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5 White Paper on the Business Environment in China
August of that year, fuel spending accounted for 40 percent of
total transportation costs. Domestic Chinese courier companies,
already operating on extremely thin margins due to competition
with “tens of thousands of local competitors o ering increasingly
lower charges” have reportedly su ered greatly.20
Despite fuel cost uctuations, capital cost hikes, and
potential setbacks contained in the 2009 revision of the Postal
Law (see below), many participants in the sector remain
optimistic about growth, and with good reason: according
to the National Bureau of Statistics, between 2002 and 2008
(the last year for which data was available) total freight volume parcel delivery services is [...], far outpacing the development
has increased from 14.8 billion to 25.8 billion tons annually.21
Xinhua reported that the total value of goods shipped over
the rst half of 2011 rose by nearly 14 percent year-on-year
to reach 74.7 trillion yuan, despite having decreased by 4.7
percent in the same period of 2010.22
Increasingly, e-commerce is a driver for logistics industry
development; booming Internet retail sales, combined with
the above-mentioned policy initiatives, reportedly achieved
sector-wide revenue in excess of 18 billion yuan in 2009.23
E-commerce may, in fact, be growing too fast for the
domestic cargo network to keep up: China Daily reported
leading up to the Spring Festival in February 2011 that “major
[domestic] private delivery companies, such as Yuantong and
Shentong, decided last week to stop accepting new packages in
some cities to ensure parcels in the already-full warehouses are
delivered before the Spring Festival,” and that “ e phenomena
underscored the fact that China’s logistics sector is lagging far
behind the country’s booming e-commerce market, which has
witnessed explosive growth in recent years.”24
More recently, Walmart Asia president and CEO Scott
Price also ngered China’s ine cient logistics infrastructure
as the biggest challenge to e-commerce in the nation, rst and
foremost “stemming from the lack of e cient and reliable
last-mile delivery.”25
On top of that, the State Post Bureau reportedly enforced
its rst-ever ne for parcel mishandling against domestic
carrier Shentong Express after a video was posted online of
“workers furiously distributing goods, kicking parcels and
throwing items to the ground.” e ne was for 10,000 yuan
(approximately $1,500).26
More severe punishments have since been handed out:
“[In November 2012], the China Air Transport Association,
or CATA, announced it was putting four domestic logistics
rms on its no- y list because of security aws, after a re
started in a storage bin of a ight that eventually landed at
Dalian Zhoushuizi Airport in October.”27
e four rms, Shanghai YTO, Yunda Express, and the
Huixing and Qihao courier rms were “forced to suspend
their air freight services until their business procedures im-
proved.” According to the association, “Shanghai YTO was
152
blamed for its incorrect classi cation of lithium batteries,
while the other rms were punished for transporting the pro-
hibited article vesuvian, which caused the re.”27
e punishments take place as domestic courier services
“are having to invest to compete in the air freight market, in
some cases buying their own aircraft.”27
Some rms aren’t waiting for domestic delivery services to
increase capacity. “With more Chinese shoppers going online,”
writes e Wall Street Journal, “demand for warehouses and
of the country’s logistics infrastructure.”28
E-commerce giant Alibaba, itself solely responsible for a
large slice of daily parcel deliveries, was reported in 2012 to
be “in talks with a few Chinese logistics rms—including a
warehouse operator and a parcel-delivery company—to invest
a total of $100 million in them by the end of [that] year.”28
Separately, the company also invested “billions of dollars
to build a network of warehouses across China” and by Sep-
tember 2012 had already purchased parcels of “land in Tian-
jin, Shanghai and Guangzhou” upon which to build huge
warehouse complexes.28
Foreign participation in the sector—where permitted by
law—is robust. In February 2009, FedEx opened its $150
million Asia Paci c hub in Guangzhou,29 which is expected to
contribute a value upwards of $63 billion to China’s economy
by 2020.30
Competitor UPS similarly opened an Asia Paci c hub in
Shenzhen, reportedly costing $180 million.29
In 2008, UPS o cials reported that China, Hong Kong,
Japan, South Korea and Taiwan accounted for more than half
of the company’s total intra-Asia volume that year, and are an-
ticipated to grow in terms of overall volume in the future.31
Roughly four years later, the company also announced “the
opening of three new healthcare distribution facilities in the
Asia-Paci c region, two of which are to be located in China,
in Hangzhou and Shanghai, [bringing its] healthcare distribu-
tion facilities around the globe to 36.”32
DHL’s $175 million North Asia hub in Shanghai is due
for completion in 2012,33 and the company now owns a to-
tal investment in the nation worth $30 million, spanning 39
branches and 26 sales o ces across the country. It targets 90
branches and sales o ces by 2015.34
Marie-Christine Lombard, CEO of TNT, predicted that
by 2020 the PRC’s delivery market would be equivalent to
the current market size in the United States—valued at ap-
proximately $85.7 billion.35
Although foreign delivery services may face substantial op-
erating challenges and erce local competition, foreign inves-
tors are increasingly optimistic about the sector.
In September 2013, “Carlyle Group said it was collabo-
rating with real-estate investment manager Townsend Group,