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Mail Competition Both Good and Bad
China's relatively fragile express delivery companies are bracing themselves for the inevitable blow from worldwide competition, following the country's accession to the World Trade Organization (WTO).

However, competition is also expected to spur domestic enterprises to improve their management, technology, and service in a short period of time, experts said.

According to China's commitments to the WTO, foreigners are allowed to set up express joint ventures in China, holding up to a 49 per cent stake.

One year after China's accession -- which took place in December -- foreigners will be permitted to hold controlling shares in joint ventures.

Four years after the WTO entry, solely foreign-funded express enterprises or subsidiaries will be allowed to launch in China.

Cut-throat business

"Though foreign companies were not permitted to carry out international express business in China until last year, the world's top four express giants - DHL, FedEx, UPS and TNT - have tipped their toes into this potentially vast market since 1986," Fan Yimin, a researcher with the Chinese Academy of Social Sciences, said.

They are competing with Express Mail Service (EMS), affiliated with China Post, which has monopolized the domestic express market.

FedEx opened direct airlines to China last year and promised that goods can be delivered from China to the United States and other Asian countries within one day.

DHL uses specific business airlines to increase its delivering speed. Both are faster than EMS.

Official statistics showed that, during the past decade, the average growth rate of China's international express service stood at 20 per cent.

However, the increase rate for EMS on a year-to-year basis was just 2 per cent and its market share in China's international express sector declined from 97 per cent in 1995 to 40 per cent last year.

Experts claim international express business will remain the focus of competition between domestic and foreign express delivery companies.

Experts attributed the achievements of the international giants to their modern management skills, mature market promotion, advanced technology support and high-quality services.

"The modern express business does not only transport goods from one place to another but also involves e-business and logistics services, such as providing store houses, goods distributions and transport solutions," Fan said.

Meanwhile, foreign giants' high-tech support on automatic goods distribution, client resources management, global communication and customs procedure systems guarantees sufficient and accurate business operations.

Furthermore, the convenient services, including a detailed delivery timetable and various payment methods, as well as online package tracking and checking, appear attractive and lucrative to clients.

To increase their market share, foreign giants are striving to establish and expand their express networks across the country.

Wu Dongming, deputy general manager of DHL (China), said his company has set up 20 outlets and 160 express centres in more than 20 key cities across China, and plans to expand to all medium and large cities within two years.

FedEx plans to add 100 cities to its business network by 2005, and UPS is to expand its clientele from 21 cities to 40 by the end of the year.

EMS admits it is in an inferior position compared with the world express masters.

"But we also boast our own advantages," said an official from EMS, who wished to remain anonymous.

China Post's network across the nation offers a backbone for EMS, which can reach small cities and rural areas untouched by foreign competitors.

In recent years, EMS has learned from their foreign counterparts, which offered shortcuts for EMS to upgrade its management and services.

According to the official, EMS bought or rented 10 aircraft and opened specific express airlines covering Beijing, Shanghai, Guangzhou, Chengdu, Qingdao and Xiamen last March.

Also, with China's railway system becoming increasingly faster, EMS heightened its service efficiency from July and started a package express business in August.

Experts believe the competition and pressures brought by China's full opening up of its express market is expected to spur up rapid and healthy development of the industry as a whole.

Apart from the competition between foreigners and EMS, insiders revealed that some domestic competitors are aiming to enter the market.

Based on their sales and transportation networks around the country, Konka and TCL said they plan to launch express and logistics businesses in the near future.

Some aviation companies are also planning to march into the express market soon.

(China Daily March 30, 2002)

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