Workers at a delivery service sort parcels in Hangzhou, Zhejiang province. China is set to further open its express delivery market to foreign companies.[Photo by Hu Jianhuan/China Daily]
More overseas companies can now participate in the domestic market
Consumers will soon have a plethora of express delivery companies to choose from in China as the government has decided to open up the express delivery market to qualified foreign companies.
The decision to introduce more foreign investment in the sector was taken at a State Council executive meeting chaired by Premier Li Keqiang on Sept 24. The central government will create a business environment in which both domestic and foreign express companies can compete fairly, said a note released after the meeting. The enhanced competition will be an incentive for domestic companies to improve their operations and services, stimulate domestic demand and create more jobs, it said.
Leading overseas logistics companies have set their sights on the Chinese market as early as 2009, when the country’s new Postal Law was implemented. United Parcel Service of America Inc has received licenses to operate express services in 33 Chinese cities, and 19 of these were granted this year. Apart from the two major hubs in Shanghai and Shenzhen, UPS also has about 250 operating facilities throughout China.
UPS expressed confidence that the “continuous market opening would facilitate greater opportunities for business growth, especially among small and medium-sized customer segments, as this growth is critical for the connectivity and competitiveness of the economy”.
FedEx Corp said that it has been working closely with the relevant authorities to obtain express delivery services permits ever since the new Postal Law came into effect. Regarding the further opening-up of the package express delivery market, FedEx said it would be operating domestic business as usual in China.
Sarna Yeung, partner of industry consultancy Roland Berger Strategy Consultants, said local accessibility of suppliers would be the main growth driver and urged logistics companies to expand their domestic distribution networks in the respective countries to reach as many end-customers as possible.
“Accordingly, they must invest in new distribution hubs and delivery fleets to secure a good share of the market,” she said.
However, private express companies still account for the lion’s share of the market in China. According to a report released by Deloitte Touche Tohmatsu Ltd and the Development and Research Center of the State Post Bureau, 78.9 percent of market share is held by private companies, 19.9 by State-owned enterprises and the remaining 1.2 percent by foreign ones.
Zhang Jianhua, a senior manager at the Shanghai branch of the Shenzhen-based express company SF Express Co, said his company would adopt a wait-and-see attitude toward the influence of the overseas companies on domestic ones.
Chu Xuejian, vice-chairman of the Shanghai Logistics Association, said: “It is very likely that consumers will opt for Chinese companies, which charge less, when they want to deliver less important shipments but opt for foreign ones, which charge more but provide better and much safer service when it comes to important goods.”