UPS Success Depends on Breaking China Customs/China Post Axis

Somewhere on Second Ring Road East

Kudos to UPS for making the decision to buy out Sinotrans’ share of their joint venture. Sinotrans is living proof that you can’t have multiple, competitive joint ventures with the same local partner and expect all of them to be equally successful. DHL was first into China and first in with Sinotrans, and as a result got the best people and most attention. Add that to DHL’s tightly focused and very aggressive push into the market, and you get a formula for success.

Just as an aside, TNT is another company in UPS’ position. They too have a Sinotrans JV that has been going nowhere. TNT needs to swap out of its partnership as well if it plans to be competitive.

None of this suggests that UPS’ troubles are over in the market. Now they will have Sinotrans as an enemy rather than a lead weight, which might redound to DHL’s favor. The other problem is the one they all face: China Post is allegedly in cahoots with the Customs Service to delay clearance of all non-document express parcels coming into China using anything but Express Mail in a fairly brazen attempt to damage the prospects of UPS, DHL, TNT, and FedEx. Until they can get over this workaround, UPS will be unable to compete effectively in China. Without a strong local partner, UPS needs to build a powerful constituency in China and ally themselves with their rivals to end the customs nonsense, or they will find their business in the PRC unsustainable. Remember where you heard it first.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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