China's draft postal law angers private firms

Local and foreign express delivery companies have denounced the latest draft of China’s Postal Law, saying it would create unfair competition, violate trade agreements and destroy non-state businesses employing hundreds of thousands of people.

A meeting last week between industry representatives and officials from China’s State Council, or cabinet, and other departments failed to ease fears over the likely impact of the long-delayed law, express delivery company executives said.

They say one clause of the draft would give a unit of state-owned China Post a total monopoly over deliveries of parcels weighing less than 150g, which account for more than 90 per cent of the intra-city business of private delivery companies.

“When this new draft comes out, we’ll all have to shut our doors,” said Liu Heping, vice president of private delivery company Shanghai East Union Express.

The monopoly on small package deliveries would not have any immediate direct affect on international companies, but they would be hit by other provisions favouring China Post, tightening licensing controls and compulsory payments to subsidise universal postal services.

International companies such as DHL, UPS and FedEx are keen to expand into China as its booming economy makes it both a powerful source of demand for international services and also an increasingly important market for intra-city and inter-city deliveries.

The Conference of Asia Pacific Express Carriers (Capec), which is representing international delivery companies in negotiations with the government, said information from industry sources suggested the draft law would “stifle healthy competition”.

“China is drafting a new, misguided postal law without consulting industry and without considering the broader economic implications of a restrictive postal regime,” Capec said in a written response to the draft.

The Legislative Affairs Office of the State Council and the State Post Bureau declined to comment on the new draft, the eighth of a law that has been in preparation for years.

Industry executives said officials at last week’s meeting refused to provide a copy of the draft.

“We feel very unsatisfied with their attitude,” said Xu Yong of the local TTK delivery group. “As we meet the standard of interested parties, we have a right to this information.”

Industry executives estimate that more than one million people work for the private delivery companies that have sprung up in cities around China in recent years.

The ban on private deliveries of under 150g marks a concession since early drafts set the bar at 350g. However, it could wipe out the many companies that serve customers within a single city and could also have a major impact on city-to-city express services.

The draft law is also believed to block foreign and private firms from the small but potentially strategic business of deliveries from online retailers.

Beijing is currently preparing to restructure the postal system, separating its industry regulatory function from its huge savings network and delivery business.

However, private delivery companies believe that the attempt to legislate favourable treatment for China Post’s express delivery unit reflects an unwillingness to create a genuinely open market.