With the mainland's logistics demands on the fast track - the sector has grown at an annual average rate of more than 20 per cent in the past five years - coupled with booming foreign trade, Chengtong's business model makes good sense. To date, the group's volumes have been expanding yearly at 30 per cent in the past five years.

But major success could still be a distance away as the overall industry development is still in its infancy and logistics to many firms is simply moving goods from one point to the other. The concept of comprehensive value-added logistics services has yet to gain wide understanding and acceptance.

Mr Hong said many mainland logistics players lacked an efficient corporate and operational framework that yielded high utilisation and the government had yet to put in place a regulatory framework.

To secure sustainable development and keep an edge, Mr Hong said Chengtong would specialise in serving the steel industry and handling logistics of super large equipment for industries such as the petrochemical, railway and highways sectors.

'[For the steel sector] we could be the 'dragon head'. Steel extends to the lives of many people; it's inseparable from our lives. China's annual output has exceeded 300 million tonnes,' he explained.

'If we specialise and solidify our position in this sector, I believe the market will be expansive.'

By the same token, China's economic growth is driving the demand for industrial equipment.

Mr Hong said the firm's business principle was to participate from the beginning of the supply chain, when Chinese companies signed equipment acquisition agreements with overseas or domestic vendors.

This puts the logistics operator in a better position as, for instance, the size of the equipment and special needs could be worked into drawing up a transport plan, if nothing else.

In a business sense, 'anyone can engage in simple logistics. But the more stages of procedures we participate in the higher the value of the transactions', he said.

The group has 15 million square metres of warehousing facilities, providing annual storage for 35 million tonnes of goods. It controls Shanghai-listed Zhongchu Development and Hong Kong-listed China Chengtong Development Group.

Parent Chengtong Group is the reincarnation of the State Commodities Bureau, merging with 19 other offshoots and firms of various ministries in 1992 to become the operator of the biggest number of warehouses in the country.

'This enterprise, like others, has undergone significant restructuring after economic reforms were introduced,' Mr Hong said.

In 1992, the State-owned Assets Supervision and Administration Commission designated Chengtong as one of the handful of pilot state-owned enterprises, along with Shenhua Energy and Baosteel, to establish a board of directors. To date, Mr Hong said half of the directors were outsiders and the remaining staffers.

He said that today's Chengtong, like all of its mainland peers, was the result of many of his official-turned-company executive predecessors' failures and hard work.

'Just think, many of them were officials but took the plunge and entered the market,' he said. 'Today's Chinese state enterprises chiefs took a long time to become what we are now.'

He said he was no exception being a former official from the State Commodities Bureau where he had worked since he graduated from university in 1979.

Because of that, Mr Hong said the new generation must seize every opportunity and be precise on making the right business decision at the right time.

'One should be confident of what is needed in the next few years. Over-early introduction of concepts doesn't deliver a market, late introduction loses opportunity. Many of the advanced western technologies may not be applicable now to China.' What has taken off, Mr Hong said, was trade financing, which 'combines commerce and logistics'.

Domestic manufacturers would leave their procurement contracts with Chengtong units, starting from the purchasing stage and going through to production to sales. Chengtong would guarantee the funding and repayment to banks.

Last year, the trade financing business reached eight billion yuan, up from 40 million yuan four years ago, and this year it is forecast to top 10 billion yuan.

So far, the group has tied up with Huaxia Bank, Agricultural Bank and China Construction Bank as 'financial institutions are very optimistic' about this business.

This, he said, for now was China's definition of value-added logistics.