Chinese courier YTO Express to launch global expansion from new Hong Kong headquarters

Mainland courier YTO Express is set to launch an ambitious global expansion plan from Hong Kong after electing to set up its new international business headquarters in the city.

YTO Express’ decision to use Hong Kong as a springboard to become the leading Chinese courier outside the country follows its purchase of a majority stake in On Time Logistics (OTEL), which is listed in the city.

“Without Hong Kong, it is difficult for Chinese mainland companies to realise globalisation,” said Yu Weijiao, chief executive of YTO Express, on Tuesday. “The headquarters for YTO’s international business will be in Hong Kong.”

The Alibaba-backed express delivery firm, which carried out a back-door listing in Shanghai last year,

has set its sights on international expansion with the purchase of 61.87 per cent stake in Hong Kong-based On Time Logistics.

“Acquiring OTEL gives us much easier access to expand our overseas business than building the networks by ourselves,” said Yu. “OTEL will be the sole platform for us to reach global markets in the foreseeable future.

“We see strong growth in China’s cross-border e-commerce business and that is one of the businesses we focus on.”

The size of the China’s e-commerce market is forecast to reach 1 trillion yuan by 2020, “providing a historical opportunity for Chinese logistics companies to expand their global business,” he added.

Confident that it will successfully expand its global footprint, YTO Express aims to become the largest Chinese mainland courier in terms of international business by 2020. It mainly plans to follow routes along the area covered by China’s belt and road trade strategy.

“However, it’s impossible to deny that for Chinese mainland companies it’s nerve-racking to step into overseas markets, because of differences in culture and law,”said Hao Wenning, vice president of YTO Express on Tuesday. “But the brand influence of OTEL in global logistics markets will enable us to quickly adapt to local cultures and enlarge our international business team.”

OTEL, founded in 1995 by Spencer Lam and operating out of Hong Kong, has 52 offices in 17 countries and serves clients in 150 countries. The company started out as a local air and sea freight forwarder.

“For the overseas business expansion, one of the major costs will come from buying aircrafts to strengthen air freight services,” said Hao.

He said YTO Express would not enlarge its stake in OTEL in order to keep its Hong Kong listing status. “OTEL could also serve us as a platform for overseas finance,” he added.

OTEL has come under intense pressure in the face of fierce competition. Its net profit plunged by about 90 per cent to HK$5.0 million in 2016 from HK$49.9 million a year earlier. The drop was mainly down to excess supply in the air and sea cargo space, which led to aggressive pricing competition within the industry.

“We are positive on YTO’s clear strategy,” said Qu Yongzhong, an analyst from Northeast Securities. “The overseas network of OTEL will help the company’s global expansion in the long term but from a short-term view, we see limited momentum coming from the deal.”

E-commerce giant Alibaba, which owns the South China Morning Post, bought a minority stake in YTO Express in May 2015.