Express delivery nears crucial crossroads
( 2002-03-29 09:37 ) (1 )

The State Postal Bureau (China Post) is having problems protecting its express delivery service.

Because of the high-speed development of international delivery giants in the home market, China Post decided to use the term "exclusive operator" in its letter delivery business.

In a recent announcement, China Post said all express delivery companies should be registered with the bureau before May 6.

These companies would only deliver goods "weighing more than 500 grams" or they would have to charge more than China Post.

The bureau said all the companies must stop "illegal" services after the May deadline.

China Post, which carries out duties of both a government organ and a commercial organization, has exclusive rights in letter delivery, a bureau spokesman said.

China Post must provide service to all Chinese, no matter in poor or rich regions. In some very remote areas, China Post is relied upon as the major communications bridge between local residents and the outside world.

But providing these universal and valued services has not proven profitable. China Post has lost money and needs subsidies from more successful businesses like EMS (express mail service), the bureau spokesman said.

EMS' exclusive operation in certain businesses is a legal right granted by the government.

China Post has taken a series of steps to try to stop the "illegal operation" of other express delivery companies.

The move irked express delivery companies, especially joint ventures with top international companies.

The world's top four express delivery service providers, UPS, FedEx, TNT and DHL, have all launched joint ventures in China and recorded good business growth due to their wide-ranging delivery network and efficiency.

The companies criticized the bureau's steps, saying the bureau is "protecting a monopoly" and "will hurt the whole economy."

Li Limou, a representative of the express delivery companies, said China Post should not confuse letter delivery service with express delivery service.

Li, also vice-president of the China International Freight Forwarders Association (CIFA), which has 539 member companies, said China Post's move will drag on the development of express delivery business in the long run.

The rapid development of express deliverers has fueled growth of China's exports and imports, Li said.

China's foreign trade accounts for 25 per cent of the nation's annual revenue, and the express delivery contributed greatly by sending commercial contracts, documents and product samples.

Li said more than 60 per cent of the shipments his member companies delivered are on China Post's banned list.

So if these companies were only allowed to deliver goods more than 500 grams or charge higher than China Post, many of these firms would die, Li said.

He said his member companies have approval from the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) and are operating according to the ministry's stipulations.

Spokespersons for both MOFTEC and the Ministry of Information Industry (MII) said they have no further information about the conflict.

Industry opinions

The conflicts between China Post and express deliverers go back to the early 1990s.

When China Post launched EMS business in 1985, it was the sole express delivery provider in the country.

Overseas express delivery providers also expanded China's market by setting up joint ventures with local partners.

It is difficult for China Post's EMS to compete with them on international deliveries because the joint ventures have better transportation instruments, richer management experiences, far-reaching delivery networks and high work efficiency.

"Time is money" is the slogan many trade companies list as the top discipline.

Since the overseas express delivery companies offer faster delivery speed and cheaper prices, it's no wonder many large companies are turning from China Post to them.

Lu Tingjie, vice-president of the Beijing University of Post and Telecommunications, said the conflicts between the post office and express delivery companies extend overseas.

He said the US Government has re-defined common letters and commercial letters.

The letters between people are called ordinary letters and delivered exclusively by the post office.

Commercial letters, however, are bills, advertisements, company to company notes, receipts and notice letters, Lu said.

He said the delivery of commercial letters should be opened gradually.

China's Post Law was enacted a decade ago but did not differentiate between different kinds of letters.

The government should revise the Post Law to amend and update some articles, industry insiders said.

For the time being, China's express delivery business is being managed by two government bureaux, MOFTEC and MII. Both will not give up their control on the profitable business willingly, they said.

Zhang Chunjiang, MII's vice-minister, said recently that the government is considering setting up a subsidy fund for telecom businesses.

But the post sector, which is closely related to the telecom business, needs a subsidy more urgently, said Liu Liqing, China Post's director-general.

A subsidy would enable China Post to make capital while giving space to other express delivery operators, experts said.