Postal restructuring shows market is maturing
On September 4, the postal administration was established in four provinces and provincial-level Tianjin. The China Post Group Corp is under preparation. Moreover, banking regulators have nodded approval for the launch of the postal deposit bank.
The move, which splits postal regulation from business in those regions, marks the most substantial postal reform in past years. It has a profound impact on deepening the reform of the sector, and its success will provide valuable lessons for those departments where the regulatory and business functions remain mixed up.
Meanwhile, it also serves as an example for the adjustment of governmental functions, a well-touted idea in current China.
The functional splitting is inevitable as China's postal sector deepens its reform.
More than two decades ago, the late leader Deng Xiaoping set the splitting of governmental function from business as one of the major directions of the country's reform drive. It is fair to say that the telecommunications, power and oil sectors have made much headway in this respect.
However, the postal and railway sectors have seen their reforms proceed rather slowly. Both sectors are continuing the old planning regime and act as both industrial regulator and market player. The State Postal Bureau, or China Post, represents the government to supervise the market while directly carrying out the postal business. This obviously goes against the rule of market economy.
In recent years, the postal market has seen profound changes take place. Thanks to the rapid development of telecommunications, the traditional mail services have shrunken; on the other hand, the rise of private express mail delivery companies and the development of non-postal publication circulation have placed increasing pressure on the traditional postal system.
Under such circumstances, the old postal regime can no longer satisfy the demands of the market, and has to split the administrative function from postal businesses.
The designated functions of the new postal bureau are to implement laws, regulations and policies on postal management and to supervise the postal market. It is also entitled to co-ordinate the traditional compulsory business of basic mail service, mail service for the military and circulation of publications for the blind.
In a sense, the splitting of functions is also an adjustment of government roles. Such adjustment is to shift the business activities, which should not be carried out by the government, to enterprises and the market while the government maintains its role of public management and service. Such an arrangement will improve the efficiency of enterprises and the government. The splitting will also help stem "rent-seeking" activities.
The postal business split from the old national postal bureau will go to the China Post Group Corp, which will no longer assume any administrative role but be an independent enterprise that acts in accordance with market law.
In the past, the postal business had been monopolized by the national postal bureau and suffered from low efficiency and heavy losses. The new group will be obliged to make a profit while providing more convenient, lower-cost services to the public.
Admittedly, due to the exacerbating competition from both domestic and overseas companies and its own heavy historical burdens, the new postal group will face an uphill battle. To win the battle, it must continue to reform itself.
The group must make itself into a real market-based company. At the beginning, it can be wholly State-owned before the shareholding mechanism is introduced. But either way, it must first establish sound corporate governance to lay down a solid foundation for its market-oriented development. The traditional management, co-ordination and impetus mechanisms should be made to cater to new market circumstances. It can draw lessons from other State enterprises that have conducted corporate reforms.
China Post Group has a great infrastructure advantage. It will inherit the quite comprehensive national network of postal services, an advantage no other companies have. So long as it can make significant headway in corporate management, it will win its way on its market networks.
Since it is facing a hard time transforming from the old regime into a market entity, the group can be granted some fiscal support. But it will not be such subsidies, but its provision of better services, that will ensure its success. Although galloping advancements in information technology have grabbed many of its traditional growth points, they have also created new market demand. The postal group should take this opportunity to expand its business.
The formation of the postal deposit is another major initiative in the postal reform. It is also a major move regarding the financial system reform.
Once, the postal deposit was an unbalanced business. It took in public funds, but did not have the power to grant loans. In the strict sense, the postal deposit units are not bank branches. This violates the market principle.
This time, the business is separated from the postal system and the postal deposit units become commercial banks in the real sense.
In our maturing financial market, there have been varieties of banking institutions, including domestic banks, share-holding banks and foreign banks. Now the new postal bank will activate the market and help the public enjoy more convenient services. The postal bank, thanks to its far-reaching networks, is able to make full use of its existing advantages to compete with other financial institutions.
The current postal reform, predictably, will have an impact beyond one single department.
