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The foreign express com- panies are ready for a fullforced march.
On September 24， Chinese premier Li Keqiang held a standing conference of the State Council， in which the Chinese government decided to fully open the domestic parcel delivery market. The qualified foreign express companies can be given a bigger business scope based on their original scope of business or area of operations. Meanwhile， the licensing process is to be further simplified to promote the joint development of express business， ecommerce and manufacturing.
DHL， FedEx， UPS and TNT， the said top four international express giants， immediately got involved in a furious battle the moment they stepped into this market. However， there was only a little space for them to play thanks to the limitations applied by the Chinese market.
“The limitations have solidly oppressed the foreign express companies， keeping them away from good business in China，” a report issued by the National Development and Reform Commission and the Ministry of Commerce wrote. “Even though the four companies have taken 75% of the abroad express delivery market of China， in the domestic part， their market share is less than 1%.”
They are undoubtedly excited by the news about the full opening-up of this market. For them， the international business， which can earn 40 billion yuan per year， will be the strategic core in the future.
Foreign Express Companies Bound by Policies
The door of the Chinese express market was opened to foreign companies in the 1980’s. At that time， a large number of foreign companies， led by the top four， successively got into this highly-populated country. But the Chinese government only allowed them to take over the abroad express business or other business with special requirements and a few customers.
Limited by the policy， the four express companies take similar strategic routes without the network or talents. They chose to work with China National Foreign Transportation Corp （Sinotrans） to found joint ventures. Along with the cooperation they had brought their own management system and replicated the Sinotrans’ network distribution in the shortest period.
However， after years’ cooperation， three of the four companies but DHL chose to part with Sinotrans.
At the end of 2001， China joined in the WTO. As promised， it opened the express market except the exclusive business of postal services agencies stipulated by the Chinese laws. Foreign companies were allowed to set up Sinoforeign joint ventures in China with the stakes of foreign companies capping at 49%. The upper limit of proportion was increased to over 50% one year after the membership. Four years after that， foreign companies were allowed to set up wholly-owned subsidiary companies in China. Therefore， the year of 2005 became an important year for the business of foreign express companies. The top four welcomed fast development from then on. At that time， the express business was under the administration of the Ministry of Commerce， which had no limitations over foreign companies’operations.
But the good days were over along with the completion of the separation of postal services from administrations and the issuance of Law of Postal Services of China. The new law applied a cap over the business scope of foreign express companies in China， especially the letter delivery business. Foreign express companies were also required to apply new business licenses from the State Administration of Postal Services. In 2009， the new Law of Postal Services was issued， which completely shut the door of domestic express business for foreign express companies. The State Administration of Postal Services need- ed to put the national safety into consideration when reviewing the business license of foreign express companies.
The top four companies， which failed to get the license of running domestic express business in China， lost their previous fast growth speed. From 2010 to 2012， the four companies got the license of doing business in China successively.
The lack of domestic express busi- ness has forced the foreign companies to focus on the international express business， where they won the majority of the market with their high-quality services.
DHL’s “China First”
As the earliest foreign express company in China， DHL took the largest market share among the top four. Its insistence in the cooperation with Sinotrans once gave it a lot of profits in China. In spite of this， its development in China was far from being smooth.
When DHL got into China， it founded DHL-Sinotrans with Sinotrans， in which the two companies halved the contributions and shares.
The first comprehensive e-data exchange system in China was built by DHL-Sinotrans and General Administration of Customs of China. In return， DHL got many discounts and favorable conditions in China. In 2004 DHL-Sinotrans got the business license and was allowed to delivery parcels domestically. At that time， the other three companies were far from the domestic express market of China.
In August 2004， DHLSinotrans settled in South China. In the same year， it set up a branch in Taiyuan， Shanxi， an important for DHL’s marching into the domestic logistics market. DHL would continue its drastic development had the new Law of Postal Services not been issued. Five years after China’s acquisition of the WTO membership， DHL-Sinotrans could keep its development pace at 35%-45%. In 2006， China became the fastest growing market of DHL in the world. The German company also announced the“China First” strategy. At that time， the company had invested US$900 million in China.
In 2007， DHL invested US$175 million building the DHL express North Asia airfreight hub in Pudong Airport， Shanghai. This is so far the largest investment project of DHL in China. In 2009， DHL， in the name of DHL-Sinotrans， acquired three domestic express companies.
But the issuance of the law has disrupted the company’s plan. For this， Jerry Hsu， CEO of DHL Express Asia-Pacific， said that the new law has forbidden the foreign companies， no matter they were wholly-owned or joint ventures， to run the letter delivery business in China. “The letter delivery business， however， takes 35% of our total business in this country.”
