China has approved the domestic business licenses of US-based international logistics companies FedEx and UPS. The two now hope to take a bigger bite out of the fast expanding Chinese delivery market.
With core services in the air cargo segment, FedEx and UPS will compete to divert market share in the domestic air cargo away from Chinese domestic company China Air Transport Association and other local delivery companies like SF Express, Yunda, YTO Express and Shentong Express. Until now, foreign firms like FedEx and UPS could deliver packages from abroad to destinations in China, but were excluded from domestic delivery i.e. packages sent between locations in China. The new regulation will cover domestic express parcels but will still exclude FedEx and UPS from competing in the mainland China domestic document/letter delivery market.
See our full analysis of FedEx | UPS
Growing e-Commerce Businesses Boost Demand For Express Delivery Services
China?s express delivery business has?nearly doubled in the past five years, reaching $9.1 billion in 2010, up from $4.7 billion in 2006. In 2011, it grew at 30%, three times China?s GDP growth. Nonetheless,?Chinese logistics industry still trails developed markets in terms of cost, quality and reliability of service providers due to regulatory restrictions and is still highly fragmented.?((Foreign firms eye China?s crowded express delivery market, Reuters, January 2012))
China?s surging e-commerce is a major force driving the growth of express delivery market. While several big Chinese e-commerce players have been investing huge capital into building their own logistics networks and?end-to-end express delivery services to reduce costs, smaller e-commerce companies offering online shopping still look towards reliable third-party logistics and delivery services.
Volumes for express delivery are estimated to have ?grown by 60% last year up from 2.3 billion packages in 2010, half of which came from online shopping orders. China, thus, represents a huge business opportunity for international logistics companies like FedEx and UPS.
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