China's Biggest Courier Firm Could Soon Deliver Parcels by Drone

(Bloomberg) -- Chinese courier company SF Holding Co. says it’s won a license to operate drones, opening up a new potential frontier for package delivery in the world’s second-largest economy.

SF, the nation’s largest listed courier provider by market value, said late Tuesday that one of its units was granted China’s first ever drone operation license and that the firm was now legally able to operate logistics drones. Two phone calls to the Civil Aviation Administration of China weren’t answered Wednesday, when SF’s stock jumped more than 5 percent, the biggest contributor to gains on the Shenzhen Composite Index.

Package delivery is key in the world’s biggest consumer market, where the rise of e-commerce and mobile payments has shifted shopping for everything from groceries to factory parts online. More than 40 billion parcels were shipped around China in 2017 -- that’s about 110 million packages a day -- and volumes are expected to reach 49 billion parcels this year, according to the State Post Bureau, China’s delivery-industry watchdog.

Delivery firms have been eyeing the use of logistics drones since about 2015, when e-commerce giant Alibaba Group Holding Ltd. partnered with Shanghai YTO Express Logistics Co. in a one-time test -- delivering packages of ginger tea by drone. Fellow online retailer JD.com, which has its own delivery service, was reported to have started making delivery drones last year and tested the service in some rural areas.

Shares of SF’s rivals declined in Chinese trading, with YTO Express Group Co. -- Shanghai YTO Express’ parent -- down as much as 2.4 percent and STO Express Co. falling as much as 1.2 percent in the mainland market.

To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net, Philip Glamann in Shanghai at pglamann@bloomberg.net.

©2018 Bloomberg L.P.

With assistance from Amanda Wang, Philip Glamann