Chinese workers sort parcels, most of which come from online shopping, at a dispatch center of STO Express in Hangzhou city, east Chinas Zhejiang province, 11 November 2013. [Photo/dfic.cn]

Even as Chinese parcel carriers' business expands, US-based United Parcel Service Inc and FedEx Corp are pursuing licenses to offer more intercity express delivery services in China.

"Even though there's no indication that giant foreign carriers will dominate the domestic market in the near future, their huge fleets, diversified services and international recognition are exerting great pressure on us," said Zhou Ye, head of the information office at YTO Express.

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Zhou noted another challenge: E-commerce companies such as Tmall.com and Gome Electrical Appliances Holding Ltd have established divisions to handle express shipping services and team up with existing express service carriers to grab market share.

"However, the future of this industry will no longer be decided by the number of vehicles or staff," Zhou said.

Technology, equipment and capital will enable capable carriers to rise to the next level of service by carrying more chemical goods, high-end foods, cosmetics and pharmaceutical products. These products usually require premium delivery services at high rates, and thus they're more profitable than most parcels.

To pursue this segment, YTO Express bought four cargo aircraft over the past two years and established a partnership with Air China Ltd and China Eastern Airlines Corp Ltd under which it will use their warehouse facilities.

It plans to put two more new airplanes into service in the first half of this year. Two years from now, it plans to have 15 owned or leased freighters.

YTO Express divides the domestic market into eight areas, 59 transit centers and more than 5,000 distribution outlets covering 1,500 cities. It offers air-express services in more than 70 first- and second-tier cities.

China Postal Airlines (which is jointly owned by the State Post and Telecommunication Bureau and China Southern Airlines) signed a contract with US-based PEMCO World Air Services Inc for five Boeing 737-300 converted freighters last September.

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