Editor's note: According to Steffen Schiottz-Christensen, managing director of Maersk Logistics (China) Ltd, by 2008, China will account for more than 10 per cent of global trade. China's logistics market is already the third largest worldwide in terms of spending.

But the country also has inefficient goods distribution and transportation, especially compared to countries such as Singapore, Germany, and France. Generally, logistics costs are disproportionately high in Asia. Therefore, the competitive advantages to be gained by reaching international benchmarks for costs are substantial. In 2000, total amount spent on logistics costs in China was 20 per cent of the GDP value. In 2004, it had increased to 21.6 per cent. In the United States, the cost hovers around 10 per cent.

These numbers are a strong incentive for international logistics companies to partake in China's ongoing development.

Steffen Schiottz-Christensen explains to China Daily's Shanghai reporter Ida Relsted how declining logistics costs in the future will be crucial for China, particularly its western region, to compete.

Q: How do you find the current state of China's infrastructure?

A: The distribution efficiency in China is relatively low, and there are a lot of opportunities to improve on this. A lot of investments are now being made in additional infrastructure by the government which Maersk Logistics regard as very positive.

Yet, the infrastructure for rail is insufficient. Commercial rail traffic in China is still in the developing stages. The network of tracks is not sufficient at this point in time and the trains are being used for other priorities. Passengers, military, and bulk goods are being moved on rail, with containers getting the lowest priority.

In a country of this size, containerised rail transportation offers a cheap, efficient, and even environmentally friendly way to move cargo. But a large part of (China's) long-distance cargo is moved by truck, which again requires a lot of fuel and is costly. The cheaper, but very slow solution is river transport with domestic barges or feeder carriers on, for example, the Yangtze River.

Yangtze transport in China is only open to domestic companies. Maersk subcontracts other carriers on the river, which we also do for trucking. The battlefield in the future will be on the landside services.

Q: From your professional point of view, is cargo getting transported from and to the West?

A: Going west has been a longstanding priority of the Chinese government. Maersk Logistics monitor where our volumes are going which provides us with a good indicator of the economy. Our results are that a lot of cargo is moving north. East China and north China are now growing faster than the traditional dynamo, Guangdong, and cargo is moving up rather than in.

We have made a lot of predictions of at which point costs will allow production to move inland. It is a matter of money and logistical challenges. The incentives you can get from establishing business in western China tax incentives, lower labour costs are countered by high logistics costs and the time factor.

However, with rising costs on the coast, particularly in Guangdong, the parity is closing. Even with the current relatively insufficient and expensive infrastructure in western China, it may soon become attractive, particularly for low-end manufacturing, to move to Chongqing or other places in western China.

Q: A recent example of newly developed infrastructure in China is the Yangshan Deep Water Port. How is Maersk Logistics involved in that project?

A: We learned about Yangshan in 2001 when it was approved by the government. Firstly, it was clear that Shanghai was going to run out of port capacity. With the current cargo growth and the current trade patterns there was not enough quality port capacity in Shanghai. Second, the old port, Waigaoqiao, has restricted access issues like limited water depth, so very big ships cannot enter.

Even with the many expansions of Yangshan, for the foreseeable future, their port capacity will continue to be tight, simply because of trade growth and volume growth, resulting in a suitable demand for both ports.

Maersk is a partner in the port development. Phase one is owned by the government, phase two is owned by a consortium where Maersk currently has a 32 per cent stake, and as more phases are added on, the ownership stake will either be deluded or companies can buy more.

Q: Why is Maersk investing so much money when it may not see immediate returns?

A: The drivers for investment are not independent value creation; they are to secure capacity for Maersk Line. Investment serves to secure our own supply, since we are now so big, both Maersk Line and Maersk Logistics, that it is difficult to depend on outsourcing. Therefore it is also a defensive move to stay in control.

Q: What are the major difficulties you are facing right now as a logistics company?

A: It is the fight for talent. People are our biggest asset, but there are very few logistics professionals, since there is no logistics university degree in China.

In response, Maersk has development and training programmes, the most famous one is the two-year MISE, Maersk International Shipping Education, focusing on shipping and logistics. In 1994 it changed from being a Danish to an international program, and three years ago the numbers of Chinese exceeded the number of Danes, out of the total 300 to 400 young participants.

We also have about 60 expats in Maersk Logistics, out of a total of 2,000 employees. As foreigners they teach their co-workers, so when the expats leave China, they leave knowledge behind.

We also foster an environment where people can think independently, and we put a lot of effort into that. Fortunately we have a good name, so people apply. Actually, we interview more than 80,000 people each year.