DHL spreads network in booming China

International express and logistics company DHL announced recently it would invest a further US$110 million into infrastructure in China to meet the country's continuing huge economic growth.

New Zealand DHL Express general manager Derek Anderson says the country is one of the fastest-growing markets within the company's global network.

More than half of DHL's total investment in the Asia Pacific region has been in China in the past five years.

DHL is looking to develop hardware and software, increase construction of branches and grow and develop the knowledge base required to service demand.

"We're expecting to employ 1500 new people every year in China," he says.

Such rapid high growth brings challenges of its own. Anderson cites the size of the country and the difficulties of terrain leading to "quite challenging infrastructure being required."

The first international express company to enter the China market in 1986, DHL has a freight and logistics network covering 318 cities across the country.

Anderson says the company has always seen China as an essential piece of the global market.

"There was an early view that there was business to be done."

With multiple dialects throughout the country, the continued expansion means language has been one of the more difficult and ongoing hurdles to overcome.

Anderson says potential traders need to be aware how the misuse of language can create obstacles in negotiations, as a phrase in one province can have an entirely different meaning in another.

"They shouldn't underestimate language differences in order to ensure common understanding."

He says the Chinese government's approach has changed considerably in the past 20 years. It has moved from a closed and highly bureaucratic system to one in which the benefits of the growing economy from the main centres is shared across the country.

This directive has led DHL to venture westward, outside the usual key economic areas in China, establishing a presence in provinces such as Shaanxi, Yunnan and Sichuan.

The company has also opened 16 new branches. DHL Global Forwarding acquired 17 domestic airfreight licences, to give second and third-tier cities access to key economic zones so they can contribute to provincial growth.

New Zealand's export freight mix is still mainly primary product – agriculture, wood, textiles, and leather – but as China has become more technologically advanced there has been an increase in exports of machinery, finished apparel (as opposed to solely raw material) and more high-tech products.

However, Anderson says there is still a lack of confidence from many New Zealand companies in dealing with China.

At the end of 2006, DHL Express conducted an online survey on trade.

Most of the 490 companies who responded saw China as an important destination for New Zealand's goods and services. Some 75% saw China as the key market for developing economic relationships.

However, more than two-thirds of the companies were wary of doing business there and wanted more help and support to facilitate trade.

More than half believed that to be successful trading with China, companies needed to have a local presence there.

Those respondents already established in China encouraged other New Zealand companies to partner with Chinese firms, employ local staff or set up a local office.

To try to address some of the concerns about trading confidence, Anderson says, DHL offers exporters a trade-lane management facility. A dedicated New Zealand team works with counterparts in China to ensure regulatory requirements are met.

It also provides the standard services of customs brokerage, a 24/7 contact centre, and online track-and- trace and e-commerce tools.

"We're a long-term player there with significant investment and sound partnerships with local organisations."

With the proposed free trade agreement on the horizon, in addition to the number of new Air New Zealand services set up to service Shanghai and Hong Kong, Anderson felt there were good reasons to be confident that the economic boom will continue.

While he said he hates to try to pick a winner, Anderson believes China will continue to grow in importance for his company.

"You can just read the evidence. China is a major growth engine for the globe."