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Russell Barling

The deadline for international express operators to be 'certified' by China's State Post Bureau has been extended to next month as the battle for the mainland's lucrative small-package market heats up.

China Post this week posted a notice in the China Daily  informing international and domestic express operators they had gained a six-week reprieve from the May 6 certification deadline which would have restricted them from carrying parcels weighing more than 500 grams.

The new deadline is June 15. If the restriction holds, carriers of parcels under the assigned weight would have to charge more than China Post.

The extension was granted after United States Department of Commerce officials visited Beijing last week, according to industry sources.

The dispute's potential to disrupt trade has prompted intervention from the highest levels of government. The State Council this week gave China Post and the Ministry of Foreign Trade and Economic Co-operation (Moftec) until May 15 to sort things out.

Moftec became involved in February when China Post told Sinotrans, Moftec's shipping, logistics and freight forwarding arm, it would have to adhere to the new regime.

An industry executive said: 'Moftec is the regulatory body for the express industry, but to what extent it will represent the interest of the international express operators we don't know. At least it knows they are strongly opposed to the weight limits.'

Foreign and domestic officials argue the restriction would be against a basic tenet governing accession to the World Trade Organisation.

According to the roll-back provisions of qualification for the WTO, after accession no member is allowed to enact regulations that further restrict trade.

The move is widely seen as an attempt by the State Post Bureau, which governs China Post and its Express Mail Service (EMS), to regain control of the high-yield sector of the mainland's parcel industry.

Documents comprise as much as 70 per cent of the China express market in unit terms, express sources say.

China Post has a monopoly on domestic express and mail distribution, but EMS has seen its share of the mainland's international express market decline from a monopoly in 1986, when global express operators gained access, to as low as 28 per cent last year, according to one estimate.

The dispute widened beyond the express carriers in February when the State Post Bureau, governed by the Ministry of Information Industry (MII), dragged Sinotrans into the affair.

Sinotrans is a joint-venture partner in China with every international express operator except Federal Express. It also employs hundreds of thousands of domestic freight forwarders, who rely on the potentially restricted sector for 60 per cent of their revenues.

'The MII thinks this legislation will protect China Post, but it is more likely to put as many as 300,000 people out of work,' one industry official said last week.

Sinotrans, which does not recognise MII's authority to invoke the restriction, last month threatened to shut down the domestic distribution of goods on the mainland rather than surrender its position in the market.

Postal authorities reportedly responded by impounding Sinotrans' vehicles and searching some of its offices.

'Moftec and China Post are not friends,' an express executive quipped last week.

Much of the potentially explosive dispute is due to the conflicting agenda of the State Postal Bureau, which is playing the role of adjudicator and participant, say industry sources.

Forwarders and express operators are being asked to apply for certification from a body which is one of their rivals.

Moreover, the bureau has been told by the MII it must make China Post profitable by the end of this year, a development only possible through the continued economic health of its cash cow, the EMS.

The potential of the international express industry in China, which includes small packages, is said to be enormous. EMS alone last year saw turnover hit US$600 million and the market is growing annually by as much as a third.



Breathing space for express carriers