Page 236 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
about this disparity and argued that regulations and will support YTO’s efforts to go global by leveraging
protectionist trade policies are killing small businesses. OTEL’s international business expertise, global network
China’s digital shoppers will spend an average of $473.26 of 52 offices in 17 countries, and the advantages of
per person on foreign goods, up from $446.33 last year. incorporation in Hong Kong. With a framework for
By 2020, half of China’s digital shoppers – somewhere in international expansion moving into place, YTO Express
the region of 700 million people – will be buying foreign has hinted that its next steps will likely involve the
products online, with total sales reaching an estimated acquisition of wide-body aircraft by its airline subsidiary
$157.7 billion (King, Chinese Cross). The problem is (Kauffman, Cainiao).
China has been clouded by regulatory uncertainty,
which threatens to not only influence the cost of foreign China Eastern Air (CEA) Holding has sold nearly half
products purchased by Chinese consumers through web of its freight subsidiary to four companies to become
portals, but also to potentially alter the supply-chain path the country’s first mixed-ownership reform deal in the
by which goods make their way into the country. With aviation sector. The parent company of China Eastern
the airfreight industry betting heavily on cross-border Airlines CEA Holding signed the deal for Eastern Air
e-commerce as a significant source of growth, these Logistics with Legend Holdings, Global Logistic Properties,
looming changes have freight forwarders and shippers Deppon Logistics and Greenland Financial. CEA Holding
on edge (Kauffman, Crossing). said 4.1 billion yuan of state and non-state capital was
invested in the cargo unit, which brought its debt ratio
Embedded within Alibaba’s most recent quarterly down to 75 percent, from 87.86 percent at the end of
results was a clear sign that couriers in China have 2016. CEA Holding Chairman Liu Shaoyong said, “Eastern
increasingly aligned their IT platforms with that of Air Logistics aims to become a world-class air logistics
Alibaba’s logistics affiliate, Cainiao. As of March 2017, company on par with FedEx, UPS and DHL.” Liu added,
81 percent of all items sold through Alibaba-owned “The practice also aims to work out new experience for
sites moved through Cainiao’s delivery network. This the reform of China’s state-owned enterprises.” China
figure was up significantly from 60 percent in March Eastern Airlines sold Eastern Air Logistics to its parent for
2016. Hangzhou-based Cainiao operates a platform 2.43 billion yuan, saying the unit’s shrinking market share
which integrates multi-modal transport suppliers and and debts were crimping the airline’s overall operating
express couriers from every corner of the country in performance (Yang).
order to seamlessly deliver packages. This helps smooth
the gaps in the courier’s service areas. Unlike UPS and Warehousing and Storage
FedEx, which can serve nearly every zip code in the U.S.
within a matter of days, China’s couriers are comparably According to IBISWorld, revenue for the storage and
quite fragmented. In many ways, Cainiao functions as warehousing industry was around $27.2 billion in 2017,
a domestic freight forwarder to ensure parcels make it up 6.2 percent from 2016. In the five years through 2017,
from point-to-point, even if that means utilizing multiple the industry has been growing at an annualized rate of 8.4
last-mile providers. As supply chain partners increasingly percent. The market researcher claims industry demand
adopt Cainiao’s platform, the volume of parcels under has been strong since China’s entrance to the World
the platform’s control has grown dramatically. Alibaba Trade Organization in 2001. Foreign logistics resources
reported the average number of parcels moving through industries streamed into the Chinese market, which
Cainiao’s network to be around 42 million packages per improved service quality and accessibility, and increased
day from January to March 2017. With such great insight demand for warehousing services. East China is the
into the uplift requirements for e-commerce parcels largest consumer for services in this industry, estimated to
moving around China, Cainiao possesses the information account for 49.3 percent of industry revenue, 47.3 percent
necessary to influence the network development of of enterprises and 45.3 percent of employees in 2017. East
its airfreight partners. With Cainiao’s network reaching China, especially Shandong and provinces in the Yangtze
maturity in domestic China, it is starting to forge River Delta, is the most economically advanced region in
partnerships on its own, and through its affiliate courier China. Many cities along the east coast in this region are
partners. Earlier in May 2017, YTO Express announced major port cities, among which Shanghai and Xiamen are
its intention to acquire a 61.87 percent stake in Hong the largest. Attracted by the large flow of goods, many
Kong-based forwarder and logistics specialist, On Time warehousing enterprises have established branches and
Logistics (OTEL), and establish its international business warehouses in this region (IBISWorld).
