United Parcel Service Inc. is teaming up with the parent of China's biggest package-delivery company, S.F. Express, in a bid to tap surging demand for deliveries from China to the U.S.
With Chinese businesses increasingly targeting global markets, chiefly through online sales, UPS aims to help them gain "access to the world," said Ross McCullough, the company's president for Asia Pacific.
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Under the arrangement revealed by the U.S. company and S.F. Holding Co. on Friday, the 50-50 joint venture will be formally based in Hong Kong, near S.F. Express's base in Shenzhen. However, their plans call for the business to operate in mainland China, pending regulatory approval. Each partner will commit $5 million in capital to establish the company, according to Mr. McCullough.
An e-commerce boom has fueled the rapid growth of China's express delivery companies, none more so than S.F. Express, founded by the country's third-richest man, Wang Wei. The company's revenue increased by a fifth last year to $8.37 billion, and it recently announced plans to build the world's biggest airfreight hub in Ezhou in central China.
The Chinese government estimates that the country's delivery-sector revenue will top $116 billion by 2020, up from $51 billion last year.
Linking UPS's global and S.F. Express's local networks will offer Chinese businesses and individuals delivery options "they couldn't get otherwise," said Mr. McCullough.
UPS's business in the country grew 30% in the first quarter, said Mr. McCullough. Its Chinese customers are primarily medium-to-large companies, while S.F. Express is plugged into a vast network of smaller merchants scattered across the country, he said.
"They have a footprint in China that's amazing; we have a global network they don't have," Mr. McCullough said.
The partners would "collaborate to revolutionize the logistics sector," said Alan Wong, group vice president at S.F. Express.
While UPS is aggressively expanding its own business in China, the tie-up was necessary for the company to capitalize fully on the country's delivery boom, Mr. McCullough said.
The joint venture will focus initially on China-U.S. deliveries, then add those between the Asian country and Europe at a later date, he said.
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(END) Dow Jones Newswires
May 27, 2017 02:47 ET (06:47 GMT)