Tong Wenhong, CEO of Cainiao Network, speaks at a press conference in Hangzhou, capital of East China's Zhejiang Province on Monday. Photo: Zhang Ye/GT

Cainiao Network, the logistics affiliate of Alibaba Group Holding, on Monday announced a preliminary investment of 1 billion yuan ($154 million) to get its logistics alliance ready for what's expected to be a surge of parcels driven by the government's support for rural and cross-border e-commerce.

Within five to eight years, Cainiao is expected to help its delivery partners have the capacity to deliver 100 billion parcels annually, Cainiao CEO Tong Wenhong told a press conference held in Hangzhou, capital of East China's Zhejiang Province.

In 2015, Chinese e-commerce generated 20.6 billion parcels, up from 860 million a decade earlier, said Tong.

Cainiao appears to be something that the e-commerce giant can bank on to make up for its shortcomings in logistics relative to JD.com Inc and Amazon.com Inc, said analysts.

"With the help of its delivery partners, Cainiao will have a stronger delivery capacity than either JD or Amazon does in China," Liu Dingding, an industry analyst with Beijing-based market research firm Sootoo, told the Global Times Monday.

Cainiao was jointly established in 2013 by Alibaba and three leading domestic express delivery firms: SF Express Co, STO Express and Shanghai YTO Express.

The alliance has more than 128 warehouses nationwide, and it can help its delivery partners offer same-day service in 12 cities around the country.

Efforts in the logistics sector are part of Alibaba's recent diversification strategy to explore new opportunities in industries such as entertainment and Internet finance.

"Alibaba has to seek new growth points to offset potential risks that its core online marketplace Taobao may face due to uncertain regulations in China and a worldwide crackdown on counterfeit goods," Shao Zhonglin, an industry analyst at Shanghai-based market consultancy yongyiresearch.com, told the Global Times Monday.

Taobao, a consumer-to-consumer online platform that accounted for 58.4 percent of Alibaba's total gross merchandise value of 964 billion yuan in the quarter ended December 2015, has long been under pressure over suspected sales of counterfeit goods on its platforms.

Although it hasn't been included on the annual blacklist of e-commerce sites targeted by the US Trade Representative (USTR) for sales of fake goods since 2012, the USTR said in a statement in December 2015 that Alibaba should make more effort to weed out fake goods from Taobao.

Big hopes for Cainiao

Alibaba CEO Zhang Yong said at the conference on Monday that Cainiao is expected to forge a smart logistics system that can make the domestic logistics industry more efficient.

This effort is in line with the central government's call for innovative development in the logistics sector in the next five years to accompany supply-side reforms and boost economic growth, said Liu, noting that Cainiao has bright prospects.

Liu estimates that Cainiao could eventually be valued at $100 billion.

However, Shao has a different view.

Alibaba's powerful online marketplaces have made it possible for the e-commerce mammoth to unite domestic major couriers, Shao told the Global Times on Monday.

"But as the delivery companies gradually upgrade their businesses into more profitable sectors via fundraising following their IPOs, the Cainiao alliance may fall apart and may not run as smoothly as Alibaba expected," he said.

A general manager with a Beijing branch of STO, who declined to provide his name, acknowledged to the Global Times that the surge in e-commerce initiated by Alibaba spurred a boom in the volume of packages handled by domestic express delivery firms.

"But our profit margin has been greatly squeezed by Taobao retailers," he said.

The Alibaba-backed YTO, for instance, which the China Express Association ranked as the largest domestic express delivery firm by volume in 2015, reported a decline in net profit from 747 million yuan in 2014 to 717 million yuan in 2015.

YTO recently moved to obtain a backdoor listing via a takeover deal by Shanghai-listed garment manufacturer Dalian ?Dayang Trands Co. YTO thus follows in the footsteps of STO, which was publicly listed in December 2015.

To expand its delivery partners' profits, Alibaba is wooing more retailers to use delivery services offered by the Cainiao alliance, said analysts.

At the conference, Cainiao pledged a 50 percent discount in service fees for retailers who sign cooperation agreements with Cainiao before May 28.