Revenue from China’s postal services jumped by 22.3% in 2011 to CNY15.6 billion. Half of the revenue (CNY7.58 billion) came from the express business, up 32% year-on-year. Revenue from the international express business in 2011 accounted for only 24.4% of the industry’s total, declining 6.7 percentage points from the previous year. Geologically, East China accounts for 81.1% of the country’s total express business revenue, almost unchanged from 2010. In comparison, Central China took up 9.9% and West China 9%. The market was partly driven by the country’s booming e-commerce industry. The country’s total online shopping revenue reached CNY800 billion in 2011, said He Liming, Chairman of the China Federation of Logistics and Purchasing. This generated a total business volume of 3.65 billion pieces of express mail and parcels, He said. Analysts said logistics services need to be further improved and might hold back the development of the country’s robust e-commerce industry. In 2011, the country’s total logistics costs increased by 12%.

The number of domestic express package deliveries is expected to reach a record high of 393 million in the month running up to the Chinese New Year on January 23, according to the State Post Bureau of China. The figure is predicted to rise by 143 million, or 57.2%, from the same period last year, which may paralyze express services in some parts of the country, said Han Ruilin, Spokesman for the State Post Bureau of China. E-commerce dealers often offer large sales promotions and people send more parcels to their home regions in the run-up to the Spring Festival. The Bureau issued a directive to ask Chinese courier companies to maintain normal operations during the year-end delivery period. Express services should hire additional shuttle buses to make sure packages are not delayed. Da Wa, Secretary General of the China Express Service Association, said domestic demand for express services will far exceed supply in China for at least the next five years. Da predicted in December that the number of domestically delivered packages in 2011 will total more than 3.5 billion. China is the world’s third-largest express market, behind only the United States and Japan. The transaction volume showed an average annual growth of 27% in the past five years, with the number of packages and documents processed daily increasing from 3 million to 13 million.

The Ministry of Transport will seek to expand China’s express courier sector by 150% by 2015, turning the service into a CNY143 billion business. Under the government’s latest five-year-plan, the Ministry will nurture at least five large Chinese express courier companies, each with revenue of more than CNY1 billion by 2015, in the hopes of positioning them against global leaders such as FedEx and UPS. The use of express courier services is increasingly vital with the explosive growth of e-commerce, the Ministry said in a statement on its website. KPMG also said a major factor in the recent domestic growth of logistics was e-commerce. “This business is set to continue growing rapidly,” it said in a report. Morgan Stanley forecasts China’s e-commerce revenue will grow 75% from 2010 to 2013. “DHL and FedEx have been unable to conquer the local market,” Anthony Wong, a former President of the Hong Kong Logistics Association said. Establishing large express courier companies would make it easier for Beijing to collect taxes from them, as opposed to the plethora of small couriers that tend to fly under the radar, Wong added. By 2015, the Ministry of Transport wants express courier services to cover 98% of China’s municipalities and provincial capitals, with 95% availability of 24-hour delivery services within the same city.

FedEx Express has expanded its airport facility in Hong Kong by more than a third to improve its parcel-handling efficiency, ignoring the downturn in the air cargo industry. The company installed new equipment and storage space, which would allow it to handle 200 tons of cargo in just under 45 minutes, compared with two to three hours in the past, said Anthony Leung, Managing Director of FedEx Hong Kong and Macao. The ground handling facility of FedEx at the Asia Airfreight Terminal in Chek Lap Kok has been expanded 37% to 4,695 square meters. The number of trucking docks has been doubled to 14 and those with direct ramp access also doubled to four. An additional 748 sq m of caster decks have been added to facilitate faster movement of freight shipments. FedEx has also increased Hong Kong staffing levels by 5%. The expansion in facilities comes as cargo volumes are dwindling. Hong Kong International Airport saw its cargo tonnage drop 4.6% year on year in the first 11 months of last year. Leung said the express cargo business would be less adversely affected by the European debt crisis than general air cargo. This is because importers tend to place ad hoc orders in small quantities rather than in bulk when they need to test customer response on products before placing big orders for them.

Night curfews and a shortage of take-off and landing slots are hampering the development of courier air cargo operations in China, express freight airlines have complained. Carriers said the problem is severe in western provinces where the infrastructure for night-time cargo operations is lacking. Li Dongqi, President of SF Airlines, said a midnight-to-6am curfew “seriously lowers operating efficiencies for firms like us. Business volumes are very low – time slots are the constraining factor”. SF Airlines, the air carrier subsidiary of Shenzhen-based courier company SF Express, has grown significantly in the past two years. The carrier handled about 210,000 tons of express shipments so far this year using a fleet of 15 chartered freighters including 34-ton-capacity Boeing 757s and Boeing 737s, capable of carrying 20 tons. The carrier also has a strategic partnership with China Cargo Airlines. Li said the airline wanted to expand its air express operations to Hong Kong and Taiwan following the launch of a Singapore and Malaysian operation, although it was “not ready” for “trans-ocean business”. Li’s views were echoed by other express cargo operators, including Su Guoxin, Chief Executive of Donghai Airlines and Gao Pei, Executive Vice President of China Cargo Airlines. Gao said the curfew and a lack of stable freight volumes constrained expansion. Shan Daxin, Vice President of Marketing for Yangtze River Express Airlines, said these issues had developed because of rapid growth in airfreight demand as electronics and other high-tech manufacturers moved into western cities such as Chongqing and Chengdu. Gao of China Cargo Airlines added that domestic air cargo demand had “increased significantly” so far this year and China Cargo controlled about 30% of the total airfreight volume in Shanghai. This is despite just 1.1% growth in overall domestic air cargo volumes in the first nine months, according to figures from the Civil Aviation Administration of China (CAAC), the South China Morning Post reports.