China lets foreign courier firms control ventures
SHANGHAI, Jan 14 (Reuters) – China has allowed foreign firms to own up to 75 percent of international freight forwarding ventures as part of its pledges to the World Trade Organisation to open up its logistics sector.
The decision comes months after global courier firms such as Federal Express (NYSE:FDX – News) and United Parcel Service (NYSE:UPS – News) claimed mixed success in settling a dispute over Chinese curbs on foreign players conducting delivery business in the country.
“We are implementing the new regulations to boost healthy development in the freight forwarding business and regulate foreign firms’ investments in the sector,” the Ministry of Foreign Trade and Economic Cooperation (Moftec) said in a statement on its Web site www.moftec.gov.cn.
“Chinese partners involved in setting up Sino-foreign joint ventures and cooperative deals in international freight forwarding business must take at least a 25 percent stake.”
The regulations, seen by Reuters on Tuesday, took effect on January 10 and was cautiously welcomed by foreign express couriers.
U.S. giant Federal Express (NYSE:FDX – News) said the rules were in line with China’s commitments to open up its markets after it became a WTO member in December 2001. But Fedex had no plans at present to change its business operations in the country.
“FedEx welcomes the new regulations from Moftec, which liberalises foreign ownership of companies in China conducting international freight forwarding services,” David Cunningham, president of Fedex Asia Pacific, said in a statement.
“FedEx has no immediate plans to make changes in the light of these regulations, but we will continue to assess opportunities such as these as our business and market conditions develop,” he said.
FOREIGN FIRMS TREAD CAREFULLY
According to the ministry’s rules, logistics joint ventures must have a registered capital of at least $1 million and they can be in operation for not more than 20 years.
After gaining government approval, such ventures can take part in businesses such as transport, storage and packaging.
They can act as agents in transporting international exhibits, personal belongings and goods in transit.
They can also conduct international express delivery services, but cannot delivering personal letters and certain government documents involving counties and above.
Global delivery firms such as FedEx, United Parcel Service, DHL and TNT (Amsterdam:TP.AS – News) have hit snags in their advance into the potentially huge Chinese market.
Last year, they were embroiled in a months-long dispute as the government imposed restrictions on certain delivery services.
In September, the government allowed foreign companies to deliver some documents abroad. However, it also barred them from personal letters and most government mail, and the U.S. government called the new rules a limited success.
