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P. 168
6 White Paper on the Business Environment in China
Despite fuel cost fluctuations, capital cost hikes, and cases buying their own aircraft”27.
potential setbacks contained in the 2009 revision of the Postal Some firms aren’t waiting for domestic delivery services to
Law (see below), many participants in the sector remain
optimistic about growth, and with good reason: according to increase capacity. “With more Chinese shoppers going online,”
the National Bureau of Statistics, between 2002 and 2008 (the writes The Wall Street Journal, “demand for warehouses and
last year for which data was available) total freight volume has parcel delivery services is [...], far outpacing the development of
increased from 14.8 billion to 25.8 billion tons annually21. the country’s logistics infrastructure.”28
Xinhua reported that the total value of goods shipped over E-commerce giant Alibaba, itself solely responsible for a
the first half of 2011 rose by nearly 14 percent year-on-year to large slice of daily parcel deliveries, was reported in 2012 to be
reach 74.7 trillion yuan, despite having decreased by 4.7 percent “in talks with a few Chinese logistics firms—including a ware-
in the same period of 2010.22 house operator and a parcel-delivery company—to invest a total
of $100 million in them by the end of [that] year.”28
Increasingly, e-commerce is a driver for logistics industry
development; booming Internet retail sales, combined with the Separately, the company also invested “billions of dollars
above-mentioned policy initiatives, reportedly achieved sec- to build a network of warehouses across China” and by
tor-wide revenue in excess of 18 billion yuan in 2009.23 September 2012 had already purchased parcels of “land in
Tianjin, Shanghai and Guangzhou” upon which to build huge
E-commerce may, in fact, be growing too fast for the domes- warehouse complexes28.
tic cargo network to keep up: China Daily reported leading up
to the Spring Festival in February 2011 that “major [domestic] Foreign participation in the sector—where permitted by
private delivery companies, such as Yuantong and Shentong, de- law—is robust. In February 2009, FedEx opened its $150 mil-
cided last week to stop accepting new packages in some cities to lion Asia Pacific hub in Guangzhou,29 which is expected to con-
ensure parcels in the already-full warehouses are delivered before tribute a value upwards of $63 billion to China’s economy by
the Spring Festival,” and that “The phenomena underscored the 2020.30
fact that China’s logistics sector is lagging far behind the coun-
try’s booming e-commerce market, which has witnessed explo- Competitor UPS similarly opened an Asia Pacific hub in
sive growth in recent years.”24 Shenzhen, reportedly costing $180 million.29
More recently, Walmart Asia president and CEO Scott In 2008, UPS officials reported that China, Hong Kong, Ja-
Price also fingered China’s inefficient logistics infrastructure pan, South Korea and Taiwan accounted for more than half of
as the biggest challenge to e-commerce in the nation, first and the company’s total intra-Asia volume that year, and are antici-
foremost “stemming from the lack of efficient and reliable last- pated to grow in terms of overall volume in the future.31
mile delivery.”25
Roughly four years later, the company also announced “the
On top of that, the State Post Bureau reportedly enforced opening of three new healthcare distribution facilities in the
its first-ever fine for parcel mishandling against domestic carrier Asia-Pacific region, two of which are to be located in China, in
Shentong Express after a video was posted online of “workers Hangzhou and Shanghai, [bringing its] healthcare distribution
furiously distributing goods, kicking parcels and throwing items facilities around the globe to 36.”32
to the ground.” The fine was for 10,000 yuan (approximately
$1,500)26. DHL’s $175 million North Asia hub in Shanghai is due for
completion in 2012,33 and the company now owns a total in-
More severe punishments have since been handed out: “[In vestment in the nation worth $30 million, spanning 39 branch-
November 2012], the China Air Transport Association, or es and 26 sales offices across the country. It targets 90 branches
CATA, announced it was putting four domestic logistics firms and sales offices by 2015.34
on its no-fly list because of security flaws, after a fire started
in a storage bin of a flight that eventually landed at Dalian Marie-Christine Lombard, CEO of TNT, predicted that by
Zhoushuizi Airport in October”27. 2020 the PRC’s delivery market would be equivalent to the cur-
rent market size in the United States—valued at approximately
The four firms, Shanghai YTO, Yunda Express, and the $85.7 billion.35
Huixing and Qihao courier firms were “forced to suspend their
air freight services until their business procedures improved.” Although foreign delivery services may face substantial op-
According to the association, “Shanghai YTO was blamed for erating challenges and fierce local competition, foreign inves-
its incorrect classification of lithium batteries, while the other tors are increasingly optimistic about the sector.
firms were punished for transporting the prohibited article ve-
suvian, which caused the fire.”27 In September 2013, “Carlyle Group said it was collaborating
with real-estate investment manager Townsend Group, as well
The punishments take place as domestic courier services “are as warehouse developer and operator Shanghai Yupei Group, to
having to invest to compete in the air freight market, in some invest a total of $400 million in 17 warehouses in China that
will be leased to firms including retailers and e-commerce com-
168 panies.”36
In August [2013] Cathay Capital Private Equity and the Si-
Despite fuel cost fluctuations, capital cost hikes, and cases buying their own aircraft”27.
