FedEx Chinese sales soar but wants fairer market

FedEx Corp, the world’s largest air express transport company, increased revenues from China by an annual 40 percent in the quarter to end-February, but said again it was battling on an uneven playing field.

FedEx, which does not normally divulge sales by country or region, fears government legislation now in the works could impede progress and protect China’s postal monopoly, a senior executive told Reuters on Tuesday.

FedEx is vying with Deutsche Post’s DHL Express and United Parcel Service Inc to muscle in on an insular sector that it says could one day be the world’s top cargo market.

Rocketing trade, which surpassed $850 billion last year, is driving Chinese demand for air freight, although the market is now dominated by local monopoly China Post and domestic freight forwarders such as Sinotrans Ltd.

Now Beijing is drafting rules to tax foreign courier firms to help it fund a rural postal service, industry insiders say.

“When you get down to it, you have to be concerned that there’s an unlevel playing field if this legislation goes through,” David Cunningham, FedEx’s Asia Pacific president, said in an interview.

“We’re certainly making our views known about it.”

Revenue from China grew 40 percent in the three months to February 29, Cunningham said, almost double its growth in the Asia Pacific. He declined to offer exact numbers.

“It’s growing greater than the average,” he said.

Sinotrans, which has partnerships in China with DHL and UPS, on Monday reported 23 percent higher net profits for 2003 and said it expected these to grow by 10-15 percent this year, with turnover seen increasing by 15-20 percent.

UPS, which has 18 percent of the Chinese market, according to Bear Stearns, has said sales there could have climbed 50 percent to $300 million in 2003. Analysts estimate the market could be worth $1.5 billion annually.

BEST PARTS OFF-LIMITS

Despite loosening regulations since China joined the World Trade Organisation, analysts say the most lucrative areas will continue to be off-limits to foreign couriers.

Last September, Beijing allowed foreign companies to deliver some documents from China abroad, but barred them from personal letters and most government mail.

That decision came after months of wrangling and was seen as preserving China Post’s stranglehold on letter delivery.

Now, the proposed tax would be a fresh blow to foreign firms battling for a bigger slice of a market fiercely guarded by government-run China Post, which is both the industry’s monopoly and its regulator.

“It creates an environment where China Post will act as both the regulator and a competitor,” Cunningham said. “All we’re asking is that there be a level playing field for all parties, and that the regulator not be a participant.”

Despite its protests, FedEx is moving swiftly ahead.

Fedex, whose brightly coloured trucks and planes deliver everything from mortgage applications to flammable gases around the world, is adding 100 Chinese cities to a network already spanning more than 200 Chinese cities.

The company said in September it may move its Asia-Pacific express hub to Guangzhou’s new airport in southern China — expected to open later this year — from the Philippines when its lease expires in 2007.