My first-ever byline in The Wall Street Journal, and my first big scoop as a reporter.
Rivals of China’s Postal Service Claim Unfair Competitive Practices
By ANDREW BATSON and CHARLES HUTZLER
Updated May 29, 2001 12:01 a.m. ET
BEIJING — China’s postal service is trying to force domestic and foreign competitors out of lucrative express-delivery services, in an apparent attempt to bolster its position ahead of the more open market that China’s entry to the World Trade Organization promises to bring.
China Post, through its local branches, has prodded police and licensing authorities to investigate 200 express-delivery companies, said a spokesman for the State Postal Bureau, the government body that runs the country’s postal service. Among those investigated so far are foreign companies who dominate international express services: FedEx Corp., United Parcel Service Inc. and DHL Worldwide Express Ltd., a unit of Deutsche Post AG.
The investigations are already having an impact on business. According to company executives, Chinese officials are reviewing the license of FedEx’s local partner in the southern boomtown of Dongguan; they confiscated but later returned two envelope shipments from the Shandong office of UPS’s local agent, Sinotrans; and they have investigated the offices of DHL-Sinotrans in the western cities of Chengdu and Xian. “It’s disrupted our normal business operations,” DHL-Sinotrans Managing Director Charles Chia said in a written statement to questions submitted by Dow Jones Newswires.
At stake is China Post’s share of the market for fast delivery of business letters and cargo, which has grown rapidly in step with a dynamic economy and its integration with the global market. Although none of the major foreign players is willing to provide an estimate of the market’s value, UPS, which inaugurated its first direct flights between the U.S. and China last month, has said its six weekly services should generate $300 million in revenue next year. China Post expects its own domestic and international express-delivery service, EMS, to bring in income worth $600 million this year.
While China Post has publicly welcomed the competition, foreign executives say privately the postal service is using its domestic clout to strengthen its position ahead of China’s expected entry to the WTO. After its accession to the global trade body, China is expected to do away with a rule that currently restricts foreign companies to 50% ownership in joint ventures with local firms.
China Post “looks like it’s trying to protect EMS,” said an executive at one foreign express-delivery company. Its actions also come as the government continues to pursue a drive to break up monopolies in industries from telecommunications to power generation, hoping to foster greater competition and better services for consumers.
In this case, the maneuvering has centered on competing interpretations of the law. Under the 15-year-old postal law, the postal service is granted monopoly rights to deliver letters and packages, except when China’s cabinet, the State Council, provides otherwise. China Post, which is run by the Ministry of Information Industries, is arguing that the first half of that clause should be observed. The foreign companies say their legal rights lie in business licenses issued beginning in the mid-1980s by the country’s Ministry of Foreign Trade and Economic Cooperation.