FedEx Readies for Surge in E-Commerce With New Hub in Shanghai

(Bloomberg) -- FedEx Corp. expects growing cross-border online transactions to be a driving force for its business in China as the company prepares to open one of its largest facilities in Shanghai.

“Absolutely that's an important part of it,” David Cunningham Jr., chief executive officer of FedEx Express, the world's largest cargo airline, said in an interview in Shanghai Monday. Cunningham said the city is a key leg of FedEx's global cargo network, with more transshipments expected to flow into Shanghai in the future before being moved to other markets.

Air cargo volume in China has increased steadily as demand rises in the nation's cross-border e-commerce market, where the value of goods is projected to climb 43 percent to 758 billion yuan ($117 billion) this year. As appetite for foreign products ranging from diapers to cosmetics to fresh produce expands among the emerging middle class, China's air cargo volume is expected increase around 6.2 percent in 2018, after climbing 6.6 percent in 2017, the largest gain in seven years, according to the Civil Aviation Administration of China.

“There's an opportunity to bring a lot of products and a lot of convenience to the Chinese consumers,” Cunningham said before the official opening of FedEx's international express and cargo hub at the city's Pudong International Airport later Monday. “With the wealth of Chinese consumers, and the worldliness of Chinese consumers, they're gonna demand goods from the U.S. and Europe and parts all over the world.”

Increased Connectivity

The new 134,000-square-meter Shanghai hub provides greater connectivity to Chinese customers, particularly those shipping to the U.S. and Europe, the company said in a statement Monday. FedEx previously announced an investment of more than $100 million in the facility.

The burgeoning Chinese e-commerce market has lured both foreign and local companies to expand. United Parcel Service Inc. set up a $10 million venture with Chinese express delivery company SF Holding Co. in Hong Kong in May. JD.com Inc., China's second-biggest online retailer, added warehouse space roughly equivalent to the size of Monaco in the third quarter of last year. China's top three state airlines are also reforming their air cargo units and selling stakes in the business.

To contact Bloomberg News staff for this story: Dong Lyu in Beijing at dlyu3@bloomberg.net.

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Lena Lee, Sam Nagarajan

©2018 Bloomberg L.P.

With assistance from Dong Lyu