potential setbacks contained in the 2009 revision of the Postal Some firms aren’t waiting for domestic delivery services to
Law (see below), many participants in the sector remain
optimistic about growth, and with good reason: according to increase capacity. “With more Chinese shoppers going online,”
the National Bureau of Statistics, between 2002 and 2008 (the writes The Wall Street Journal, “demand for warehouses and
last year for which data was available) total freight volume has parcel delivery services is [...], far outpacing the development of
increased from 14.8 billion to 25.8 billion tons annually21. the country’s logistics infrastructure.”28
Xinhua reported that the total value of goods shipped over E-commerce giant Alibaba, itself solely responsible for a
the first half of 2011 rose by nearly 14 percent year-on-year to large slice of daily parcel deliveries, was reported in 2012 to be
reach 74.7 trillion yuan, despite having decreased by 4.7 percent “in talks with a few Chinese logistics firms—including a ware-
in the same period of 2010.22 house operator and a parcel-delivery company—to invest a total
of $100 million in them by the end of [that] year.”28
Increasingly, e-commerce is a driver for logistics industry
development; booming Internet retail sales, combined with the Separately, the company also invested “billions of dollars
above-mentioned policy initiatives, reportedly achieved sec- to build a network of warehouses across China” and by
tor-wide revenue in excess of 18 billion yuan in 2009.23 September 2012 had already purchased parcels of “land in
Tianjin, Shanghai and Guangzhou” upon which to build huge
E-commerce may, in fact, be growing too fast for the domes- warehouse complexes28.
tic cargo network to keep up: China Daily reported leading up
to the Spring Festival in February 2011 that “major [domestic] Foreign participation in the sector—where permitted by
private delivery companies, such as Yuantong and Shentong, de- law—is robust. In February 2009, FedEx opened its $150 mil-
cided last week to stop accepting new packages in some cities to lion Asia Pacific hub in Guangzhou,29 which is expected to con-
ensure parcels in the already-full warehouses are delivered before tribute a value upwards of $63 billion to China’s economy by
the Spring Festival,” and that “The phenomena underscored the 2020.30
fact that China’s logistics sector is lagging far behind the coun-
try’s booming e-commerce market, which has witnessed explo- Competitor UPS similarly opened an Asia Pacific hub in
sive growth in recent years.”24 Shenzhen, reportedly costing $180 million.29
More recently, Walmart Asia president and CEO Scott In 2008, UPS officials reported that China, Hong Kong, Ja-
Price also fingered China’s inefficient logistics infrastructure pan, South Korea and Taiwan accounted for more than half of
as the biggest challenge to e-commerce in the nation, first and the company’s total intra-Asia volume that year, and are antici-
foremost “stemming from the lack of efficient and reliable last- pated to grow in terms of overall volume in the future.31
mile delivery.”25
Roughly four years later, the company also announced “the
On top of that, the State Post Bureau reportedly enforced opening of three new healthcare distribution facilities in the
its first-ever fine for parcel mishandling against domestic carrier Asia-Pacific region, two of which are to be located in China, in
Shentong Express after a video was posted online of “workers Hangzhou and Shanghai, [bringing its] healthcare distribution
furiously distributing goods, kicking parcels and throwing items facilities around the globe to 36.”32
to the ground.” The fine was for 10,000 yuan (approximately
$1,500)26. DHL’s $175 million North Asia hub in Shanghai is due for
completion in 2012,33 and the company now owns a total in-
More severe punishments have since been handed out: “[In vestment in the nation worth $30 million, spanning 39 branch-
November 2012], the China Air Transport Association, or es and 26 sales offices across the country. It targets 90 branches
CATA, announced it was putting four domestic logistics firms and sales offices by 2015.34
on its no-fly list because of security flaws, after a fire started
in a storage bin of a flight that eventually landed at Dalian Marie-Christine Lombard, CEO of TNT, predicted that by
Zhoushuizi Airport in October”27. 2020 the PRC’s delivery market would be equivalent to the cur-
rent market size in the United States—valued at approximately
The four firms, Shanghai YTO, Yunda Express, and the $85.7 billion.35
Huixing and Qihao courier firms were “forced to suspend their
air freight services until their business procedures improved.” Although foreign delivery services may face substantial op-
According to the association, “Shanghai YTO was blamed for erating challenges and fierce local competition, foreign inves-
its incorrect classification of lithium batteries, while the other tors are increasingly optimistic about the sector.
firms were punished for transporting the prohibited article ve-
suvian, which caused the fire.”27 In September 2013, “Carlyle Group said it was collaborating
with real-estate investment manager Townsend Group, as well
The punishments take place as domestic courier services “are as warehouse developer and operator Shanghai Yupei Group, to
having to invest to compete in the air freight market, in some invest a total of $400 million in 17 warehouses in China that
will be leased to firms including retailers and e-commerce com-
168 panies.”36
In August [2013] Cathay Capital Private Equity and the Si-
