UPS eyes China parcel biz

Company in the running for domestic license from authorities

BEIJING - United Parcel Service Inc (UPS), the world's largest package-delivery company, is gearing up to acquire a domestic parcel license from China's State Post Bureau and further expand its business in the country, company executives said on Tuesday.

UPS Chairman and CEO Scott Davis will discuss the issue with government officials during his one-week trip to China starting on Monday.

"We are still waiting for the license," UPS International President Daniel Brutto told media in Beijing on Tuesday, adding that he has been seeing officials every six or eight weeks to discuss the issue.

According to media reports, the Atlanta-based company spent a year studying its application for the license before taking it to the bureau in late September.

But a source at the bureau familiar with the matter told China Daily that UPS' application had not been formally accepted as the company was preparing supplementary materials. A final decision would be made within 45 days of the application's acceptance, said the source.

"China is an extraordinary import market for us," said Davis. The company witnessed a 50 percent year-on-year increase in parcel volume in China in the third quarter, while daily international volume rose 13.7 percent to 2.24 million units from 1.97 million units over the same period.

Davis said the global economic situation in the next year would not be much different from that of 2009 and 2010, despite some challenges such as trade protectionism. "The global recession is behind us now and we are in recovery mode."

He said Asia is going to be the strongest force in the recovery, and China has become the prime engine.

"The more a country develops, the more need for package services," said Brutto. He said there would be rising demand for domestic package delivery and tremendous growth in customers in China, and UPS would be able to provide great value to the domestic market after more than 100 years of development.

Despite continued growth in individual package delivery, Brutto emphasized the company would still target the high-value business-to-business market instead of the low-value market in China.

China's revised postal law in 2009 prohibited international players from operating in the country's letter and document delivery segment. But the authorities permitted domestic package license applications from international companies such as UPS from Oct 1 this year.

The company now has more than 5,000 employees and 92 operating facilities in major cities across China.

DHL of Germany's Deutsche Post, one of its competitors, now has nearly 10,000 staff in China and more than 300 domestic depots. Its 50-50 joint venture with Sinotrans acquired Shanghai Quanyi Express Co Ltd in 2008 to further develop its domestic network.

Dutch carrier TNT has more than 18,000 employees and about 1,500 depots in the country, after completing the acquisition of local player Hoau to expand domestic road distribution in 2007. FedEx also purchased local company Tianjin Datian W. Group Co Ltd in 2007.

Xu Yong, chief adviser of China Express Consulting, predicted that international companies could take up to 8 percent of the domestic express delivery market by 2015.

UPS entered China in 1988, and did business for 16 years as a joint venture with Sinotrans. In 2005, it acquired ownership of Sinotrans' international express operations.

In 2008, UPS opened a $125 million international air hub in Shanghai, connecting China and other Asian countries with Europe, the United States and the Middle East.

It also opened an Asia-Pacific air hub in Shenzhen to replace operations at the former Clark Air Force Base in the Philippines in May 2010, with a total investment of $180 million and 400 employees capable of sorting 18,000 packages an hour, its largest capital commitment yet in Asia.

UPS' third-quarter profit climbed 69 percent year-on-year to $930 million, and its revenue increased 9 percent to $12.2 billion during the same period.