(Ecns.cn) -- Selling its entire stake in Sinotrans A-Plus Express (APEX), the German logistics giant DHL pulled out of its domestic delivery business in China this June. For the past seven years, DHL had made enormous efforts and concentrated greatly on this global market with the largest potential. So why did it walk away without any hesitation despite huge investments?
Some experts suggested that it left due to money-losing pressures, especially after the implementation of the revised national postal law that limited foreign-invested companies to package deliveries. Some said it made the decision in order to launch an IPO in Hong Kong, and the retreat was an unavoidable choice as there was no better alternative.
For profit or market?
DHL, FedEx, UPS, and TNT are generally considered to be the four international logistics giants. However, they have all been limited by Chinese postal policies.
Since the very beginning when they entered China, the four giants all had to choose to cooperate with Sinotrans. Otherwise they could not operate in the express delivery business. However, the other three foreign companies ended their cooperations one by one, and only DHL stuck with it to the end.
In 2004, DHL was the first foreign company to begin its express service in China. In 2006, DHL announced a series of favorable policies for China and made the potential market its priority in its global strategy. In 2009, DHL made three acquisitions of domestic express delivery companies. Last year, it planned to expand into more areas in the country, including the Pearl River and Yangtze River deltas.
Clearly known by the public, the implementation of the revised national postal law must be one of the reasons for the huge loss suffered by these international giants. The revised law, drafted by the State Post Bureau and approved by the National People's Congress, took effect just three months after DHL-Sinotrans completed three acquisitions of domestic express delivery companies and launched APEX in June 2010.
In the statement, Sinotrans admitted that its domestic delivery operations lost about 99 million yuan ($15.3 million) by the end of 2010, and mentioned that competing against low-cost Chinese rivals was an unbearably difficult challenge.
"The timing for DHL to fully enter the Chinese express delivery market has not yet arrived," said Xu Kewei, DHL Express Asia Pacific CEO, talking about the reason for the retreat.
Meanwhile, another piece of news also attracted the attention of the express mail industry. At the time of the retreat, DHL was planning to apply for an IPO in Hong Kong. It was guessed that the sell-off might be a move to eliminate worries possibly aroused by its money-losing business in China. By giving up China's domestic express delivery market, DHL might actually have greater ambitions.
