The company said it would offer next-business-day domestic delivery services in China from June.

The US express delivery giant was previously only involved in international express services in China. Its close rivals DHL and United Parcel Service Inc launched domestic services in 2004 and 2005 respectively.

"We are well-positioned to capitalize on China's transition to a consumer economy through its rapidly growing middle class," said Michael L. Ducker, president of FedEx Express International.

Eddy Chan, senior vice-president of the company, described the business as a "long-term" investment and said the company was confident about the market because up to 90 percent of its existing customers in China and abroad had expressed the need for domestic services.

FedEx has set up its China regional hub in Hangzhou, East China's Zhejiang Province, to carry out the domestic service.

"Hangzhou offers the right combination of air traffic capacity, reasonable operating costs, a central geographic location, favorable weather conditions, and a future customer base that are all crucial for the set-up of a logistics center," said Ducker.

Xiaoshan International Airport, where the regional hub is located, invested some 26 million yuan in infrastructure for the company while FedEx initially invested about 4 million U.S. dollars on facilities in the newly established hub. It will initially be able to sort up to 9,000 packages per hour.

Huang Weilin, an official with the airport, said the two parties had inked a 3-year contract for the 10,000-square-meter site.

FedEx will operate two circular routes from Hangzhou nightly: a north route will cover Beijing, Tianjin, Shenyang and Qingdao; while the south route will service Guangzhou and Xiamen. With trucks, it could cover 200 cities throughout the country.

Domestic carrier Okay Airways will take care of transport using three Boeing 737 freighters.

The company said it had plans to procure more freighters.