China Post's market share to erode further amid foreign rivalry
China's State Post Bureau (China Post) will maintain its dominance in the domestic courier service sector in the coming years, but will see its market share in international express mail forwarding further eroded by increased foreign rivalry.
To protect the local industry, the Chinese government bans foreign forwarding firms from the domestic express mail delivery sector and only allows them to offer international courier service through joint ventures with local partners, Zhang Guotian, an analyst with China Merchants Securities said.
However, restrictions have failed to curb foreign firms rapidly expanding in the country, Zhang said.
Major global players, such as DHL Worldwide Express, FedEx Corp, United Parcel Service Inc and TNT Express, have grabbed a 62% combined market share in the international forwarding service sector over the past 10 years.
DHL, which has a 50-50 joint venture in the mainland with Sinotrans Air Transportation Development Co Ltd, has managed to occupy a 36% share of the market, with UPS holding an 8.0% share by joining forces with the same local firm, he said.
FedEx secured a 12% share of the market via Federal Express-DTW, a joint venture with Datian W. Air Service Corp. TNT holds a six pct share of the market through cooperation with a domestic partner, he said.
Shielded by China's Postal Law, which bans foreign and private participation in the domestic courier service sector, China Post has still only lost a 10% share of the local express mail delivery market with around 1,000 small private courier firms, said Li Lei, an analyst with China Securities.
These private firms entered the foray with China Post calling themselves logistical service providers, a typical cat-and-mouse game between the government and enterprises, Li explained, as private involvement in the logistics sector is legally recognized.
Li said China Post is unlikely to yield its 90% share of the market further to the plethora of small players on the domestic front, as they are not strong enough to compete with the omnipotent China Post, which has extensive distribution networks in place nationwide.
However, news will not be so encouraging on the international front for the former state monopoly, he predicted.
China Post, which already had a 62% share of the international courier business taken away by foreign peers over the years, will see its market share eroded further as global heavyweights continue their expansion in the country, he added.
DHL's chief operating officer for the Asia Pacific, John Mullen, said in April the company's business volume in China is growing at an annual rate of 45-50 pct, and that he expected the country to become its largest market in the Asia-Pacific region within two to three years.
Mullen said DHL plans to add some 10-11 collection and distribution centers in China this year and invest further in infrastructure and technologies in the region.
FedEx, which operates direct freight flights to the US from Beijing, Shanghai and Shenzhen, has targeted expansion into 100 more Chinese towns and cities within five years, up from the current 221.
UPS registered a 45% rise in sales pct last year and is moving its China headquarters to Shanghai from Hong Kong, chasing increasing demand on the mainland.
TNT and China Post agreed in April to form a strategic partnership and have set up a team to explore joint opportunities in postal services, express delivery and logistics.
Still, both analysts agreed that although China Post will undoubtedly concede home turf further to foreign rivals in the coming years, it will not find itself cornered, as demand for international courier services keeps growing amid a booming foreign trade climate.
China's foreign trade rose 21.8% from a year earlier to 620.8 bln usd in 2002, and is expected to grow 10-13% to 680-700 bln this year according to official estimates, despite the impact of SARS.
"Life will not be miserable for China Post, as the pie is expanding continuously," Li said.
