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It's been two weeks since the Ministry of Foreign Trade and Economic Cooperation granted a "go-ahead" to foreign express companies to expand investment. With the current stake of up to 50 percent in a joint venture, foreign express companies have long been waiting for enlarging that percentage. But now, when policy allows, they choose to keep a low profile.
The reason, they say, is they're still waiting for the final result of the long-running business dispute with China Post.
Since the beginning of last year, China Post has announced a series of possible curbs on foreigners in the express business in China, including weight and rate restrictions. For instance, any single piece of over 500 grams is not allowed in foreigner's business. China Post also imposed a ban on carrying personal and most government mails. This in fact slashed the market for foreign companies by 60 percent.
Eddy Chan is the spokesman for the Conference of Asia Pacific Express Companies, or CAPEC.
"? China Post on the one hand, is a regulator, on the other hand, is a player in the industry."
But under Chinese law, China Post has sole rights to delivering letters in the country but also acts as the industry regulator.
During the latest round of restrictions released in early September last year, China Post required foreign courier companies to apply for new operating permits within 60 days.
After that, the world's top four express companies, FedEx, UPS, DHL and TNT all submit the new entrustment paperwork, and business is on the normal track. CAPEC spokesman Eddy Chan explains why.
"First, the application of the entrustment is just a one-time event. Second thing, the scope and duration of the certificate we get from China Post under the entrustment will be the same as the scope and duration of the license which have been approved by MOFTEC to our business. The third reason, we got the assurance from them that all the procedure will be in conformity with WTO arrangement. Most importantly, I think that they promised that our business will not be negatively affected."
But the spokesman for CAPEC says they're still against the principle of having to submit the entrustment.
"That is not good for the healthy development of the whole industry."
His concern is shared by the express firms because they worry that the entrustment papers would conflict with a business license from the foreign trade ministry.
Since 20 years ago when foreign express business entered China, these companies have been administered by the foreign trade ministry.
So far in China, the top four international courier companies occupy two thirds of the whole market. The rest part is shared by China Post's EMS, or Express Mail Service, and other privately-invested companies. Compared with 30 percent annual growth rate of foreign couriers, the growth of EMS is on a slow pace. From 1995, it only manages about two percent growth each year.
The opinion gap is based on Postal Law. Over the phone, our reporter Shen Ting interviewed Gao Yangzhi, an expert at Shanghai Postal Affairs Research Institute, to tell what's the focus of dispute and what needs to be revised in China's Postal Law.
"According to the current Postal Law of China, China Post and its regional offices have the sole right to deliver mails and anything with the feature of mails. However, the law doesn't give a clear definition of what a mail is.", he said.
What he means is: it's hard to decide if it's a mail when the content inside the envelope is about paper advertisement or an invitation card for an important event, etc.
That's why some express companies are also delivering some kind of paper files, which China Post believes belongs to its business scope.
Gao Yangzhi urges to revise China's Postal Law to be in line with international practice.
"The international common practice of postal service is: if the mail is under 500 grams in weight, it must be the deal of postal authorities. But if over 500 grams, express companies can share the business."
Below is a story about China Post's new challenges, because the mail deliverer will no longer enjoy government subsidies from this year on, and fiercer competition is coming.
For China Post, 2003 might be a hard year. It's time to rethink how to position itself and get ready to be responsible for any profit or loss, as the government subsidies to postal services will end. Being left in deep debt for years, China Post, again, faces quite a lot of challenges. Let's first have an idea of what a postal staff is thinking of the difficulties.
Xu Liliang has been working in a post office for eight years. When hearing that his salary is no longer from government subsidy, he couldn't help but sighed.
"It's a bad news."
But soon after that, he said it's a good news.
"Now we're within the market economy. In that case, post offices are regarded as enterprises, who're responsible for their own prosperity."
In the past, Xu Liliang was at counter, receiving letters, moving parcels, and helping with remittance. Most of his colleagues also worked in that way. Now, Xu Liliang said some of them play the role as a salesperson after work. Some promote stamps or post cards, and some sell IC telephone cards or calendars. Why? For making a living. Nowadays the salary sees a dramatic drop as the whole postal industry is in red. The ever-decreasing government subsidy will also add to the problem. All of these have imposed more pressure.
"On the one hand, we must be skillful, efficient and professional. On the other hand, we should actively look for new income sources, such as making stamps according to customer requirements, as long as the customization is legal. Thus, we make the stamps full of individuation."
His feeling is justified. Since 1999, China cut subsidies for postal services year on year, from one billion US dollars to about 100 million dollars, almost down by 90 percent. And this year, the subsidy will even be zero.
To work in an enterprise looking for profit maximization, Xu Liliang says it's time to change mentality, because only by more efficient and effective mechanism can he has his income going up.
"I really hope postal staff can have better compensation in the future, not just being satisfied at the bettering working environment."
Now the question is why the state monopoly China Post is kept in red for years? How to turn this newcomer to market economy profitable? Again, Biz-China invited postal expert Gao Yangzhi to analyze why and how?
Before 1998, China's postal services were subsidized by income of telecommunication services. Today, being caught in debt is one thing, China Post is involved in the dispute with the world's top express delivery companies. At the same time, private express companies are also snatching market share from China Post.
Expert Gao Yangzhi says China Post's case is not unique.
"Postal services suffering losses is commonly seen in the world, because postal services are defined as public utilities, not profitable business. The charge for delivering a mail is far below the real cost. So for a long time, postal services have been in debt."
Meanwhile, the telecommunication services have cut a big slice of the cake from postal services. As postal staff Xu Liliang explains.
"It's a digital era now, isn't it? Nowadays less and less people write letters. Most make phone calls to keep in contact. As you see, mobile phones, faxes, emails. People have more choices."
But postal expert Gao Yangzhi attributes the loss to the internal management, more than the objective reasons.
He says the postal system suffered from backward technology, poor service quality, inefficiency and below-cost services. He raises some urgent affairs.
"Postal offices must be allowed to do some profitable businesses, such as insurance and treasury bond agency services, salary and pension payments, international remittance, express money transfer and philately."
In fact, to improve service quality, the postal authorities required delivery personnel to obtain licenses, linked rewards to service quality, required rapid response to tracing inquiries, offered refunds for lost mail, introduced complaint lines and sped up mail delivery.
In addition to raising postage rates, the postal administration developed new businesses, such as gift delivery and telephone fee collection.
Expert Gao Yangzhi says postal system is handicapped by its duty to serve poor remote areas, but it'll be better if there's a special fund to cover the postage expense in those areas. Gao also offers another suggestion.
"It's a win-win solution to cooperate with foreign express companies. On the one hand, the postal system has established a large network reaching the remote areas. On the other hand, express companies can make it more efficient with advanced technology. But on thing to remember: China Post enjoys the sole right to deliver mails, and for those business not included in its proprietary scope, express companies can share."
Now China Post is actively encountering competition by taking advantage of its nationwide network coverage. The country's largest logistics company has been set up Saturday, and in this way, as director general of China Post, Ma Junsheng described, will become a new growing point for the parent company to enlarge its reserves.
"Setting up logistic center will be an effective way for us to expand business scope."
Currently the relevant authorities are preparing to separate profitable operations from unprofitable ones as part of the restructuring necessary for a public listing.
(CRI News January 21, 2003)
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