headquarters in Hong Kong. The OTEL acquisition
236
about this disparity and argued that regulations and will support YTO’s efforts to go global by leveraging
protectionist trade policies are killing small businesses. OTEL’s international business expertise, global network
China’s digital shoppers will spend an average of $473.26 of 52 offices in 17 countries, and the advantages of
per person on foreign goods, up from $446.33 last year. incorporation in Hong Kong. With a framework for
By 2020, half of China’s digital shoppers – somewhere in international expansion moving into place, YTO Express
the region of 700 million people – will be buying foreign has hinted that its next steps will likely involve the
products online, with total sales reaching an estimated acquisition of wide-body aircraft by its airline subsidiary
$157.7 billion (King, Chinese Cross). The problem is (Kauffman, Cainiao).
China has been clouded by regulatory uncertainty,
which threatens to not only influence the cost of foreign China Eastern Air (CEA) Holding has sold nearly half
products purchased by Chinese consumers through web of its freight subsidiary to four companies to become
portals, but also to potentially alter the supply-chain path the country’s first mixed-ownership reform deal in the
by which goods make their way into the country. With aviation sector. The parent company of China Eastern
the airfreight industry betting heavily on cross-border Airlines CEA Holding signed the deal for Eastern Air
e-commerce as a significant source of growth, these Logistics with Legend Holdings, Global Logistic Properties,
looming changes have freight forwarders and shippers Deppon Logistics and Greenland Financial. CEA Holding
on edge (Kauffman, Crossing). said 4.1 billion yuan of state and non-state capital was
invested in the cargo unit, which brought its debt ratio
Embedded within Alibaba’s most recent quarterly down to 75 percent, from 87.86 percent at the end of
results was a clear sign that couriers in China have 2016. CEA Holding Chairman Liu Shaoyong said, “Eastern
increasingly aligned their IT platforms with that of Air Logistics aims to become a world-class air logistics
Alibaba’s logistics affiliate, Cainiao. As of March 2017, company on par with FedEx, UPS and DHL.” Liu added,
81 percent of all items sold through Alibaba-owned “The practice also aims to work out new experience for
sites moved through Cainiao’s delivery network. This the reform of China’s state-owned enterprises.” China
figure was up significantly from 60 percent in March Eastern Airlines sold Eastern Air Logistics to its parent for
2016. Hangzhou-based Cainiao operates a platform 2.43 billion yuan, saying the unit’s shrinking market share
which integrates multi-modal transport suppliers and and debts were crimping the airline’s overall operating
express couriers from every corner of the country in performance (Yang).
order to seamlessly deliver packages. This helps smooth
the gaps in the courier’s service areas. Unlike UPS and Warehousing and Storage
FedEx, which can serve nearly every zip code in the U.S.
within a matter of days, China’s couriers are comparably According to IBISWorld, revenue for the storage and
quite fragmented. In many ways, Cainiao functions as warehousing industry was around $27.2 billion in 2017,
a domestic freight forwarder to ensure parcels make it up 6.2 percent from 2016. In the five years through 2017,
from point-to-point, even if that means utilizing multiple the industry has been growing at an annualized rate of 8.4
last-mile providers. As supply chain partners increasingly percent. The market researcher claims industry demand
adopt Cainiao’s platform, the volume of parcels under has been strong since China’s entrance to the World
the platform’s control has grown dramatically. Alibaba Trade Organization in 2001. Foreign logistics resources
reported the average number of parcels moving through industries streamed into the Chinese market, which
Cainiao’s network to be around 42 million packages per improved service quality and accessibility, and increased
day from January to March 2017. With such great insight demand for warehousing services. East China is the
into the uplift requirements for e-commerce parcels largest consumer for services in this industry, estimated to
moving around China, Cainiao possesses the information account for 49.3 percent of industry revenue, 47.3 percent
necessary to influence the network development of of enterprises and 45.3 percent of employees in 2017. East
its airfreight partners. With Cainiao’s network reaching China, especially Shandong and provinces in the Yangtze
maturity in domestic China, it is starting to forge River Delta, is the most economically advanced region in
partnerships on its own, and through its affiliate courier China. Many cities along the east coast in this region are
partners. Earlier in May 2017, YTO Express announced major port cities, among which Shanghai and Xiamen are
its intention to acquire a 61.87 percent stake in Hong the largest. Attracted by the large flow of goods, many
Kong-based forwarder and logistics specialist, On Time warehousing enterprises have established branches and
Logistics (OTEL), and establish its international business warehouses in this region (IBISWorld).
headquarters in Hong Kong. The OTEL acquisition
236
