Chinese government OKs joint venture between UPS, SF Express

Chinese government authorities have approved a proposed joint venture between UPS Inc. and SF Holding Co. Ltd., the parent of one of China's largest package delivery operators, UPS and SF Holding said today.

The government's action allows UPS to pick up parcels in China on behalf of SF Express Co. Ltd., SF Holding's parcel unit, and move them to the U.S. through the UPS network.

The decision by China's Ministry of Commerce will pave the way for the companies to collaborate on other trade lanes, the companies said. At this point, nothing firm has been announced. The proposed joint venture was disclosed in May.

SF Express, touted as China's leading express delivery provider, serves 13,000 points nationwide with 15,000 trucks and 36 freighter aircraft. However, it has a very small presence in the U.S., and uses other companies, including UPS, to deliver from China. Atlanta-based UPS, which began operations in China in 1988, operates in 330 cities with 872 package cars and tractor-trailers, and 200 weekly flights linking the two countries. It does not operate its own aircraft within China, and under the venture will rely on the SF Express fleet to broaden its coverage of time-sensitive goods.

The companies began collaborating two years ago, when UPS' global express service was made available at SF Holding's Heike retail stores in Shanghai and Shenzhen, China. At the same time, the companies rolled out a product called "Global Reach Plus," which will be targeted at businesses with less-urgent delivery requirements. The service will deliver packages in five to seven business days and provide end-to-end visibility through the companies' combined IT networks, the SF Holding and UPS said.

The joint venture is another step in the growth trajectory of cross-border e-commerce, where orders are delivered with the so-called landed cost—the cost of all aspects of the international transaction, such as transport, warehousing, and customs clearance—visible to the customer.

Global parcel volumes rose to 65 billion in 2016, from 44 billion in 2014, according to an index prepared by Pitney Bowes Inc., a global technology company based in Stamford, Conn. Global parcel traffic will increase between 17 and 28 percent a year between 2017 and 2021, Pitney Bowes forecast.