China's leading logistics company Sinotrans Ltd says it will embark on a spending spree this year for port and transportation facilities as a way to quickly gain a competitive edge.

This year's investment budget is 2.5 billion yuan (US$312.5 million), compared to 1 billion yuan (US$125 million) spent over the past three years, said Zhang Jianwei, executive director and president of the Hong Kong-listed company.

"We have been too cautious (in investments) in the past three years," he said yesterday before an opening ceremony for the company's Tianjin container yard.

He added the company's performance in the capital market lacked momentum.

The 2.5 billion yuan will be used mostly to buy infrastructure facilities in targeted areas.

In China's big coastal port cities such as Shanghai and Shenzhen, Sinotrans will focus on container yards and container freight stations, where they will receive, assemble, hold, store and deliver containers, according to Zhang.

"We will not compete with large liners to buy container berths in these big ports as they are expensive and take a long time to produce returns," he added.

A container berth in Shanghai's Yangshan port will cost more than 1 billion yuan (US$125 million).

But Zhang said the company would consider some smaller berths in other cities along the Yangtze River Delta and Pearl River Delta.

Sinotrans also plans to build some delivery centres around railway stations in some key cities in Central and western China.

"When completed, the company will have a good logistics network in the country," said Zhang.

These purchases will not be completed this year, but are expected to be finished in five years and will require further investment, according to the company's development plan.

Part of the money for the purchases will be gained through additional shares. A shareholders' meeting will be held in May to vote whether to provide flexibility to the company directors to issue more shares when needed, which will not exceed 20 percent of the issued share capital of the company.

As part of the company's network building, it kicked off operations for its container yard in Tianjin's Binhai New Area, which covers an area of 210,000 square metres and is expected to have a yearly turnover of 500,000 TEUs.

Tianjin was China's fifth largest container port last year and has huge potential.

The central government has listed the development of the city's Binhai New Area as part of its national strategy.

Like other local logistics companies, Sinotrans faces strong competition in 2006.

China opened up its logistics market completely in December 2005, which will draw other logistics giants to share in the promising market, including Fedex, UPS and Maersk.

Besides big purchases, Sinotrans is set to optimize its resource-allocation, step up its development of new products, improve services and efficiency and strengthen its internal control.

It posted a 6.6 percent yearly increase in net profit for 2005, reaching 857 million yuan (US$107 million).

The company's turnover surged to 28.8 billion yuan (US$3.6 billion), a jump of more than 30 percent year-on-year.

Its core businesses did well in 2005, with freight forwarding and express services recording a year-on-year surge in turnover of 31.9 percent and 36.7 percent respectively.

(China Daily April 27, 2006)