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Pending postal law

A private express firm president was not worried when he heard DTW was being acquired by Fedex, but he expressed deep concerns about a draft revision of the postal law.

Two points in the draft will hit private firms hard: letters with a weight under 350 grams can only be handled by China Post, and non-postal businesses, aiming to do letter and parcel delivery business, must get permission from postal service regulators.

Because most private firms handle letters under 350-gram limit, many private delivery firms will have no chance of survival if the draft becomes law.

Build-up to battle

The changes mean conflict is inevitable.

However, we believe four foreign giants - Fedex, DHL, UPS, and TNT - will not seek a greater stake in the domestic delivery business and that their China business will mainly serve cross-border delivery.

Private express delivery companies are also finding ways to survive, primarily by developing their own parcel business.

Our view is that although the logistics and express delivery business has been growing rapidly since China's accession to the World Trade Organization in 2001, it is still in an early stage and the infrastructure remains poor.

Foreign companies therefore need to use their financial strength to build necessary infrastructure while strengthening their capability to handle goods on the ground. This will help maintain their competitive advantage in the market.

Service and technology are two other ways foreign firms can demonstrate their leadership. Private and State-owned companies should learn management and technology expertise from their foreign counterparts to build an information network for customers, allocate resources efficiently and use capital effectively.

                                                                                                                                                            (China Daily 05/09/2007 page15)