Ding Ningning

For the current stage of China’s economic development, the reform of the postal service is a hard nut to crack.

On the one hand, all the financial indicators of the postal service declined drastically after the postal service was separated from the telecom service. On the other, the postal service faces the criticism from the competitors in the opened services for mixing government administration with enterprise management. If the short-term goal of returning to profitability is to be achieved, it will further weaken the postal service’s ability to seek long-term development.

What kind of an industry does the postal service belong to? Does the reform of the postal service have to consider its impact on social and political objectives? How to promote the long-term development of China’s postal service? All these issues require in-depth studies.

I. The Postal Service Is Not an Industry of Natural Monopoly

Whenever the reform of a public service sector pops up, many people tend to take "monopoly breakup" as the only proper course, instead of analyzing the nature and origin of this monopoly. This is not a serious and scientific attitude. In an extreme sense, government is also a public service sector. Does the monopoly of government have to be broken up? Before the ideal of Great Harmony is realized, it is perhaps too reckless to call for a breakup of this monopoly.

Unlike a railway network and a power grid, the postal network itself does not have the physical factor of exclusiveness. In short, a postal route neither prohibits other people from passing through, nor poses an obstacle by the passing through of other people to the postal route. From the perspective of economics, therefore, the postal service is not an industry of natural monopoly. The monopoly of the postal service is created by the government, and therefore it is a typical industry of administrative monopoly.

Why should the government exercise monopoly over the postal service? First of all, the monopoly is designed to ensure the safe delivery of official documents and letters. Historically, most of the postal services in various countries evolved from the delivery system of official documents (for example the courier stations in ancient China). It was only after the emergence of contemporary nationalist countries that the postal service began assuming the responsibility of delivering letters for all citizens and thus becoming a public service (public product) provided by the government. In the meantime, the postal service still assumed the responsibility of delivering government documents. As long as no solution is found to substitute the above two responsibilities, the exclusive right (monopoly) to operate the basic business of the postal service (such as delivery of letters) should not be broken up. Otherwise, such a breakup will be harmful to the interests of both the state and the public. Under the precondition of maintaining the exclusive operating right, the reform of the postal service should emphasize greater financial transparency and stronger public supervision (especially from the customers).

Nevertheless, the demand for breaking up this monopoly is not completely unfounded. With the development of science and technology, the postal service has constantly expanded the spheres of its business. Due to the system inertia of business expansion, the postal service naturally extends its exclusive operating right (monopoly) to new areas such as bulk parcel delivery, special delivery, express delivery and telecommunications. It is apparent today that many of these business areas are competitive and the breakup of monopoly is needed to increase the efficiency of their services.

In view of the above analysis, the reform of the postal service must first of all define what is the basic business and what is the expanded business if unnecessary detours must be avoided. On the basis of protecting the postal service’s exclusive right to operate the basic business, its exclusive operating right in the area of expanded business should be revoked so that the postal enterprises can actively participate in competition and achieve the goal of promoting development through reform. Lack of understanding of the above issue will lead to a loss of national interests. For example, one typical mistake was that China only excluded "personal letters" when it opened international express mail service (see item 4 on the part or all of the business that can be done by agency in Article 16 of Chapter IV of the Regulations of the People’s Republic of China on the Administration of International Freight Shipping Agency promulgated on June 29, 1995). This is because it is impossible to determine whether a letter is personal or not. The common practice in other countries is to designate the letters below a certain weight as the protected area of the postal service’s exclusive business.

II. Distinguish the Responsibilities and Advantages of the Government and the Market

Moving from the planned economy to the market economy is a set goal for China’s reform. But it does not mean that all sectors must be marketized.

In the market economies of the West, the division of labor between the government and the market was very clear in the first place. According to the textbooks of Western economics, the advantage of the market is to increase the microeconomic efficiency of enterprises through competition and it was the government’s responsibility to provide universal services for all citizens. But after World War II, the excessive national policy on nationalization and welfare in the Western countries (mainly in Europe) led to a decline in economic viability and a drastic increase in government burden, hence the emergence of the Thatcher-Reagan revolution in the 1970s. The tide of privatization not only swept across all the sectors of general competition, but also affected the public service sector.

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