24/7 Wall St.

Trade friction between the United States and China has threatened the ability for the U.S. delivery companies FedEx and UPS to do business in China. FedEx, in particular, has been questioned by the Chinese government about the contents of some of its packages. However, the expanding, homegrown delivery business in China is likely a bigger challenge than the relationship between Washington and Beijing.

According to the government-controlled People’s Daily:

According to a report on the development of China’s express delivery sector in 2018 released this April by China’s State Post Bureau (SPB), last year, China’s express delivery sector handled over 50 billion parcels and the employees in the industry amounted to 3 million.

In 2018, China’s express delivery companies provided services to an average of 280 million person-times of people per day, according to the report, suggesting that one out of five people in China was using express delivery services each day.

Combined, Chinese delivery companies employ 3 million people.

The level dwarfs the number of packages shipped domestically in America, and the number of employees who work in the industry.

The competition to U.S. business inside China is not new. Companies from Walmart to GM and Apple to Google have faced it. What is hard to tell is the extent to which the Chinese government favors local companies and creates an uneven field of competition. This certainly happened which Google was edge out of the country. Local search operator Baidu has over 80% of the market.

And FedEx and UPS do not have the delivery infrastructure in China to compete with local interests completely. All in all, that limits their prospects no matter what happens politically.