The Chinese express market is set to continue growing at high double-digit rates for the foreseeable future, hitting RMB 1 trillion by 2020, while more M&A deals are likely, according to a senior Chinese official.
Volumes and revenues in the Chinese express market have soared in the last four years, Lihu Feng, deputy director general of the Research and Development Centre of the State Post Bureau (SPB), told the European Post and Parcel Services conference in Lisbon last week.
Volumes rose from 3.7 billion pieces in 2011 to nearly 20.7 billion in 2015, which was average annual growth of above 50% from 2011 to 2014, with 48% volume growth recorded for 2015.
Express industry revenues have surged by an annual average of 38% from RMB 76 billion in 2011 to nearly RMB 277 billion last year, according to SPB data.
Looking ahead, Feng predicted: “In the next five years, China’s express market will continue to witness a hefty annual growth rate of 30%, reaching total revenue of RMB 1 trillion by 2020. That is a conservative forecast.”
Competition is also increasing, meaning that the largest companies are slightly losing their high combined market share, Feng pointed out. The eight largest express firms saw their combined market share drop back from 82% in 2011 to 77% last year, while the four largest players had 50% of the market last year compared to 65% in 2011.
Another clear trend is domestic and foreign investment in the Chinese express industry, especially by private equity. Market leaders such as S.F. Express, ZTO and ZJS, for example, have seen significant investments.
The SPB director predicted more M&A deals. “Capital will continue to focus on the express industry and M&A transactions will accelerate,” he said.
The express sector is particularly important for overall economic development in China by linking regions, reducing logistics costs and so far creating an estimated 200,000 jobs, he pointed out.
Feng predicted that express delivery services will spread nationwide, especially from eastern China to the centre and west of the country. “The overall layout will be East – the standard, Middle – the expansion and West – the platform,” he commented.
Among other trends, he said that express companies would probably develop additional logistics services and further diversify products and services. In addition, some would seek to ‘go global’, either on their own or through partnerships.
