Intense changes in express delivery market
By Zhu Yong (China Daily)Updated: 2007-05-09 14:08
The author Zhu Yong is senior consultant with Shanghai Tkcis Consulting
China's express delivery market is facing a time of unprecedented change. Four major foreign players, China Post, private local firms and State-owned companies are all busy adjusting their strategies, and the government is poised to revise business policies.
After UPS broke from its local partner - Sinotrans, Fedex spent $400 million to acquire the remaining
stake of its joint venture with the Chinese firm DTW Group. It also bought all
of DTW's assets in the domestic and international express delivery markets. 
And while foreign giants are expanding in China, the State-owned giant, China Post, is attempting to gain the upper hand with a possiblly favorable postal law, sparking cries of foul play from foreign and local private firms.
Fedex's buyout of its local partner signifies the acceleration of foreign express delivery firms' expansion in China.
DTW's domestic express delivery business suffered losses of 60 million yuan in its first 11 months in 2004, but Fedex still spent $400 million for DTW, which highlights Fedex's desire for DTW's network.
Industry sources say Fedex's is trying to catch up with its competitors. DHL announced its entry into the domestic express delivery market in 2004, TNT has already begun domestic parcel delivery and UPS has the rights to international express delivery business in tier-one cities.
The joint venture agreement with DTW was originally expected to expire in 2009, but Fedex bought out the Chinese firm because it wanted immediate exposure to the domestic market.
Exit of domestic players
Since selling to Fedex, DTW has given up its domestic express delivery business and its chairman, Wang Shusheng, said the firm's focus would shift to goods logistics, warehousing, international goods forwarding and distribution.
Sinotrans, another domestic delivery giant, seems to be considering whether it should exit the business, or up investment. Zhang Jianwei, Sinotrans' president, used to say his company would continue to strengthen its position in the domestic market. The firm's air delivery arm, Sinotrans Air Transportation Development Co Ltd, still holds 25 percent of international express delivery market.
Sinotrans Air announced to acquire 51 percent of stakes in Shentong Express, a domestic express delivery firm, and 49 percent of Sichuan Airlines.
However, since Zhao Luxiang took over the position of chairman, Sinotrans Air's strategy seems to be changing. The company has recently suspended cooperation with both Sichuan Airlines and Shentong Express.
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