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UPS' COO says China will influence global trade

By Michael Barris in New York | China Daily USA | Updated: 2013-12-10 11:00

China and other emerging markets will significantly influence global trade in the next two decades, the chief operating officer of United Parcel Service Inc said.

"The China story and the emerging markets story certainly hasn't been written - that's a story in process," David Abney told China Daily in an interview on the sidelines of the World in 2014 Summit in Manhattan. "All of our multinational customers that we talk to on a regular basis are focused on these emerging markets," Abney said. "You can't mention the word 'emerging markets' without talking about China. It's just got such an influence."

The Atlanta-based package delivery giant, which is known for its brown delivery trucks and workers in brown uniforms, launched its China operations in 1988. With Asia-Pacific customers in 45 countries and territories and regional hubs in Shenzhen and Shanghai, it has played a part in spurring China's growth into the world's second-largest economy.

"We certainly believe that we play a key role (with) not only Chinese businesses but multinationals that are located in China, in getting in and out of the country," Abney said. "I think one of the reasons (for that) is that we're viewed as an enabler, right? When you can get exports out or you get packages in, that is creating jobs. Creating jobs not only in China, but wherever is connecting in other parts of the world."

The company's brown trucks have become increasingly visible on China's streets as Chinese continue to embrace online shopping.

On China's biggest online shopping day of this year, Nov 11, also known as the 11.11 Shopping Festival, China's biggest online shopping company processed more than $5.75 billion in its online payments system - a record for a single day anywhere in the world, surpassing by two and a half times the total for US retailers last year on so-called Cyber Monday. The sale is a tradition that started in 2009, when merchants offered discounts to perk up sales in the otherwise quiet time of the year.

The challenge of efficiently delivering packages to some 330 cities spaced across varying populations and terrain has resulted in the use of alternative energy vehicles to reduce fuel costs, including those powered by natural gas and electricity.

"We just look at the individual country and the characteristics and we try to match those technologies with the right circumstances," Abney said. For instance, electric and hybrid-electric vehicles can be used in densely populated cities like Beijing or Shanghai, where delivery addresses are relatively close together. Overall, fuel consumption accounts for an average of 5.6 percent of UPS's global operating revenue.

"We measure everything, and if we can save a few seconds a stop - when you multiply that by almost 100,000 drivers a day - you can see how you can get tremendous savings," Abney said.

The company has been pushing negotiators to reach a deal on the proposed Trans-Pacific Partnership (TPP). The pact being discussed by the US and 11 other countries - Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam - would create a free-trade bloc that makes up nearly 40 percent of the global economy. Talks, which began in March 2010, are expected to conclude early in the New Year, if not by the end of this year, Mexico's economy secretary, Ildefonso Guajardo Villarreal, said over the weekend.

UPS Chairman and CEO D. Scott Davis has said the proposed agreement "would become a 21st century global commerce model" that would open "countless avenues of expanded trade."

Although China is not involved in the TPP talks, Abney said the pact's potential to involve "a lot of the key economies in Asia" and possibly "China at some point" deepens its importance. "Anything that reduces barriers to trade - and these free-trade agreements certainly do - we encourage and support on both sides of the Pacific," the COO said.

The US's economic health also affects the China trade conversation, Abney said. "The better the US economy does, of course, is going to increase the flow between China and the US," he said. "The US will pull more product from China."

Years ago, when China was annually seeing double-digit economic expansion, "all of us in this business were increasing flights" and filling those flights with "a lot of products going in," Abney said.

"Now the economy has slowed down, but it's getting a little bit better in the US. We're starting to see a little bit of that pull. What we're seeing, though, is intra-Asia trade between China and the rest of Asia is increasing at a higher rate than China-to-the-US or China-to-Europe."

With logistics costs representing a higher percentage of GDP in Asian nations than in Europe, the US or Japan, "there is a lot of local trade going on between countries", Abney said. "So China may not be shipping as much to the US at this time. But trade across the rest of Asia does seem to be pretty healthy. And supply chains go across, so even a product that's going to end up in the US or Europe could crisscross between Indonesia, Vietnam and China several times before the end product winds up in the US," he said.

Forecasters have given a mixed outlook for China's growth rate next year - ranging from as low as 7 percent, to more than 8 percent. China's 2013 GDP goal is 7.5 percent.

"We do notice that it's not accelerating the way that it was," Abney said. "That does not mean we think the economy is going to shrink. It's just growing at a lesser rate."

"You can't underestimate the world's second-largest economy, and the influence that China and the rest of the emerging markets are going to have in the next 15 to 20 years on global trade," the executive said.

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