As the first foreign operator in the world, Deutsche Post subsidiary DHL Global Forwarding has been given the right to transport airfreight shipments within China with immediate effect. Heiner Siegmund reports.

As a precondition, the China Air Transport Association (CATA) granted a number of licenses to the forwarder in order to manage domestic cargo flows between 17 Chinese cities. Among them are Beijing, Guangzhou, Wuhan and Xiamen, to name just a few.

"We are following a settlement trend that is moving from the east coast to the country’s interior," said Peter Landsiedel (53), CEO Asia/Pacific of DHL Global Forwarding.

This move has been under way for some time and is expected to intensify in the future ¨C partially as a consequence of Beijing’s direct support of it. This means strategically that DHL Global Forwarding will already be on the spot when the next wave of producers will arrive; be it the telecommunication industry, automotive suppliers or manufacturers of consumer goods.

Said Landsiedel: "DHL Global Forwarding Domestic Airfreight is a strategic tool for us to expand further westwards into second and third tier cities in China, enabling DHL to work more closely with our customers in the hinterland."

According to Landsiedel, there have been a number of factors, which played a decisive role in why his company and not any of DHL’s competitors in the forwarding industry has been selected to be the first foreign provider of domestic services in China.

"Currently, we are operating 40 branches in the country, so we didn’t start from scratch. Secondly, we are a global player, which enables us to link domestic Chinese cargo services with our intercontinental network."

He also pointed out that DHL offers customers a high level of quality ¨C from door to door. All in all, this means that "we have a very strong competitive position, something CATA certainly considered during their decisionmaking process, in accordance with our multi-million dollar investment plan."

In fact, prior to the launch of its domestic airfreight service DHL Global Forwarding announced the spending of as much as US$20 million to further expand its Chinese network.

"The China Air Transport Association didn’t impose any additional fees for issuing those 17 transport licenses," Landsiedel stressed.

The permits have no expiration date. However, they are bound to specific minimum standards, which Landsiedel didn’t further elaborate due to competitive reasons, as he says.

To optimise the flow of goods, DHL Global Forwarding plans to establish a hub and spoke system at the airports of Beijing, Shanghai, Hong Kong, Guangzhou, Wuhan and Chengdu.

"Through them, we will develop the flux of inner-Chinese airfreight shipments in co-operation with our local airline partners," Landsiedel said.

These capacity providers include Air China Cargo, China Cargo Airlines, China Southern and Shanghai Airlines ¨C with whom capacity purchase agreements have been signed in the meantime, he added.

"By partnering with major Chinese carriers we can guarantee high product quality, competitive pricing and ensure sufficient capacity especially during peak seasons," said Victor Mok, DHL Global Forwarding’s senior VP Greater China.

As far as the traffic flows are concerned, DHL expects a reduction in the imbalances between imports and exports. There are a lot of consumer goods coming into China due to the emerging middle classes and their increasing buying power. This leads to a growth of imports, predicted Landsiedel.

For feeding and de-feeding as well as to-door deliveries or pick-ups at the shipper’s facilities DHL Global Forwarding is collaborating with 40 local subcontractors.

"Since we do business for quite a while in this country we know the trucking companies fairly well. Nevertheless, we will constantly monitor their performance so that the customers can expect to receive a reliable transport quality."

Asked about the market share of the Deutsche Post subsidiary for Chinese domestic airfreight shipments, Landsiedel gave a rather conservative reply.

"We are aiming at about ten percent in the next four to five years. To achieve this goal we want to systematically expand our network by gradually adding 13 other cities to it."

According to Boeing’s latest World Air Cargo Forecast, the domestic Chinese cargo market has grown at over 20 percent every year since 1990.

Until 2010 it is expected to double its current size and reach about US$3.4 billion in 2010. As a consequence China’s domestic airfreight market has become the second largest in the world (after the US) with an annual growth rate forecast of 10.8 percent over the next two decades.