Concerns over Chinese postal law
China should improve transparency of a new law governing the country’s USD 6bn-a-year express delivery market, say executives at UPS, the package delivery group.
An updated version of China’s Postal Law, which was promulgated in 1986, is in its ninth version and has been a source of concern for foreign and domestic courier companies pitted against China Post, the incumbent.
US-based UPS, its international peers and upstart Chinese express companies are in the awkward position of having to “compete with our regulator”, Mike Eskew, UPS chairman and chief executive, said in an interview with the Financial Times.
Ken Torok, UPS Asia Pacific president, noted that transparency surrounding the law’s most recent drafts had deteriorated. There are concerns China could introduce a “universal tax” of 4 per cent on overseas entrants.
“We would look at that as a form of double taxation,” Mr Torok said. “We are just looking for a level playing field in the industry.”
Mr Torok contrasted the opacity of China’s new postal law with a more open process in India, which is also revising its antiquated regulatory regime and posts drafts on the internet.
“When they do that everyone has visibility,” Mr Torok said. “We’d like to see more of that [in China].”
Uncertainty also surrounds how China intends to “carve out the monopoly”. According to an earlier draft of the law, only China Post’s express delivery arm would be allowed to deliver parcels weighing less than 150g – a restriction of particular concern to the incumbent’s domestic competitors.
UPS currently does not accept packages of less than 2kg for delivery in China.
Last October, an increasingly vocal domestic lobby of state-owned and private courier companies that compete against China Post took issue with the proposed limit. The Conference of Asia Pacific Express Carriers – which represents UPS, DHL, Fedex and TNT – has also been critical of the drafting process.
Booz Allen Hamilton, a consultancy, estimates China’s express delivery market will reach USD 5.8bn this year and USD 7.4bn next, making it a coveted destination for international courier companies.
UPS was the first of the “big four” international couriers to wholly own its China operations, as allowed under the terms of the country’s accession agreement to the World Trade Organisation. The company bought out Sinotrans, its state-owned joint venture partner, for USD 100m in 2005.
It employs 4,500 people in China and is building an international hub in Shanghai. UPS is now applying for trucking and freight forwarding licences in China. But it must secure national, provincial and even municipal approvals.
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