China never approved foreign-funded express firms: post bureau
No sooner had DHL, the global logistics leader declared it the first foreign firm to carry out express delivery service in China and stirred up media fever when a spokesperson from the China State Post Bureau claimed that so far, it had never approved any foreign- funded company to set foot in the field.
The bureau hasn’t provided DHL with the license necessary for carrying out express business in China, nor did it approve any other foreign-funded firm, said the spokesman. China did not promise to open its postal market in its commitment to the WTO. As to whether DHL has violated Chinese laws and regulations by founding a place in the field, the bureau said it would keep a close eye on DHL’s business in China.
Although China did not promise to open the postal service, it constitutes just a part of the express market, said insiders. Besides postal service, express includes the delivery of parcels and other items. In fact, DHL opened express service in 50 Chinese cities as early as September, and the recent announcement was believed to be a victory declaration by DHL.
The State Post Bureau is not the only player in the domestic express market. Apart from private firms, FedEx, TNT and other logistics multinationals have long set foot in the market; FedEx teamed up DTW Express in the mainland business, while the latter borrowed the network of FebEx for International delivery; TNT established strategic partnership with the post bureau and founded a joint venture with the less famous Mach++ Express.
Express service is growing at 30% each year in China, luring more and more logistics giants to seize a slice of the pie. China will open its express market to exclusive foreign- funded companies in 2005, according to its WTO commitment.
However there is no clear regulation for Sino-foreign joint ventures, a loophole that DHL has taken full advantage of. The five-billion-yuan express market is a tempting pie for all delivery giants, who are increasing their investment and offering new services at an unprecedented speed. The four express giants – DHL, FedEx, UPS and TNT all designed their strategy for the Chinese market.
The Chinese benefited from the service of express multinationals. Besides door-to-door service, accurate timetable, advance, cash-on-delivery, third party payment and other services, foreign express companies are sharpening their competitive edge by applying information technology in delivery service.
Airfreight will increase 6%-7% in the next 10-20 years, while express service will double that figure to 12-14%, said insiders. The Chinese market will post some 15% annual growth and become the fastest growing region in the world.
International express giants are adding up pressure on Chinese companies. EMS, which used to be the largest player of the Chinese market, is losing its domestic shares by 4% each year, meanwhile its shares in the International market has dropped to 40% from the peak 97%. Meanwhile, the four giants of DHL, FedEx, UPS and TNT have maintained a 20% revenue growth.
While foreign express companies have broken the monopoly and introduced competition, they also triggered a reform in the express industry, said experts. For example, EMS launched a series of new services since last year, including the opening of China Post Air Express Network, dedicating more airlines and increasing delivery speed.
