source from FT
https://www.ft.com/content/26ebd9de-15f0-11e7-80f4-13e067d5072c
China Business  Added
How one Chinese rural county spawned four courier empires

Poor villagers’ ability to ‘eat bitter’ allowed them to ride China’s e-commerce boom


APRIL 14, 2017 by: Gabriel Wildau and Ma Nan in Tonglu county, Zhejiang
For a Chinese hamlet deep in the mountains, Xiatang village has a lot of mansions. Luxury cars bearing $13,000 Shanghai licence plates provide further clues that this is not your typical rural village.

With a population of just 400,000 Tonglu county in eastern China’s Zhejiang province is home to the founders of four separate express delivery and logistics companies, known in Chinese as kuaidi. Over the past 16 months, all four have listed on Chinese or foreign stock exchanges, turning their founders into billionaires.

Zhejiang is famous for its entrepreneurial culture and tight-knit business communities. Its coastal location allowed it to benefit from export-oriented light manufacturing beginning in the 1990s.

By the early 2000s, the city of Wenzhou was the world's leading producer of cigarette lighters and spectacles. Nearby Ningbo’s “limit-up kamikazes” became famous for their daring speculation in the stock market. The provincial capital, Hangzhou, is home to Alibaba and other big internet groups.

Tonglu is scenic — in the spring, its green mountains are daubed with fields of yellow rape flower — but its remote location hampered its economic development. What it did have in the early 1990s was poor villagers with a willingness to “eat bitter” — the Chinese phrase for toughness and an ability to endure hard labour.


“The people of Tonglu were adept at travelling on foot. Because transport wasn’t developed, you had to rely on your own two legs to gain contact with the outside world,” said Sun Kan, author of the 2014 book China’s Kuaidi Tonglu Gang. “The first cohort of kuaidi people drove tricycles or used other simple transport methods. City people couldn’t have endured this kind of job.”

The godfather of the Tonglu gang was Nie Tengfei, who founded STO Express in 1993 aged 20 after moving to Hangzhou and later Shanghai. Staffed by friends and relatives from his home country, STO began by delivering cakes, biscuits and alcohol. But Mr Nie’s crucial breakthrough was the realisation that STO could earn more delivering business documents.

Exporters needed customs declaration forms delivered from manufacturing hubs in Zhejiang to the customs office in Shanghai. While China Post took three days to deliver documents from Hangzhou to Shanghai, STO offered an overnight service.


Lai Meisong, chairman of ZTO Express
In Xiatang village, Mr Nie's hometown of 600 people, a long wall of relief sculpture chronicles the 25-year history of kuaidi. In one panel, a bureaucrat issues a fine to a delivery man. The caption notes that in the industry's early years, regulations forbade private companies from providing kuaidi service, forcing private carriers to “survive in a loophole”.

Others from Tonglu soon followed in the footsteps of Mr Nie, who died in a car accident in 1998. His younger brother, Nie Tengyun, founded Yunda Holding in 1998. Yu Weijiao, a Tonglu native whose wife had worked for STO, founded YTO Express in 2000. STO veteran and Tonglu native Lai Meisong founded ZTO Express in 2002.

“The change in the village is like heaven and earth,” says Feng Genfu, chairman of the Tonglu-Shanghai Chamber of Commerce. “The ones who left home and became bosses, they’ve all built big houses. When they come home from Spring Festival, it’s an endless line of fancy cars.”

By the mid-2000s, the e-commerce boom led by Alibaba had led to extraordinary growth, as delivery men fanned out across the country to deliver clothes, homewares, appliances and even, in recent years, fresh-cooked meals. Logistics companies delivered 31bn parcels in China last year, up 51 per cent from 2015.


A wall relief in Xiatang village, Tonglu county, memorialises a bureaucrat delivering a fine to an express delivery worker for operating in an industry closed to privately owned businesses © Gabriel Wildau
The four kuaidi companies have listed in quick succession. Even their method of flotation shows similarities. While ZTO completed an initial public offering in New York in October, the three others all used backdoor listings in Shanghai or Shenzhen, buying low-quality listed companies and injecting assets into their shells. This method allowed them to avoid the years-long queue for IPO approval on mainland bourses.

Back in Xiatang, an 84-year-old man surnamed Wu takes in the sun from the porch of a large house, dressed smartly in a tweed cap and wearing a gold ring and bracelet. He’s no longer very mobile but he has help — his son, one of 14 relatives who work in the kuaidi business in Shenzhen, hired two maids to cook and clean for him.

“Sure, I remember the Nie brothers,” he says. “Everyone in this village is related. Those boys used to be dirt poor. They used to sleep on the floor.”