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ATLANTA / MEMPHIS - 07/13/05 - The world's two largest expedited air freight companies - United Parcel Service (UPS) and Federal Express (FedEx) - have announced plans to expand their operations in China.

United Parcel Service (UPS) - headquartered in Atlanta, Georgia - has said it will start to offer express package service across much of the country by September, while arch-rival Memphis, Tennessee-based FedEx will reportedly sign an agreement next month to establish its first Chinese transport hub at Guangzhou Baiyun Airport in the province of Guangdong.

FedEx said it is the "first and only" foreign-owned company to own its operations in China and the move "recognizes the dramatic business opportunities" being created in the country.

At the same time, UPS has said it will pay $100 million to take over 23 service centers in a move made possible by a deal reached last December with the company's longtime joint-venture partner - the China National Foreign Trade Transportation (Group) Corp., more commonly known as Sinotrans.

China agreed to let foreign courier companies operate wholly owned international express mail businesses in the mainland as a condition of its membership in the World Trade Organization.

Beijing currently requires foreign air express companies to work with a Chinese partner, and UPS had been working with state-owned Sinotrans - the country's largest transport and logistics company - since it entered the China market in 1988.

The company has said that it plans to open a major distribution hub in the city of Shanghai by 2007.

According to press reports, the new FedEx's hub center will be financed by the Guangzhou  Baiyun Airport Authority, which will invest up to $181 million to build a warehouse and a cargo runway for use by the company. 

Construction of the FedEx hub will begin in August next year if the deal is approved by the State Council and the General Administration of Civil Aviation in Beijing.

If given the go-ahead, the facility is scheduled for completion in October 2008.

Guangzhou is considered a prime location for such a facility as the city serves as the major gateway to the Pearl River Delta, the mainland's manufacturing region and a major economic center.

FedEx employs more than 2,500 people in China, and the company has the authority to operate 23 flights per week out of the country and, in March, the company launched the air cargo industry's first direct flight from mainland China to several points in Europe.

Currently, the company's regional operations are based in the Philippines at Subic Bay, a former US naval base just north of the capital city of Manila.

Last May, FedEx extended its lease on the facility until 2010.

UPS, meanwhile, has around 21 flights a week to China, and has been granted the authority to add additional flights to Shanghai and Guangzhou.
 
Like FedEx, UPS lacks a hub in China, and instead serves the country from hubs in the Philippines and nearby Taiwan.

The lure of China has been underscored by a series of recent transportation deals - most notably, the joint venture formed last month by US motor carrier Yellow Roadway Corp. in an effort to become a one-stop logistics shop for moving large volumes of cargo into and out of the country.

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