The Chinese express market is powering ahead with growth rates of 25-30% this year and is set for annual growth of over 20% over the next five years driven by the ongoing e-commerce boom, according to recent official figures and a new in-depth research report.
The overall Chinese ‘postal’ industry, covering express, parcel and mail deliveries, increased revenues by 23.6% to RMB 306 billion between January and June 2017, data released by the industry regulator, the State Post Bureau (SPB), showed.
The express sector increased turnover by 27.2% to RMB 218.22 billion while volumes increased by 30.7% to 17.3 billion shipments in the first half-year.
Cross-border deliveries, accounting for about 75% of overall volumes, remained the top growth business, although intra-city shipments within China, representing about 25% of volumes, also grew strongly.
Cross-border volumes surged by 32.9% to reach 12.2 billion shipments, according to the SPB data, while the smaller market for shipments to/from Hong Kong, Macau and Taiwan grew by 29.2% to 360 million pieces. Domestic volumes increased by 24.2% to 4.04 billion items.
At a regional level, Eastern China continued to dominate the country’s express market, accounting for about 81% of volumes and revenues. Central China represented 11-12% of volumes and revenues, and Western China the remaining 7-8% of the market. These proportions are only fractionally different to the same period last year.
Meanwhile, a new report released by Research and Markets has predicted continued strong growth for the Chinese express delivery market from 2017 through to 2021, as e-commerce continues to boom.
Total online retail sales in China increased by 26.2% to RMB 5,156 billion last year, it stated. Retail sales of physical goods increased by 25.6% to RMB 4,194.4 billion, accounting for 12.6% of total retail sales of consumer goods. Among these goods, food, clothing and daily goods increased by 28.5%, 18.1% and 28.8%, respectively.
According to the report, surging market demand brought about by the booming e-commerce in China stimulated the fast growth of express delivery. The volume of business of express delivery in China increased from 1.2 billion parcels in 2007 to 31.3 billion in 2016. In 2016, the revenue of China's express delivery industry exceeded RMB 400 billion.
Outlining key market trends, the report highlighted various public policies to support the sector’s continued growth but also some risks and challenges, such as rising property rental and labour costs.
Moreover, China's express delivery industry is characterised by extensive development mode, severe homogeneous competition, declining profitability and huge infrastructure investment.
As a result, many private express delivery companies which find it hard to borrow money from banks have turned to going public to raise funds so as to improve their competitive advantages. There was a boom in listings last year, including ZTO on the NYSE while YTO, S.F. Express, STO and Yunda Express were listed on A-share market through back-door listings utilizing Dalian Dayang Trands, Dingtai Rare Earth & New Materials, IDC Fluid Control and Xinhai Electric, respectively; Best Express and Deppon are also planning to go public.
Looking ahead, the report forecast that China's e-commerce industry will keep growing fast from 2017 to 2021. In addition, new e-commerce modes, such as cross-border shopping, will also promote the development of China's express delivery industry. It is estimated that China's express delivery industry will keep growing at over 20% per year.
Government policies in the coming years will also support the development of the express delivery industry. For example, in early 2017, Premier Li Keqiang reiterated that online shopping is the "new economy" which directly drives sales of physical factories. As a representation of the "new economy", express delivery is driving both consumption and production.
Under the State Post Bureau’s 13th Five-Year Plan for the Express Delivery Industry (2016-2020), there are six key development targets. One of these is to build flagship express delivery enterprises and to form three to four leaders by 2020. However, with more mergers and restructuring going on, companies with ill management will be forced to close down.
