Global parcel delivery giant UPS said it will form a joint venture with leading Chinese peer SF Express, pooling resources to develop international courier services catering to a boom in business from cross-border e-commerce and small business traders.

The joint venture will initially have $10 million in investment, with each of the partners providing half, according to a Friday announcement from the recently-listed SF Holding Co. Ltd., parent of SF Express.

The venture will start by offering international delivery services, initially between the U.S. and China, and will eventually expand to other countries, UPS said in its own statement. The joint venture will leverage both companies’ networks, technologies and logistical capabilities.

“This joint venture will support products that provide competitive benefits to our Chinese customers who trade or seek to trade internationally,” said Ross McCullough, president of UPS Asia Pacific. “Our combined efforts will result in new logistics products and services to simplify and accelerate B2B and B2C customers’ cross-border trade.”

Parcel delivery services have exploded in China over the last five years, fueled by an explosion in e-commerce services from companies like Alibaba Group Holding Ltd. and JD.com Inc. SF Express, along with rivals like ZTO Express and YTO Express, delivered more than 30 billion parcels last year, representing 23 packages for each of China’s 1.3 billion people, according to the State Post Bureau. With the competition fierce at home, many of the biggest Chinese names are now looking to expand abroad.

At the same time, e-commerce companies are aggressively promoting cross-border services to feed on growing appetite for imported goods from Chinese consumers, and Chinese companies that want to export their wares overseas.

Global delivery companies like UPS and FedEx have found a niche in China but are still relatively limited in the market. That lack of progress owes to restrictions on the number of cities where they can operate, and also bigger costs associated with their services that are often considered higher end compared with Chinese peers.

“China is leading the world in terms of e-commerce market size, growth, penetration and mobile business usage,” said SF vice president Alan Wong. “Coupled with a rapidly growing and internet-savvy consumer base, it’s imperative that SF and UPS collaborate to revolutionize the logistics sector. Together, we aim to bring greater competitive advantages to our customers in China, to succeed globally.”

The new joint venture will have a 20 year duration, and is subject to regulatory approval, the companies said.

By Yang Ge
Caixin

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