FedEx and UPS lead China foray
TWO US companies, FedEx and United Parcel Service, are leading the charge among foreign logistics and transportation companies into China, writes Keith Wallis.
Both companies have seen exceptional growth in the China market and believe expansion in China is crucial to future growth.
FedEx recently agreed to pay $400m to Tianjin Datian W Group to take full control of its international and domestic express business in China. The move, which is still subject to Chinese government regulatory and licensing approval, will allow FedEx to consolidate and expand its presence in secondary cities outside the main urban centres of Beijing, Shanghai and Guangzhou.
FedEx Corp chairman Fred Smith says: ‘This strategic investment in the long-term growth of China will broaden and deepen our relationship by improving access to important markets.’
The firm’s Asia Pacific president David Cunningham adds: ‘Cities outside the eastern seaboard, like Wuhan which is itself twice the population of Los Angeles are a crucial part of growing China’s economy and vital to the long-term growth of FedEx in this region.’
FedEx has already shown its commitment to the China market by deciding to move its Asia Pacific from Subic Bay in the Philippines to a $150m purpose built facility at Guangzhou’s Baiyun international airport.
UPS chief financial officer Scott Davis is similarly excited about the logistics opportunities in China.
Speaking last month he said: ‘Business in China is still extremely strong. We don’t see anything getting in the way of this growth for many years to come. A big market, a lot of opportunities.’
He said the firm’s December 2004 agreement to buy Sinotrans out of its joint venture had ‘worked out very well. We’re able to control the quality of the service offering for UPS and puts us in an excellent position.’
The deal meant UPS took control of businesses in 23 locations and allowed the company to directly serve more than 200 Chinese cities, equivalent to 80% of the country’s gross domestic product.
UPS will also expand the number of freighter frequencies in March from 18 to 21 per week with two additional services to Shanghai and one to Guangzhou.
