China Post to split off EMS, form joint-stock chain

China’s State Postal Bureau (China Post) plans to split off its courier business, known as EMS, and restructure it into a joint-stock national chain to stem the further erosion of its market share by foreign rivals, such as DHL, FedEx Corp and United Parcel Service Inc (UPS). “The plan is to split off EMS by the end of this year and turn it into a national express mail chain responsible for its own losses or gains,” an industry source said. “China Post will also restructure EMS into a joint-stock company and open it up for investment from the private sector.” The move is a last-ditch effort by China Post to defend it weakening market position amid rising competition from DHL, FedEx and UPS as well as from around 1,000 so called “illegal” private courier firms, he said. China Post, which issues postal rules and operates delivery services, only allows foreign delivery firms to offer international express mail services and keeps the domestic part of the business for itself. But so far, a plethora of small private firms, calling themselves logistical service providers, have managed to grab a combined 10 percent share of the domestic market and China Post has already lost a whopping 60 percent share of the international courier delivery market to foreign firms. In a surprising move in May, DHL set up a unit in Shanghai to provide express mail services within the country without official permission, effectively become the first foreign company breaking into the sector. Industry analysts expect to see further erosion of China Post’s market share on the domestic front in the wake of DHL’s new venture as FedEx and UPS might move in as well. Prospects on the international courier service sector look equally grim, since DHL, FedEx and UPS have all announced plans to step up services to mainland China, following a landmark deal between the US and China to open up the aviation market to each other, announced in June. DHL has increased its Shanghai-Hong Kong freight service to five times per week from the previous four. FedEx, currently allowed to operate 11 weekly flights to China plans to launch 12 more flights per week and might build a cargo hub in Guangzhou. UPS, which operates six weekly flights to China now, also wants to double its services to the country with six additional flights and build a cargo hub in Shanghai. Industry analysts say China Post is making the right move by turning EMS into a joint-stock firm, but it may not stem further erosion of its market share, at least in the near term, as it will take time to consolidate EMS into an efficiently-run national chain. “The restructure may take years, and DHL, FedEx and UPS are moving in closer,” an analyst with China Securities said.