Could international shippers pounce on Chinese market?

By Freddie Pierce
Could worldwide shipping leaders like UPS, FedEx and DHL be pouncing on the growing opportunity that is the Chinese market? Thats what one Reuters repo...

Could worldwide shipping leaders like UPS, FedEx and DHL be pouncing on the growing opportunity that is the Chinese market?

That’s what one Reuters report insinuates. Given the shortcomings of China’s domestic courier services, it seems logical that foreign logistics companies (if they’re allowed to compete freely) could make a sizable dent in the local logistics business.

According to Cao Zhen, the manager of corporate planning at Chinese delivery company STO Express, much of the market’s shortcomings are due to staff shortage.

“With the new year around the corner, our orders are bound to soar with increasing demand from eCommerce and traditional business,” Zhen told Reuters. “But at the same time, we’re severely short-handed- which creates even greater pressure.”

China’s Lunar New Year is placing added strain on the nation’s supply chain this week. Hundreds of millions of people are traveling to home towns across China’s countryside and urban community, clogging up roads and leaving companies like STO Express understaffed.

That’s a huge problem given the level to which the delivery business has grown over the past few years. China’s express shipping business grew to $57.4 billion yuan in 2010, nearly doubling the 30 billion market the business held in 2006.

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This doesn’t mean that international shipping giants will step in right away, however. DHL, in particular, has voiced its concerns over the maturity of the Chinese domestic market.

“DHL will consider a return to the domestic market when the industry matures through consolidation and customers start to place more emphasis on quality services,” DHL said in a statement emailed to Reuters.

Those concerns didn’t stop FedEx and UPS from filing for domestic express service licenses in 2010. A decision on that is expected within a few weeks, and it’s one that could have broad supply chain ripples throughout the shipping industry. Stay tuned.

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