After waiting nearly five years, US companies Federal Express Corporation and United Parcel Service, Inc. won approval in May to operate express services in dozens of Chinese cities, including Beijing. The city licenses—21 for FedEx and 14 for UPS—were necessary after a 2009 law largely excluded foreign firms from domestic shipping and limited them to handling international packages. The new licenses bring the total number of cities in which the companies can do business to 58 for FedEx and 33 for UPS.

The licenses allow FedEx and UPS to operate independently in specific cities without having to start joint ventures with Chinese firms. They also allow the companies to operate on a business-to-consumer (B2C) platform—delivering packages directly from businesses to Chinese consumers—within the city or cities where they hold licenses, according to Reuters.

This gives FedEx and UPS increased access to one of the world’s fastest growing e-commerce markets, which is growing 60 percent each year. It may be worth $46 billion by 2015, reports Reuters.

FedEx and UPS will now be competing more closely with domestic companies like state-backed China Post, which has 22 percent of the express courier market share in China, and Shentong Express and S.F. Express. These private Chinese firms hold 12 percent and 18 percent of market share, respectively.

“The Chinese government wanted Chinese transport companies to grow to be able to support the logistics needs of the Chinese and not rely on foreign firms,” said Jerry Hempstead, president of Hempstead Consulting, according to an interview with Logistics Management. “As a result, certain impediments were put on the foreign firms to give an advantage to their own. These restrictions have now been lifted and FedEx and UPS can take off running.”

(Photo by MoneyBlogNewz via Flickr)

Posted by Ellen Huber