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Bumpy road ahead for delivery firms

By Wang Xiaotian (China Daily)
Updated: 2009-09-24 08:26

The regulations will affect small delivery companies as they would find it difficult to meet the requirements. [China Daily]

Over 80 percent of the express delivery companies in China are likely to be affected by the impending licensing system that aims to regulate service approach, with some even indicating that they may quit the business altogether.

The new regulation, issued by the State Post Bureau, will come into effect on Oct 1. It compels businesses that operate within a province or municipality to have 500,000 yuan ($73,000) as registered capital. If they offer a nationwide delivery service the sum required will be 1 million yuan. Firms that offer international deliveries will need 2 million yuan.

According to data released by industrial and commercial bureaus nationwide, the number of registered Chinese private delivery enterprises totaled more than 5,000, occupying 80 percent of the express market, and employing more than 500,000 people.

"We allow those not qualified a buffer period of one year to raise the money and improve other conditions necessary before their operation can be approved," said An Ding, head of market supervision at the State Post Bureau of China.

Apart from the registered capital, companies have to supply details of their operation's network, delivery capability, facilities, information network and staff qualification.

An said small companies that deliver within a province or municipality would be hardest hit, while for those operating further afield it would be "a piece of cake".

Officials say they want to ensure the safety of deliveries and improve the quality of service by edging the weakest companies out of the market.

"The rope should have been tightened earlier," said Cheng Xianlin, 27, a delivery worker in Beijing with three years of experience.

"The industry is very messy now and price wars initiated by some small scale companies have been damaging the whole industry as well as the service to consumers."

Related readings:  Postal delivery reform welcome  Delivery drivers fear job losses  Express delivery benefits from opening-up policy  Strict requirement for delivery service set

Shao Zhonglin, deputy secretary-general of the China Express Association, welcomed the licensing system. "It is like opening hospitals because the mail and packages matter a lot to ordinary consumers," he said "The government should set up reasonable entry criteria to guarantee players in the industry have enough capability to provide sound services to the public."

In 2008, www.315ts.net, an official website specializing in addressing consumer issues, received 10,261 complaints about delivery companies. The number has risen 47.5 percent year-on-year. Almost 90 percent of the problems concerned private firms. Poor service, delayed deliveries, missing and destroyed package made up almost 81 percent of the complaints.

Li Cheng, a researcher at a state-owned academic institution, witnessed the "miserable" experience of his colleague just a few days ago. The delivery company badly packed a jar of honey with clothes and books. The jar broke, spoiling the other items.

Li said he didn't think imposing minimum requirements would solve the problem effectively. "The industry needs detailed operating standards, as well as strong supervision from the government," he said. "Raising the bar for private enterprises is not helpful for the development of the industry in the long run. Don't forget it is customers who have to pay for the bill finally."

Gong Chao, general manager of a Beijing-based express delivery company, is one of those worried about the impact of the regulations. His company doesn't have enough money to register. That in turn has put his job and that of 100 others in peril. "Maybe I could raise the money by whatever means, but that depends on whether the regulation will be implemented in a strong and tough way. I will wait and see," he said.

Zhou Jiyuan, general manager of Jiexianfeng Express, said he was hoping to dodge the regulation by registering the company as a logistics firm rather than as an express delivery service to avoid the additional costs. He said he was unsure if he would succeed.