Even though DHL-Sinotrans was among the first foreign express com- panies to get the license of domestic express business， it still transferred the stakes of the three companies it acquired only one year before 2011. This meant that DHL officially quitted the low-end express market in China and was primarily focused on the international express business.
According to the data from Southern Weekend， the three companies DHL acquired with 217 million yuan， had the total liability of 347 million yuan by March 2011 and their total loss amounted to 33 million yuan.
“Now there are over 3000 express companies contending in the domestic express market of China. This is a troubling problem. When the business and regulatory circumstances get better in China， the opportunities for our return will emerge，” said Jerry Hsu. However， now it is not the right time. DHLSinotrans and its foreign peers are still limited by the cost from all sides and have no advantages in the price.
As said by an anonymous sales representative of DHL， the cost of DHL’s domestic business is much more costly than the one of domestic companies.“To deliver a parcel from Shanghai to Qingdao by us will cost several times as much as SF Express. So， only a few domestic clients chose ours services.”
Gaining Foothold after Independence
Now， DHL is the only one among the Top four that still remains the partnership with Sinotrans. In 2011， the company lengthened the partnership by another 25 years. The other three chose to develop independently after parting with Sinotrans. FedEx set up the FedEx Transfer Hub in Asia-Pacific Area in Zhuhai. In November 2008， UPS， the largest parcel delivery company in the world， started the construction of its Asian-Pacific Transfer Hub in the Shenzhen International Airport.
Even though the two companies did not get the business license of domestic delivery as easily as DHL， the two companies still got the paper in 2012. UPS and FedEx， the two companies from the U.S.， respectively established their bases in Shunyi District， Beijing and Baiyun District， Guangzhou. They got engaged in all kinds of deliveries apart from letters. By now， UPS has been allowed to start business in 33 cities of China， while FedEx has got the approval of 58 Chinese cities.
TNT， the last company of the Top Four， did not give up the Chinese market either. Now， TNT has already placed its core of Chinese business into the international delivery. Early in 2013， it has sold its expressway delivery to a Chinese local company.
Nowadays， China has become the second largest express market in the world， only next to the United States. However， the income of one single domestic express company is only one eighth or even one tenth of its foreign peer， a show of the foreign express companies’ strength.
In spite of the advantages in the number， domestic companies are always haunted by and blamed for the service quality. According to the data from the State Administration of Postal Services， the most common complaints from customers for express companies are about the delay in the delivery， which take 50% of the total accusations. In addition， the loss of parcels， missing of stuff inside， bad service of couriers， damaged letter and unreasonable charging are rising at a fast rate too.
This time， the full opening-up of the express market to foreign companies will bring strong competitive stress for the Chinese express market that is obviously in chaos.
In the 2014 China Development Forum for High-end Leaders this March， Li Keqiang promised to open more market sectors to foreign investors and is trying to create a more equal competitive circumstance in the logistics industry. He also reminded foreign companies of “preparing for the competition with their Chinese peers”.
Limited Short-term Impact
When the express market is fully opened， the foreign express companies， which can get a full set of licenses， will be given the opportunity to amplify their advantages in the competition and offset the disadvantages by lowering their cost or so. Some people worry that the new situation might make the ecommerce dealers， the most important force in China’s express market， to turn to foreign companies to solve the problems of later delivery， parcel loss and other problems.
The four companies are indeed ready to make furious strike at this market.
The four companies have now taken 75% of the international express market. TNT owns 33 branches in China. FedEx could send parcels to 200 cities in China. UPS has 200 flights per week to connect China with the global market. DHL， which takes 40% of the international express market in China， plans to set up five additional branches and 20 sales offices in 2015.
“DHL is going to be focused on the international delivery business in the foreseeable future. But we do not exclude the possibility of starting B2C business in China，” said DHL in an official report.
UPS showed its welcome to the Chinese government’s decision to open up the express market more， which is good for creating an equal business circumstance for Chinese and foreign express companies.
“The impact （of opening up ex- press market to foreign companies） will not come out in a short while，” says Xu Yong， chief consultant of China Express Consultancy. He even says that the impact will not be fatal in the future. He holds the idea because he found that the express market in Europe， United States and Japan are taken by domestic companies when he visited these places.
Yu Ping， director of China Federation of Logistics and Purchasing， also believes that foreign companies’ full involvement will not bring negative impact to Chinese domestic express companies and this industry. “The price is not a right path for the development of express enterprises. If they want development， they need to rely on advanced services and management. The foreign companies will eliminate some underperforming enterprises and give the express market a better future.”
