Leading integrated express delivery service companies such as DHL, FedEx, TNT, and UPS believe China's ongoing postal reforms will have a profound, positive impact on the country's overall economy and their own Chinese operations.

The four international logistic giants have noted key concerns regarding the country's new postal scheme and the definition of a postal monopoly.

They say that a vibrant and competitive express services sector in China, which is in the interest of the country's economy, can only occur if the playing field is level and competitive.

"We have already handed in our written statement to the relevant postal reform department and we will pay attention to the reforms," says Ken Torok, president of UPS Asia-Pacific.

The Conference of Asia-Pacific Express Carriers (CAPEC), an organization representing the interests of DHL, FedEx, TNT, and UPS in Asia, says that Chinese postal reform will have a positive impact on the country's overall economy as long as it maintains the "three separations principle."

This refers to the separation of government and enterprise, the separation of government and capital, and the separation of government and utility undertakings.

The four companies must get licences from both the State Postal Bureau and the Ministry of Commerce.

The State Postal Bureau plays a dual role in the industry. It is the national postal operator and the country's postal regulatory authority.

"The four companies should be doing the business that is restricted to the State Postal Bureau," a CAPEC spokesman says.

"The focus of postal reform is the separation of government from enterprise," says Gu Lianyu, director of the postal committee affiliated with the China Communications Association.

CAPEC suggests establishing a regulatory authority for the country's postal sector so that there is a complete and transparent separation between the postal regulatory authority, the national postal operator, and other government authorities.

The postal regulator must also only have jurisdiction over the service obligations of the universal postal service provider.

General transportation and express industries, both domestic and international, should remain outside the authority of the postal regulator.

On July 22, the State Council approved the new postal scheme, which focuses on separating government administration of the sector from the postal business.

The State Postal Bureau will be transformed under the scheme into the Postal Management Administration, which will be the postal regulatory authority, and China Postal Group Corporation, the postal company.

The four international companies welcome efforts by the Chinese Government to expedite the postal reform process. The Postal Law, which is still under revision, is now becoming a growing concern for the four.

The new Postal Law classifies the country's postal services as either basic services or competitive services.

Basic services are letters and newspaper subscriptions, the postal system's core business in the past.

Express delivery and logistics services fall under the competitive businesses category.

The State Postal Bureau rules that express delivery companies are not permitted to deliver addressed letters weighing less than 500 grams each. The post office's Express Mail Sending (EMS) service is limited to addressed materials weighing less than 2000 grams each.

Those weighing over 2000 grams each are exclusive to express delivery companies.

DHL began to compete with the post office's EMS services after entering the Chinese market in 1986. All four of the companies are now interested in getting a piece of the EMS business.

The EMS industry will next try to grab the market from small and mid-sized enterprises (SMEs), says Ma Shengjun, vice director of the State Postal Bureau.

This is also exactly what the four international couriers want.

Chen Jialiang, president of FedEx Greater China, says the company will turn SMEs into a new growth element for the company's China operations.

UPS has also already started its own "SMEs plan." Private sector interests still believe, however, that competition with the postal service's EMS programmes is not fair.

It is impossible to figure out the real money in the country's post offices because profitable businesses like express delivery services are mixed with money-losing basic services.

The Chinese Government has been allocating subsidies to basic postal services, like in many other countries, but it is still unknown exactly where the money is going.

Postal monopoly, a highly disputed issue in the Postal Law currently under revision, remains untouched in the new scheme.

Often postal monopolies refer only to private letters and official documents.

Those commercial letters are open to both postal and non-postal service providers.

CAPEC suggests the revised postal law should establish a clear division in the regulatory framework between postal services involving universal service obligations and any businesses outside of the realm of universal services in which China Post may be involved. This includes express delivery services and logistics.

CAPEC also suggests that revisions to the postal law should ensure that the government provides no subsidies or benefits, either directly or indirectly, to businesses outside of universal services.

This means that there must be no exemption from taxes and other fees, and that there should be no special treatment by government agencies in the transport of goods outside of universal services.

"We couldn't accept the four per cent postal services fees, so we had to return them to the government as we have been handing in taxes according to the rules," says Li SongJiang, vice president of UPS Asia-Pacific.

The postal monopoly issue in the new Postal Law is being hotly debated.

CAPEC suggests that the best way to determine the scope of the postal monopoly is to maintain that the only reason to create a monopoly area is to ensure provision of basic and essential universal postal services.

Monopoly should also be defined in the narrowest possible way to stimulate economic efficiency and increase consumer options through competition.

"Defining the postal monopoly and splitting mixed services are crucial to the reforms. Of course companies want the monopoly to be defined in the narrowest possible way to ensure larger market share," says Liu Jianxin, secretary-general of the Express Delivery Committee of China International Freight Forwarders Association (EDCCIFFA).

Although China is opening its logistics and express delivery sector under its commitments to the World Trade Organization (WTO), the country has its own way to define postal monopoly, insiders say.

"These monopoly restrictions should be reduced on a clearly stated schedule," says UPS Asia-Pacific's Torok.

"The monopoly should be defined initially as a combination of price and weight addressed letters weighing less than 350 grams each, where the price is also no greater than three times the fastest standard category of domestic mail over the shortest domestic distance."

Nobody, however, can determine how to define monopoly and split postal services before the new law is released, says Luo Kaifu, president of EDCCIFFA.

The reforms will undoubtedly pave the way for new legislation.

(China Daily 08/29/2005 page5)