Freight carrier beefs up coverage of smaller cities for fresh profit

SHANGHAI - DHL Global Forwarding, the freight unit of Deutsche Post AG, on Sept 20 said it will set up five more branch offices and open another 20 sales offices across China by 2015 to increase its coverage to 30 percent of the nation's third-tier cities.

Steve Huang, CEO of DHL Global Forwarding China, said that DHL will spread to the central and western regions of the country because many industries are moving to these areas. "Growth in central and western regions of China is in keeping with the government plan, and it is definitely the key priority," Huang said.

DHL has already set up 39 branches and 26 sales offices nationwide, and it plans to have 90 branches and sales offices in China by 2015, he added. Its total investment in China has so far reached $30 million.

According to Huang, DHL has recently opened five branch offices - two inland ones in Zhengzhou, Henan province, and Taiyuan, Shanxi province, and the other three in the third-tier cities of Wenzhou, Zhejiang province, Xuzhou, Jiangsu province, and Huizhou, Guangdong province - with another five in the pipeline.

The opening of these offices is in line with the geographical shift in the nation's industry from the coastal areas of the Yangtze River Delta and the Pearl River Delta to the central and western regions, analysts said.

"DHL has benefited from a rapid buildup of infrastructure in these regions. This has in turn facilitated the provision of DHL's scheduled, reliable and flexible door-to-door services and multimodal transport solutions," said Roger Crook, CEO of DHL Global Forwarding and DHL Freight.

According to Crook, foreign investment in central and western regions is being strongly encouraged by the national and provincial governments.

"In fact, their efforts have paid off. Foreign direct investment to central and western regions surged by 27.6 percent year-on-year in 2010, compared with 15.8 percent year-on-year in the eastern regions, according to the Chinese Ministry of Commerce," Crook added.

Zhengzhou, in central part of China, doubled its GDP in less than five years to more than 400 billion yuan ($62.6 billion) by the end of 2010. Its government announced it would invest 200 million yuan a year to accelerate efforts of to develop the city into an international logistics center by 2015.

Similarly, the GDP of Taiyuan, China's largest coal producing city, reportedly topped 177.8 billion yuan in 2010, and the city registered a compound annual growth rate of 11.58 percent between 2005 and 2009.

"As one of China's pivotal railway nexuses and one of the cities in the central part of China earmarked for commercial and trade reforms, Zhengzhou has attracted investment from more than 10,000 domestic and international enterprises. Setting up an office there allows us to be in the heart of our customers' business operations," said Kelvin Leung, CEO of North Asia-Pacific, DHL Global Forwarding.

The location of the new branches and offices will be set up according to the demand. "Whenever there is a market, whenever there is a customer, we will be there," Huang said. DHL's expansion of its logistics services network follows the fast-growing demand in the central and western regions for logistics services of international standards.

"Looking beyond Beijing and Shanghai and tapping into China's existing infrastructure in these inland markets enables us to make our multimodal solutions that much more comprehensive. Customers can now not just opt for a combination of rail, road, sea and air transport with different transit times and costs but with different origins and destinations in mind," Huang added.

In the first half of the year, China's logistics sector grew steadily, with revenue reaching 74.7 trillion yuan, up 13.7 percent year-on-year, according to figures released by China Federation of Logistics and Purchasing.