Peace of the Market

Shenzhen, China — Not many competitors in the rough transportation market would think of FedEx as a company that wants to “co-exist in a peaceful environment.” But that’s how the company describes itself in China, and that may say a lot about the state of shipping industry investment in the world’s second-largest economy.

Speaking to a group of aspiring logistics professionals in this hub of China’s industrial exporting machine, FedEx’s head of China business gave a recruiting pitch that would be alien to most Westerners. He appealed to national pride, a respect for the rule of law and basic worker rights, and a need for stability in the future beyond the “chaos and turmoil in society.”

It wasn’t actually billed as a staff recruiting session, but Eddy Chan’s address at the China International Logistics and Transportation Fair spoke volumes about the strategies FedEx and other companies are taking in China.

“People say we are an American company invested in China,” Chan said. But, “FedEx China is a Chinese company. China is our home. And we are contributing to the economic development of our country. That is the best way to describe FedEx China.”

Like other Western transportation and logistics providers, FedEx is following the trail of Chinese government policies and multinational investment deep into the remote rural interior of the country.

“We’re moving further into China,” Edwin Coseteng, a managing director of IDS Logistics International, a unit of Li & Fung, the Hong Kong-based trading giant, told those attending last month’s Trans-Pacific Maritime Asia conference in Shenzhen, organized by The Journal of Commerce.

But that hardly means simply setting up shop in Qinghai and Chongqing, as many Western companies have in the coastal cities over the past decade.

The complexities — that “chaos and turmoil” — are evident in the reports of labor strife at some of the factories that have produced China’s manufacturing and exporting miracle. At the TPM Asia event, Qing Wang, Morgan Stanley’s chief economist for Greater China, said minimum wages for workers in some western China cities are half the level of those in the more familiar coastal areas, ranging from $164 a month in Shanghai to $82 a month in Anhui.

Those low wages, of course, are a big part of the appeal to Western companies. But Chan’s appeal at the Shenzhen logistics event suggests FedEx and other transportation operators are more interested in a market of 1.3 billion potential consumers than they are simply in low wages.

The company, he said, had gone from 255 staffers in China in 1999 to 3,000 by 2007, and is recruiting more.

“Local employees are 90 percent of the total in China, and we have a focus on internal promotion. Seventy percent of our employees are promoted from within. We have a very good system to ensure the fair treatment of employees,” he said.

It’s no small thing that Chan was speaking only a short, same-day delivery drive from the Foxconn factory sites that have drawn large and negative coverage around the world for their labor practices.

Those employees, presumably, will follow manufacturers and shippers inland as they build a larger economy, or, as Chan put it, “make the cake bigger . . . Chinese companies are not only focused on the domestic market but also on the overseas markets. And with the continuous growth of China, we can have more and more Chinese companies as our customers,” Chan said.

“This is very good news for FedEx,” Chan said.

It’s the good news that’s almost as important, of course, as that peaceful environment.

Paul Page is executive director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com. Follow Paul Page on Twitter, www.twitter.com/paulpage.
 

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