Apr. 24 – China’s new legislation for postal services may restrict foreign companies from competing with domestic firms.

The new Postal Law on the express delivery of documents is currently in its final stages and is expected to be approved soon when the standing committee of the National People’s Congress meet.

There is an article on the draft of the law released last year that says: “Foreign companies may not invest in the business of domestic express delivery of letters.” According to the WSJ, state media reports indicate that the provision is still there in the final version.

“We’re told there’s no substantive change” to the articles restricting foreign companies, an industry executive told the WSJ.

“Here you have a law that certainly treats domestic companies differently from foreign companies,” he added. “It could have an impact on everybody’s business.”

It is feared that the global economic crisis will push the government to enact protectionism rules.

The top foreign express-delivery companies in the country are: DHL Worldwide Express, FedEx, TNT and United Parcel Service. They are part of the Conference of Asia Pacific Express Carriers, which in the past has been calling for the government to allow them equal opportunity as local companies access in the domestic market. Majority of the foreign delivery firms are doing business in the country via joint ventures or other local operations.

A Chinese legislator, Qiao Xiaoyang, told Xinhua that the new amendment would not affect the development of foreign business operations in China, nor did it breach China’s WTO commitments.

Following China’s WTO commitments made in 2001,  it specified that while  express mail services will be open to foreign players, it will not include services monopolized by China’s postal department according to the law.

The Postal Law of 1986 says that the letter delivery is to be a monopoly of the postal department and it was only in 1995 were foreign companies allowed to do international express mail business not including private mail.

Express delivery industry in China shows promising growth compared to the stagnant traditional postal services increasing by 21 percent in 2007 and 26 percent  in 2008.