Dubious courier moves

China’s postal monopoly

If the competition is doing well, bully it

If the competition is doing well, bully it

A warning to rivals

AS CHINA’S economy opens up, its coddled state-owned monopolies know that they must prepare for greater exposure to the rigours of the marketplace. But some are in denial. A prime example is the postal monopoly, China Post. Rather than adapting to competition, it is trying to close it down.

In recent months, officials from the State Post Bureau-the agency that controls China Post-have visited rival firms in several provinces and ordered them not to handle express mail. One of the targets was a joint venture between DHL International and Sinotrans. The business licence of Federal Express’s Chinese agent in the southern city of Dongguan is being reviewed. And UPS has had two of its international shipments blocked. “This issue is affecting all the air-express companies operating in China,” says David Cunningham, president of FedEx Asia Pacific.

China Post argues that it alone has the right to handle express-mail services, whether within China or internationally, and whether business or private. But the Ministry of Foreign Trade and Economic Co-operation, which approved the operations of foreign courier firms in China, takes a different view. It argues that the law allows the government to make exceptions to China Post’s monopoly.

This it did in 1995 when it first allowed foreign firms to handle international business-mail deliveries by forming joint ventures with Chinese freight forwarders. In fact, China has allowed such business since the 1980s.

As a result of foreign competition, China Post’s share of the international express-delivery market has been whittled down to 40%. The company is likely to come under still greater pressure when foreign courier firms win the right to acquire majority ownership of their joint ventures in China and, within four or five years, to operate independently. Domestic courier companies have also mushroomed in recent years, many without official approval.

China Post appears unfazed by foreign operators’ criticism, and postal officials have sternly defended the incumbent’s stance. It involves, they say, a “serious question of principle” with wide-ranging implications for, among other things, China’s politics and state security. But for all its political clout, China Post is unlikely to win this battle. The competition is too deeply entrenched and the market developing too fast.