DHL delivers China mainland express service

DHL is to expand its operations in China, including the launch of the mainland’s first domestic express service operated by an international provider.

DHL said the launch of China Domestic, a door-to-door delivery service focused on parcels and freight, marked a “significant milestone” for the group and its partnership with Sinotrans, China’s leading transport and logistics operator. DHL-Sinotrans has nearly 40 per cent of China’s express delivery market, the company said.

DHL, a unit of Germany’s Deutsche Post, also announced initiatives in the express logistics market – the third party management of spare parts inventory for companies – with three new express logistics centres and 16 spare parts centres. DHL unit Danzas Air & Ocean will also invest USDollars 3m to set up two logistics centres in Shanghai’s Pudong and Jiuting districts focused on ocean freight and warehousing. And DHL’s logistics arm plans to increase its presence in China from 20 cities to 37 by 2007 under a USDollars 12m infrastructure development plan.

“This multi-pronged approach represents the cornerstone of DHL’s China strategy, which is to offer the full suite of express and logistics solutions from a single source,” said Uwe Doerken, DHL Express chief executive. The latest moves are the second stage in a USDollars 200m five-year investment plan unveiled in October last year, and bring DHL’s total investments in China to USDollars 215m. DHL was the first foreign express delivery service to enter China, in 1986, and in the past few years has seen its business grow at an annualised rate of 35 to 45 per cent.

“Even though our Japanese business is also growing very fast, realistically China can overtake Japan in the next two years,” said John Mullen, chief executive officer of DHL Asia-Pacific.

Despite regulatory concerns, particularly involving state-run China Post’s position as a competitor and a regulator, Mr Mullen says he is confident the Chinese government “recognises the significance of the logistics industry as a critical driver of economic progress.”

“China Post and the other smaller local players will certainly try to stop us. But I’m confident the market is big enough for all. As for major internationals, again they might see the progress we’re making and try to do the same. But we’ve got the competitive edge because of our head start.”

FedEx, a DHL rival, is to start talks with Chinese officials about creating a hub in the southern city of Guangzhou, which would make it the first large international express group to put its Asian hub in mainland China.

“The major concern is that the China market is totally unstructured today,” Mr Mullen said. “What we’re doing is bringing about a transformation of the domestic logistics industry.”