On September 24， Chinese premier Li Keqiang held a standing conference of the State Council， in which the Chinese government decided to fully open the domestic parcel delivery market. The qualified foreign express companies can be given a bigger business scope based on their original scope of business or area of operations. Meanwhile， the licensing process is to be further simplified to promote the joint development of express business， ecommerce and manufacturing.
DHL， FedEx， UPS and TNT， the said top four international express giants， immediately got involved in a furious battle the moment they stepped into this market. However， there was only a little space for them to play thanks to the limitations applied by the Chinese market.
“The limitations have solidly oppressed the foreign express companies， keeping them away from good business in China，” a report issued by the National Development and Reform Commission and the Ministry of Commerce wrote. “Even though the four companies have taken 75% of the abroad express delivery market of China， in the domestic part， their market share is less than 1%.”
They are undoubtedly excited by the news about the full opening-up of this market. For them， the international business， which can earn 40 billion yuan per year， will be the strategic core in the future.
Foreign Express Companies Bound by Policies
The door of the Chinese express market was opened to foreign companies in the 1980’s. At that time， a large number of foreign companies， led by the top four， successively got into this highly-populated country. But the Chinese government only allowed them to take over the abroad express business or other business with special requirements and a few customers.
Limited by the policy， the four express companies take similar strategic routes without the network or talents. They chose to work with China National Foreign Transportation Corp （Sinotrans） to found joint ventures. Along with the cooperation they had brought their own management system and replicated the Sinotrans’ network distribution in the shortest period.
However， after years’ cooperation， three of the four companies but DHL chose to part with Sinotrans.
At the end of 2001， China joined in the WTO. As promised， it opened the express market except the exclusive business of postal services agencies stipulated by the Chinese laws. Foreign companies were allowed to set up Sinoforeign joint ventures in China with the stakes of foreign companies capping at 49%. The upper limit of proportion was increased to over 50% one year after the membership. Four years after that， foreign companies were allowed to set up wholly-owned subsidiary companies in China. Therefore， the year of 2005 became an important year for the business of foreign express companies. The top four welcomed fast development from then on. At that time， the express business was under the administration of the Ministry of Commerce， which had no limitations over foreign companies’operations.
But the good days were over along with the completion of the separation of postal services from administrations and the issuance of Law of Postal Services of China. The new law applied a cap over the business scope of foreign express companies in China， especially the letter delivery business. Foreign express companies were also required to apply new business licenses from the State Administration of Postal Services. In 2009， the new Law of Postal Services was issued， which completely shut the door of domestic express business for foreign express companies. The State Administration of Postal Services need- ed to put the national safety into consideration when reviewing the business license of foreign express companies.
The top four companies， which failed to get the license of running domestic express business in China， lost their previous fast growth speed. From 2010 to 2012， the four companies got the license of doing business in China successively.
The lack of domestic express busi- ness has forced the foreign companies to focus on the international express business， where they won the majority of the market with their high-quality services.
DHL’s “China First”
As the earliest foreign express company in China， DHL took the largest market share among the top four. Its insistence in the cooperation with Sinotrans once gave it a lot of profits in China. In spite of this， its development in China was far from being smooth.
When DHL got into China， it founded DHL-Sinotrans with Sinotrans， in which the two companies halved the contributions and shares.
The first comprehensive e-data exchange system in China was built by DHL-Sinotrans and General Administration of Customs of China. In return， DHL got many discounts and favorable conditions in China. In 2004 DHL-Sinotrans got the business license and was allowed to delivery parcels domestically. At that time， the other three companies were far from the domestic express market of China.
In August 2004， DHLSinotrans settled in South China. In the same year， it set up a branch in Taiyuan， Shanxi， an important for DHL’s marching into the domestic logistics market. DHL would continue its drastic development had the new Law of Postal Services not been issued. Five years after China’s acquisition of the WTO membership， DHL-Sinotrans could keep its development pace at 35%-45%. In 2006， China became the fastest growing market of DHL in the world. The German company also announced the“China First” strategy. At that time， the company had invested US$900 million in China.
In 2007， DHL invested US$175 million building the DHL express North Asia airfreight hub in Pudong Airport， Shanghai. This is so far the largest investment project of DHL in China. In 2009， DHL， in the name of DHL-Sinotrans， acquired three domestic express companies.
But the issuance of the law has disrupted the company’s plan. For this， Jerry Hsu， CEO of DHL Express Asia-Pacific， said that the new law has forbidden the foreign companies， no matter they were wholly-owned or joint ventures， to run the letter delivery business in China. “The letter delivery business， however， takes 35% of our total business in this country.”
