coLumNS
indignant Postman
Wait a Minute
n October 1st, 2009 the Chi- had nearly 2,500 express delivery services support-
O
nese government enacted a ing nearly 230,000 employees, many of whom ride
law declaring that any parcels scooters to deliver parcels as small as a letter to as
delivered using express services large as - well, many of us have seen the elephan-
weighing 50g or less within a tine-sized loads scooters in China are capable of
city, or 100g packages between cities, must be con- carting.
trolled exclusively by State-owned post offices. This Other, more mature delivery services, though,
explicit citation means foreign companies cannot have provided real competition to the Chinese
invest in this part of the postal segment, and was post office. “I’ve been really impressed with do-
met with a great deal of protest from major inter- mestic carriers, especially Shunfeng,” said Bhavesh
national players like DHL Worldwide Express Inc., Mistry, Managing Partner of EastWind Precision
FedEx Corp., and the United Parcel Service Inc. Engineering, based in Suzhou. “In the last eight
A lot of this debate has been spent on whether months they’ve really grown rapidly and become
Bob Dodson is a principal of Trend-
sAsia Ltd, based in Shanghai, which
or not China is violating WTO rules of National quite reliable and professional.” According to
researches and analyzes socioeco- Treatment, which states that member countries Mistry, groups like Shunfeng have computerized
nomic and market trends that can
disrupt or benefit business opera-
present a level playing field to domestic and foreign in the same way as the international carriers and
tions in China. He can be reached entrants. But does the implementation of this new have formed partnerships with small local players
at wdodson@trendsasia.asia.
law really affect the big boys? in towns so out-of-the-way that it is
Despite their objections, this prohibitively expensive to use a Fed
segment of the business repre- Ex. These carriers can also cost a
sents a small sliver of revenue for fraction of what the international
the major international carriers. carriers charge in China.
Their strength domestically lies Nevertheless, rising salary and
in getting larger packages to their fuel costs are already forcing do-
destinations quickly, securely, mestic carriers to increase their
transparently and at a consistent rates. With the further develop-
price level. Right now groups ment of inter-city infrastructure,
like DHL or Fed-ex cannot cost- customer requirements for quality
effectively compete against local of service and delivery time will
players in the express-letter deliv- imply further domestic industry
ery business, given the price sensitivity of the av- consolidation. In two to four years, this actually
Right now
erage Chinese consumer, whether private or com- may translate into new opportunities, as a greater
groups like
mercial. number of mature domestic companies will be ripe
Before the enactment of the new law, the State- for acquisition by foreign players who want to pen-
DHL or Fed-ex
owned service already controlled about 20% of the etrate more deeply into the inland express market.
cannot cost
express letter market, which grew 21% in 2007 and It will be during the acquisitions of these mature
effectively
27% in 2008, according to the Wall Street Journal. domestic companies that large international carri-
The move actually seems more a part of an over- ers will come up against another of China’s new
compete all trend toward guojinmintui - literally, “the state regulations: the anti-monopoly law. Already, Beijing
against local
advances as the private sector recedes” - than a has made judgments against Coca-Cola, Panasonic
specific jab at foreign-invested companies in the and General Motors which have deeply troubled
players in
logistics sector. The State wanted a piece of the multinationals across industries. When the major
the express-
fast-growing action. express carriers get to the point of wrangling with
letter delivery
In reality it is local express carriers that will be Beijing’s idiosyncratic interpretations of the anti-
hardest hit by the new law, which requires capital- monopoly law, they may remember their earlier
business. ization amounts that will literally close hundreds frustrations with the new postal law as just a walk
of small, domestic express services. In 2008 China in the park.
16 JANUARY/FEBRUARY 2010 www.chainaonline.com
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