FedEx to cash in on China boom

PUBLISHED : Friday, 09 February, 1996, 12:00am
UPDATED : Friday, 09 February, 1996, 12:00am

THE express transportation industry in China is expected to grow by 30 to 40 per cent a year, Brooke Harwood, Federal Express (FedEx) managing director and general manager for China, says.

He said the growth rate was 50 to 100 per cent faster when compared with the traditional air cargo industry.

'It can be argued that we are starting from a smaller base but we are growing very rapidly,' he said.

China was the fastest growing economy in Southeast Asia, or even possibly in the world, with the US being the biggest destination for its goods, Mr Harwood said.

He said China was getting closer to becoming a member of the World Trade Organisation and that would cut the trade friction between China and other nations and spur trade.

As the China market grew, the express market would also grow, he said.

FedEx's business in China came initially from multinational firms doing business in China and slowly spreading to Chinese companies, he said.

As FedEx was the only US express carrier to China, it was set to gain from additional growth in the near future, Mr Harwood said.

FedEx was issued an operating permit by the Civil Aviation Administration of China (CAAC) last week to operate a US-China all cargo-route. The inaugural flight for the new route is scheduled for early March.

The flight will originate in New York on a route that includes Chicago, Anchorage, Beijing, Shanghai and return to New York via Anchorage.

In determining which cities in China to service initially, FedEx decided on Beijing and Shanghai. The operating permit issued by the CAAC names both cities as service points.

Mr Harwood said at aviation talks between China and the US in December, agreement was reached on increasing the weekly frequencies operated by the all cargo carrier FedEx, from two to four.

Asked why FedEx's services could not be expanded from 34 cities to 59 cities immediately, instead of in June, Mr Harwood said the company had to do much groundwork to prepare the offices to have the same level of efficiency as in the existing offices.

He said it took time to train staff and set up electronic equipment at the new offices.

'What is necessary is to get that commitment from the employees,' he said.

Mr Harwood said the firm was bringing people together at one central point and training them so that they understood the system they were learning and to ensure that it matched the existing system.

'The biggest challenge is to get across the level of intensity to get a product delivered on time and to get proof of the delivery back to the station that very night,' he said.

David Clarke, manager of FedEx's Asia-Pacific public relations division, said Asia's growth was fuelled by international trade.

China's economy is seen to grow by 8 to 9 per cent in 1995, Thailand, 8.5 per cent and Singapore, 9 per cent.

Mr Clarke said the market potential of Asia by 2015 would be underlined by the fact that four of the world's largest cities, Tokyo, Shanghai, Beijing and Jakarta, would be in Asia.

By 2020, three of the world's top five economies, Japan, China and Indonesia, would be in Asia.

By 2025, there will be 700 million people in Asia with the same buying power as Europeans.

FedEx's long-term plans for the China market, including linking the China flights to the firm's AsiaOne network, are centred in its Subic Bay hub in the Philippines.

This extension of the US-China route will enhance services between China and the 11 major Asian commercial centres while maintaining the advantages of a US-China direct link.