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2009-04-25 | All chapters

China Bans Foreign Invest In Local Express Mail Operating
Dow Jones, 24th April 2009

Foreign companies will continue to be barred from delivering express letters in China's domestic market based on a new law approved Friday, despite years of lobbying by major global express-delivery companies to lift the restrictions.

Foreign companies will be limited to delivering express packages domestically, and can only send express letters internationally, Wang Yuci, vice director of the State Post Bureau, told Dow Jones Newswires Friday on the sidelines of a press briefing.

Chinese companies, both state-owned China Post and privately operated ones, will carry out the business of domestic express delivery of letters, according to the revised postal law. The European Union Chamber of Commerce in China said Friday the law will erode foreign companies' competitiveness against their domestic counterparts in the express-delivery market, and it expressed its disappointment and concern over the "protectionism" in the legislation.

It said in a statement the ban may also raise questions about China's commitments to the World Trade Organization. "Protectionist measures would only exacerbate the current crisis and inhibit China's economic recovery," it said.

The chamber said the law will limit the development of China's logistics industry and result in less choice and lower quality service for customers.

It also criticized a new licensing system in the law for express delivery services, calling it a step backwards from the deregulation established in China's 2004 Administrative Licensing Law.

The chamber said it has been lobbying Chinese lawmakers for a level playing field in China's express delivery industry since November last year.

Companies such as FedEx Corp.(FDX) and United Parcel Service Inc.(UPS) have been lobbying Beijing for years as it worked on the new law governing mail delivery, arguing the restriction prevents them from competing in the country's rapidly expanding market for delivering documents.

China's express delivery business had revenue of more than CNY10 billion in the first quarter, more than a third of the country's total postal revenue of CNY25.96 billion, according to latest data from the State Post Bureau.

The ban over foreign companies in the domestic letter express delivery market is in line with China's commitments to the World Trade Organization made in 2001, said He Yongjian, an official with the Legislative Affairs Commission of the Standing Committee of the National People's Congress.

China's revised postal law will take effect Oct. 1. It was approved by the Standing Committee of the National People's Congress, the country's legislature which meets once every two months.

Under the original law, mail delivery was monopolized by China's official postal services. There was no separate stipulation over express delivery services.

Source: http://money.cnn.com/news/newsfeeds/articles/djf500/200904240702DOWJONESDJONLINE000500_FORTUNE5.htm

To view the European Chamber's press release on the new Postal Law, please click here.