China Post Declares to Cut Express Mail Charges

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Last updated at: (Beijing Time) Friday, August 29, 2003

China Post Declares to Cut Express Mail Charges

The China State Postal Bureau, also known as China Post, announced yesterday it will lower charges for its domestic express mail service by an average of 10 per cent, starting tomorrow.

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The China State Postal Bureau, also known as China Post, announced yesterday it will lower charges for its domestic express mail service by an average of 10 per cent, starting tomorrow.

It is the latest effort by the Sate-owned company to increase its competitiveness against increasing challenges posed by foreign rivals.

Bureau spokesman Sui Hongwei said the billing unit for express mail will change to 500 grams from the current 200 grams.

"Through the adjustment, the price for express mail will be reduced by an average of 10 per cent. The price for mail heavier than 500 grams will even drop by 30 per cent on average," Sui said.

The bureau has been charging 20 yuan (US$2.4) for the first 200 grams and 6 yuan (72 US cents) for every additional 200 grams.

Beginning tomorrow, the price will be 20 yuan for the first 500 grams.

The charge for every additional 500 grams will vary according to how far away the destination is. The price will be 6 yuan (72 US cents) per 500 grams for a destination less than 1,500 kilometres away, 9 yuan (US$1.09) for a place between 1,500 and 2,500 kilometres away and 15 yuan (US$1.81) for a destination more than 2,500 kilometres away.

Ma Zhanhong, deputy director of the bureau's Express Mail Service Department, said the price change is aimed at helping China Post win a bigger share of China's express mail service market, particularly the market for items of mail weighing over 500 grams.

"The need for greater efficiency pushes people to depend more on express deliveries. More goods, usually heavier than 500 grams, are being sent via express delivery," Ma said.

The bureau's extensive mail network and great strength can support the lower prices, he said.

Ma said he believed the benefit of the bureau's expanded market share can make up for the losses incurred by the lower prices.

Sui said the bureau's profit target will not be changed in light of the price reductions.

"We are confident we will see the benefit of this move as early as this year," Sui said.

China Post is expected to achieve an annual profit of 240 million yuan (US$29 million) this year. It made a profit of 120 million yuan (US$14.5 million) last year.

The postal service split from the telecom sector in 1998 in an effort by the government to break up the monopoly in the field. The separation left China Post with a debt burden of 18 billion yuan (US$2.2 billion).

China's express delivery business is expected to achieve an annual growth rate of 30 per cent over the next few years.

The huge Chinese market has seen the world's top logistic companies - including DHL, FedEx, TNT and UPS - muscle in on the lucrative business.

China Post has submitted a flotation proposal to the State Council. A flotation would aim to further restructure the company, and the firm would use the funds thus raised to prop up its business and compete with the increasing number of privately-run rivals.

The company is expected to list branches from its six most profitable regions on the Hong Kong stock market. The six regions - Beijing, Fujian, Guangdong, Jiangsu, Shanghai and Zhejiang - will be incorporated into a single company for listing purposes.

But bureau officials said nothing has been made final yet.

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