FedEx, a global delivery firm, said yesterday it would spend US$400 million to acquire its Chinese partner's share in their joint venture to increase its presence in the China.

FedEx will buy out Tianjin Datian W Group's (DTW) 50 per cent stake in the FedEx-DTW International Priority express joint venture, thus converting the joint venture into a company wholly-owned by FedEx.

Besides DTW Group's shares, the deal also covers its assets used to perform international and domestic deliveries from 89 locations across China. This includes trucks, offices and customer databases.

FedEx and DTW Group entered into the partnership in 1999.

DTW will continue to deliver international freight and operate its merchandise distribution businesses.

This acquisition is expected to deepen FedEx's engagement in the China market.

"China is changing the world's economic landscape," said Frederick W Smith, FedEx's chairman, president and chief executive officer.

"This strategic investment in the long-term growth of China will broaden and deepen our relationship by improving access to important markets, fuelling economic development for years to come."

It is likely to take several months for FedEx to win government approval for the deal.

David L. Cunningham, the US company's Asia-Pacific president, said that after the firm receives approval, it would concentrate not only on core cities, but also on second and third-tier cities in China.

"Cities outside the eastern seaboard, like Wuhan, which has twice the population of Los Angeles, are a crucial part of China's economy and vital to the long-term growth of FedEx in this region," he said.

"Our customers will benefit from seamless access to key areas worldwide."

The US logistics giant is striving to further improve its performance in China in competition with local and foreign rivals.

In 2008 it is scheduled to complete an Asian-Pacific transport hub in Guangzhou, in South China's Guangdong Province, in a bid to penetrate further into the air express market in China.

This transport hub will be the largest of FedEx Corp's bases outside of its home market in the United States and is the company's most important investment in the Asian-Pacific region.

A joint study by a Chinese development research institute and the Campbell-Hill Aviation Group of the United States said that the FedEx hub is expected to contribute some US$11 billion to China's economy by 2010 and around US$63 billion by 2020.

Some other multinational companies in the logistics sector also are trying to cash in on opportunities that have arisen since China completely opened its express delivery market at the end of last year.

China is the third-largest trading power in the world and also the second-largest domestic air cargo market.

It is expected to become the fastest-growing market for air cargo in future years, averaging more than 10 per cent growth per year between 2003 and 2023.

Source: China Daily