $215 million on express and logistical infrastructure in China over the next five years and plans to nearly double its fleet of vehicles here to 1,200. DHL Express, which is owned by Germany's Deutsche Post AG, holds a 5 percent share in its joint venture with Sinotrans, which serves more than 300 cities.

Memphis-Tenn.-based FedEx Corp. has direct cargo flights from Shanghai and the southern Chinese city of Shenzhen to its U.S. hub in Anchorage, Alaska, and plans to expand its China network of 220 cities by 100 more by 2008.