• China's Express Delivery Services

China's Express Delivery Services (Photo : www.gettyimages.com)

China's express delivery business will continue to grow strong in 2017, an industry expert said on Sunday, Dec. 25, after the nation's postal authority announced that the sector has handled about 30 billion express delivery parcels as of Dec. 20.

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Global Times reported that he volume could grow 40 percent to 50 percent in 2017 with more supportive policies, according to Xu Yong, chief analyst at industry portal cecss.com.

Xu noted that this is an exceptional growth considering the country's slowing economy. However, he also said this growth may be hampered by rising labor costs, low profit margins and some legal obstacles.

He said that legal work must be done on how to compensate for missing or damaged parcels or how to expedite the handling process for express delivery parcels.

Data released by the State Post Bureau (SPB) showed that as of Dec. 20, a total of 30 billion parcels was handled by the express delivery business in the country. The SPB data further showed that 27.89 billion parcels were handled from January through November, an increase of 52.8 percent from the same period in 2015. The industry earned about 354.41 billion yuan ($51 billion), up 44.3 percent year-on-year.

In November, the busiest time of the year, about 125 million parcels were delivered daily. It is 1.4 times the same number in 2015.

"A very fast growth rate upon a very big base, increased parcel-handling capacity and increasing level of government support were some of the hallmarks of the industry in 2016," Xu told the Global Times.

Xu added that an indication of the growth in the industry is that five express delivery companies have started to get listed on the stock market in 2016. "However, once get listed, these companies will only have a short period in which to strike a balance between investors' expectations of making a profit and the reality of low profit margins, that are being further eroded by rising labor costs," he said.

According to Xu, the average revenue for each parcel is 13.3 yuan. He said it is low compared to other firms' revenue.

The report said that the annual revenue of UPS reaches nearly $60 billion, almost equal to the total profits of all Chinese express delivery companies. UPS earns $10.37 per parcel, while FedEx gets $12.2 per parcel.

Xu said that the reason for this is that local Chinese companies were an offshoot of the business-to-consumer business, delivering orders by online consumers, while global delivery firms are more focused on other business firms.

"One of the trends that will run from 2017 through the next few years will be that we start to see differentiation of companies by developing their own niche strengths, such as cold-chain logistics, transporting IT goods, or specializing in baby and maternal products and cosmetics," Xu explained.