UPS' transfer hub in Louisville, Kentucky. The company is building its fifth Chinese hub in Zhengzhou, capital of Henan province. Provided to China Daily

Laeding global logistics company goes in strength from pillar to post in China

With more buying and selling going on in the world's most populous market - particularly online - the world's largest package delivery company is looking to increase its role as carrier and deliverer of goods.

United Parcel Service Inc was granted five licenses by the State Post Bureau of China in September to operate domestic courier services in Shenzhen, Guangzhou, Shanghai, Tianjin and Xi'an. It is hoping for further licenses for inner-city express services from the Chinese government and is creating its fifth regional hub, in Central China.

"We are still waiting for the approvals for another two cities, Suzhou and Dongguan," says Daniel Brutto, president of UPS International.

"We are making operational plans for domestic courier services, and to get licenses for many other cities. That will take a couple of years. We will work closely with the State Post Bureau of China to achieve our goals."

In anticipation of the increase in the nation's postal business and online transactions, the US company has expanded its business network across the country to 33 fully controlled locations in China, including Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen and Hangzhou, and has extended services to an additional 330 cities and counties.

"UPS hopes the State Post Bureau of China will continue its review in more cities," says Hou Hanping, a professor of logistics management at Beijing Jiaotong University. "These newly issued licenses to a certain extent are guarantees for the company's long-term development in this market and will help it strengthen its China network significantly."

In 2011, UPS accrued $53.1 billion (40.51 billion euros) in global revenue from package, supply chain and freight operations. It has 398,300 workers across the world, and more than 6,000 in China. The company operates 229 of its own aircraft and charters 298 aircraft for its business worldwide.

UPS operates four international and regional hubs in China - the intra-Asia hub in Shenzhen in South China's Guangdong province; Shanghai international hub which operates 190 flights a week to destinations in the United States, Europe, Asia and major Chinese cities; Qingdao hub in Shandong province is another east coast base to link its business within Asia; and in 2011, to keep pace with the progress of China's western development, UPS set up a regional hub in Chengdu, capital of Sichuan province, to serve the city's high-tech industries and surrounding areas.

The company is building its fifth hub in Zhengzhou, capital of Central China's Henan province to get close to its customer base there.

Logistics has been listed as one of the priorities in China's 12th Five-Year Plan (2011-15), Brutto says. "Cities like Zhengzhou making long-term investment in logistics allows organizations like ourselves to serve the Chinese customers better in both export and import situations."

UPS launched a new air route between Zhengzhou and Incheon in South Korea in October. Henan's businesses will in turn benefit from Incheon's flight connections to their key export markets in the US and Europe.

Cargo can be flown direct from Incheon to Anchorage, Alaska, shortening shipments to the US by at least a day. UPS operates a Boeing 767 in and out of Zhengzhou Xinzheng International Airport five days a week.

Hou says what makes Zhengzhou attractive to UPS as a regional hub is Foxconn Technology Group's original equipment manufacturing business for Apple Inc's products. As the main carrier for Apple, UPS is in charge of delivering the iPhone5s manufactured in Foxconn's Zhengzhou plant to the US market.

Zhengzhou's importance as an economic driver in China's central region has been growing in recent years, and is emerging as the next high-tech manufacturing area in China. Since Foxconn set up a subsidiary - Futaihua Precision Electronics (Zhengzhou) Co Ltd - in the Zhengzhou Xinzheng Bonded Zone in 2010, Henan's import-export volume has increased sharply.

In the first nine months of this year, Henan's import-export volume totaled $33.87 billion, 63.4 percent higher than the same period in 2011. Foxconn's Henan businesses contributed $16.78 billion, almost half of it, according to the data released by Zhengzhou Customs.

Zhang Dawei, vice-governor of Henan, says the province's location in Central China, reasonable labor costs and the rapid pace of development will help it become an important regional transport center in China over the next three years, especially for its aviation economy.

Aviation economy is an economic development mode applied to centers that develop aircraft manufacturing, technical services, air transportation, logistics, airline and retail businesses. The airports in Miami, Cologne and Bonn are successful examples of adopting such a mode to develop local economy.

To diversify China's economic development categories, the State Council recently issued guidelines to promote the nation's civil aviation industry. The Henan government and the Civil Aviation Administration of China then applied to the central government to build China's first aviation economic experimental zone.

Other key industries in the area also have seen impressive growth, including the automotive, machinery and aluminium manufacturing sectors. In 2011, Zhengzhou was ranked the most popular Chinese city for foreign trade growth and has been attracting considerable foreign direct investment.

"With many manufacturing companies moving their facilities to inland China, there is an increasing need for logistics and transportation services in this fast-growing region," says Richard Loi, president of UPS China. "The UPS Zhengzhou gateway will speed access to key markets globally, and underscores UPS' commitment to strengthening our network in China and addressing the customers' needs."

Zhang says the Henan provincial government will invest more in infrastructure construction projects, including building more railways, highways, large-scale logistics warehouses and service facilities to help foreign companies such as UPS and Apple shorten the distance between Chinese companies and the world market.

"UPS always follows the footsteps of its customers," Brutto says. "In Zhengzhou, we will offer a very competitive rate to our customers and negotiate the rate with them individually."

zhongnan@chinadaily.com.cn

(China Daily 11/02/2012 page21)