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China to Impose Restrictions on Foreign Express Mail - 2002-05-03

Just months after China joined the World Trade Organization, China Post imposes restrictions on express mail deliveries by foreign enterprises. The new rules are to go into effect May 6. International carriers such as FedEx, UPS and DHL, helped by American and European trade officials, remain locked in negotiations with Chinese officials. Industry heads call the restrictions protectionism. China Post, which acts as both China's post office and market regulator, will bar foreign carriers from making express deliveries of packages under 500 grams. That would include legal documents, architectural drawings and product samples. Instead of foreign carriers delivering these packages, China Post's own express mail service will process them.

The move could affect about 60 percent of China's international express deliveries and hurt the industry's growth.

K.M. Liu runs the UPS operations in China. He says China is one of the company's biggest new markets, with revenue growing by more than 30 percent in the first quarter of this year alone.

Mr. Liu says China Post's decision caught many people by surprise, since the announcement came just months after China entered the WTO.

"UPS, together with other members of the Council of Asia Pacific Express Companies, is very concerned about the recent proposal to give China Post administrative authority over international express companies and international freight forwarders, which in effect gives the China Post and its' express arm a new monopoly," he explained.

However, there are signs China Post may be backing away from its plan. An announcement appearing in a Chinese newspaper indicates the new rules will not go into effect immediately.

"We believe this looming deadline, now postponed to June 15, the whole issue will be resolved favorably, considering the benefit of the entire China economy," Mr. Liu said.

China expert David Doddwell in Hong Kong says Beijing sees its commitment to the WTO more as a mechanism to drive reform in the domestic economy, rather than an international trade agreement. He thinks the main difficulty in reform lies in the conflicts of interest within government agencies.

"The fact that, in many parts of Chinese government, regulators are also operators in the market, is not, long-term acceptable situation," Mr. Doddwell said. "And the liberalizing parts of the Chinese government are working through those issues step-by-step."

Mr. Doddwell says reformers in the Chinese government struggle to convince domestically focused agencies such as China Post to recognize they are part of the global economy. But despite political rhetoric on speeding up reform, Mr. Doddwell says, liberalization is taking place at a painfully slow pace.