United Parcel Service, Inc. (UPS) and FedEx Corporation (FDX) Tighten Their Belts Against Chinese Courier Services

Boom in online retailing industry has opened up new gates for courier services in the country. It is a common sight to witness courier-delivering mailmen riding on three-wheel carts and electric bikes. Major American courier services including United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) are hardly visible in the streets.

In addition to the competition from local companies, both the courier service providers had to seek government permissions before expanding their services in China. The good news is that both United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) have received license to expand their domestic express service without going into joint ventures or partnerships.

FEDEX (FDX)

The U.S. companies have been seeking permission since 2009 for business to consumers’ deliveries independently and it will allow these companies to operate through their Chinese Networks. This is an extremely crucial approval for United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) considering that the Chinese market is growing at an annual rate of 60% and might worth around $46 billion in 2015.

According to Laura Lane, Global Public Affairs President of UPS,

“We now have 33 licenses. The government just approved them in May. We’re really looking at developing those capabilities in those 33 cities, expanding our investment. But we haven’t developed a concrete plan yet in terms of where we want to go beyond those 33 cities.”

FedEx Corporation (FDX) has regained license for 58 cities ensuring comfortable operation in China. Both the companies have claimed China to be their fastest growing market and they are ready to develop a strategy for expansion. For investors, they might be able to invest in United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) instead of relatively new Chinese Internet companies.

This article has been written by Prakash Pandey.

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