Even though DHL-Sinotrans was among the first foreign express com- panies to get the license of domestic express business， it still transferred the stakes of the three companies it acquired only one year before 2011. This meant that DHL officially quitted the low-end express market in China and was primarily focused on the international express business.
According to the data from Southern Weekend， the three companies DHL acquired with 217 million yuan， had the total liability of 347 million yuan by March 2011 and their total loss amounted to 33 million yuan.
“Now there are over 3000 express companies contending in the domestic express market of China. This is a troubling problem. When the business and regulatory circumstances get better in China， the opportunities for our return will emerge，” said Jerry Hsu. However， now it is not the right time. DHLSinotrans and its foreign peers are still limited by the cost from all sides and have no advantages in the price.
As said by an anonymous sales representative of DHL， the cost of DHL’s domestic business is much more costly than the one of domestic companies.“To deliver a parcel from Shanghai to Qingdao by us will cost several times as much as SF Express. So， only a few domestic clients chose ours services.”
Gaining Foothold after Independence
Now， DHL is the only one among the Top four that still remains the partnership with Sinotrans. In 2011， the company lengthened the partnership by another 25 years. The other three chose to develop independently after parting with Sinotrans. FedEx set up the FedEx Transfer Hub in Asia-Pacific Area in Zhuhai. In November 2008， UPS， the largest parcel delivery company in the world， started the construction of its Asian-Pacific Transfer Hub in the Shenzhen International Airport.
Even though the two companies did not get the business license of domestic delivery as easily as DHL， the two companies still got the paper in 2012. UPS and FedEx， the two companies from the U.S.， respectively established their bases in Shunyi District， Beijing and Baiyun District， Guangzhou. They got engaged in all kinds of deliveries apart from letters. By now， UPS has been allowed to start business in 33 cities of China， while FedEx has got the approval of 58 Chinese cities.
TNT， the last company of the Top Four， did not give up the Chinese market either. Now， TNT has already placed its core of Chinese business into the international delivery. Early in 2013， it has sold its expressway delivery to a Chinese local company.
Nowadays， China has become the second largest express market in the world， only next to the United States. However， the income of one single domestic express company is only one eighth or even one tenth of its foreign peer， a show of the foreign express companies’ strength.
In spite of the advantages in the number， domestic companies are always haunted by and blamed for the service quality. According to the data from the State Administration of Postal Services， the most common complaints from customers for express companies are about the delay in the delivery， which take 50% of the total accusations. In addition， the loss of parcels， missing of stuff inside， bad service of couriers， damaged letter and unreasonable charging are rising at a fast rate too.
This time， the full opening-up of the express market to foreign companies will bring strong competitive stress for the Chinese express market that is obviously in chaos.
In the 2014 China Development Forum for High-end Leaders this March， Li Keqiang promised to open more market sectors to foreign investors and is trying to create a more equal competitive circumstance in the logistics industry. He also reminded foreign companies of “preparing for the competition with their Chinese peers”.
Limited Short-term Impact
When the express market is fully opened， the foreign express companies， which can get a full set of licenses， will be given the opportunity to amplify their advantages in the competition and offset the disadvantages by lowering their cost or so. Some people worry that the new situation might make the ecommerce dealers， the most important force in China’s express market， to turn to foreign companies to solve the problems of later delivery， parcel loss and other problems.
The four companies are indeed ready to make furious strike at this market.
The four companies have now taken 75% of the international express market. TNT owns 33 branches in China. FedEx could send parcels to 200 cities in China. UPS has 200 flights per week to connect China with the global market. DHL， which takes 40% of the international express market in China， plans to set up five additional branches and 20 sales offices in 2015.
“DHL is going to be focused on the international delivery business in the foreseeable future. But we do not exclude the possibility of starting B2C business in China，” said DHL in an official report.
UPS showed its welcome to the Chinese government’s decision to open up the express market more， which is good for creating an equal business circumstance for Chinese and foreign express companies.
“The impact （of opening up ex- press market to foreign companies） will not come out in a short while，” says Xu Yong， chief consultant of China Express Consultancy. He even says that the impact will not be fatal in the future. He holds the idea because he found that the express market in Europe， United States and Japan are taken by domestic companies when he visited these places.
Yu Ping， director of China Federation of Logistics and Purchasing， also believes that foreign companies’ full involvement will not bring negative impact to Chinese domestic express companies and this industry. “The price is not a right path for the development of express enterprises. If they want development， they need to rely on advanced services and management. The foreign companies will eliminate some underperforming enterprises and give the express market a better future.”