FOREIGN MAIL COURIERS FACE CHINA DEADLINE

Robert Liu is a worried man. As the co-founder of a promising joint-venture architectural firm in Shanghai, he depends on the steady flow of express mail packages to and from his company's headquarters in New York City.

But in less than three days, China's National Postal Administration will enforce restrictions that would seriously curb the operations of foreign rivals, preventing the flow of billions of dollars worth of architectural drawings, contracts and documents between China and other countries.

In an order issued last month, the NPA said foreign courier companies could not handle parcels of less than 18 ounces and that their prices must be listed higher than its own.

The NPA set a May 6 deadline for all foreign couriers to apply to the government for permission to continue their operations under the new terms or otherwise cease their business operations.

Industry sources say the NPA has told the foreign couriers that the pending ban is a precaution against threats to national security, following several deaths from anthrax in the United States.

For Liu and other foreign executives, the new regulations will have devastating effects on business, making it more difficult for firms to communicate with their offices in other countries.

"We will lose a lot of money if these rules go into effect," he said. "There's been no proven threat from anthrax contaminated mail in China … it's a clear violation of global free trade principles."

Michael Holten, a Shanghai-based management consultant, said the ban will cost foreign firms billions of dollars in lost business as their essential overseas postal links grind to a halt.

"There's a good reason why companies in China rely on foreign couriers, because the postal system here is awful," he said. "I wouldn't use it for personal mail, let alone for my business."

The ban could damage the China operations of foreign couriers such as Federal Express, DHL, TNT, United Parcel Service and Japan's OCS, whose main source of business is small parcels.

According to industry estimates, foreign couriers handle more than 60 percent of parcels in China weighing under 18 ounces and their prices are often 15 percent lower than NPA's courier service.

Last month, several foreign couriers sent a petition to the State Council and other government agencies asking for a cancellation or suspension of the order, claiming that the NPA had no authority over foreign trade issues and therefore could not legally impose such regulations.

"The effects on China's international trade, investment and diplomatic relations could be catastrophic, as the industry carries billions of dollars worth of goods and employs tens of thousands of people," the petition, issued by more than 50 foreign courier firms, said.

Several of the foreign couriers, contacted by United Press International, refused to comment on the pending ban, saying any public statement would damage negotiations with the government.

An NPA spokeswoman, contacted by telephone in Beijing on Friday, also refused to comment.

A spokeswoman for China's Ministry of Foreign Trade and Economic Cooperation, who only gave her surname, Zhang, told UPI that the agency is "actively seeking a solution" with the NPA.

"We are communicating with officials at the NPA and are working on solution that we hope will be equitable for all parties concerned," she said, refusing to elaborate.

The ban has prompted outrage from the United States and Japan and China's other major trading partners, who are eager to secure markets for their companies, but more important, that China abide by its commitments to the World Trade Organization, which it joined last December.

On Monday, U.S. Commerce Secretary Donald Evans raised the issue during a meeting with China's Foreign Minister Shi Guangsheng and other senior government officials in Beijing.

"We want foreign companies to be able to compete in the market. We are confident that the issue can be resolved," Evans said in a statement later faxed to foreign news organizations.

Yet, it is still unclear from the U.S. statement and discussions with industry executives whether the two sides are any closer to resolving the dispute as the deadline approaches.

Analysts say the pending restrictions is the latest in a series of disputes between the NPA, which controls about 30 percent of the market, and foreign courier service providers, who are all battling for control of China's lucrative parcel sector — a market that has been growing 20 percent a year.

Since the late 1970s when the Chinese government first allowed foreign couriers into the market, the NPA has been fighting for survival, with major disputes erupting over the past several years.

In 1998, the central government split the Ministry of Post and Telecommunications into separate divisions, robbing the NPA of its highly profitable telecommunications operations. One year later, the NPA posted a loss of $785 million and in 2000 it lost $397 million.

Last year, the NPA posted a profit of $7.2 million, bolstered by what analysts claim was a major boost from state subsidies, which some estimate to be a substantial portion of its profits.

The NPA's main courier provider, Express Mail Services, is under increasing pressure to become more profitable in the face of hard-hitting foreign competition and most analysts claim the anthrax scare has provided the NPA with an excuse to reassert its authority in the market.

"They are using the anthrax scare in the United States to reinstate their monopoly over the industry," said Jiang Lian, an economics researcher at Shanghai University. "It's not in the spirit of free trade."

By CHRISTIAN WADE, UPI Business Correspondent

Copyright 2002 by United Press International.