Despite all the talk of the slowdown in the Chinese economy, parts of the market will still see stellar growth in 2016. Historically the Chinese logistics industry has been focused on the movement of goods from manufacturing locations to various ports and airports in order to serve China’s dominant export industry. As its core markets in Europe and to a lesser degree in North America have struggled through economic weakness, air cargo and sea freight volumes have stagnated. Although more optimistic analysts believe that the sector will again strengthen in the second half of the year when global economic output increases, this has meant that focus for the industry this year will lie elsewhere.

Whereas air cargo, shipping and freight forwarding will struggle, the express parcels market will continue with its unremitting expansion as e-commerce growth grips the entire economy. Although outwardly good news, this will place huge stresses on the country’s logistics providers.

This will mean that e-retailers and logistics companies focus on two key strategies: firstly improving their domestic distribution networks and secondly building international links which will facilitate cross-border movements of goods.

Express providers in particular have struggled to keep up with the huge demands being placed upon them by e-commerce companies such as Alibaba, now the world’s biggest retailer. Several years ago, Alibaba recognised that it would need to build its own logistics infrastructure if it were to achieve its own aggressive development plans.

For their part, many of the country’s largest express companies have sought various ways to access the capital required to keep up with the 50% year-on-year growth that many have experienced. The long lead times for IPOs on China’s stock exchanges have meant that several will resort to ‘reverse takeovers’ in order to access market capital. Most recently YTO Express has announced it plans to list on the Shanghai stock exchange through the acquisition of an already listed clothing manufacturer. STO Express (reverse takeover), SF Express (IPO) and ZTO Express (IPO in Hong Kong) will also attempt similar routes this year to gain the necessary capital to extend and enhance their network and service capabilities.

Not content with domestic growth, many of China’s largest e-retailers have started to look internationally for new sources of revenue. Alibaba has once again taken the lead with an investment in Singapore Post (through a stake in its subsidiary Quantium Logistics) in order to facilitate its international expansion ambitions. Alibaba’s Tmall Global shopping platform (which offers Chinese consumers access to international brands) has also teamed up with an express company to facilitate the cross border importation of products from Germany. This will include items such as pharmaceuticals, baby products, high value clothing and other luxury brands.

In fact cross-border e-commerce will become one of the most important sectors for international express and logistics companies who have recognised that there is a major opportunity to promote international trade for smaller exporters previously put off by the multitude of rules and regulations. This works both ways, Alibaba’s marketplace AliExpress (which enables foreign retailers access to Chinese suppliers) has already entered into an agreement with Royal Mail which allows importers to airfreight goods to the UK, and track them throughout the delivery network.

So 2016 will be a difficult one for many express and logistics companies present in the Chinese market. Some will struggle to deal with the huge volumes resulting from e-retail activity – squaring the need for new investment with a squeeze on margins. Others in the freight forwarding sector will see flat volumes and perhaps a recovering oil price, which will also put pressure on margins. Only those companies which combine agility in the market with a longer term strategic plan to deal with rapidly changing domestic and international logistics demands will prosper in what is panning out to be a challenging year.