Foreign firms to get more access to China's delivery market

China will further open the domestic express delivery market to foreign enterprises to help develop a modern tertiary sector, authorities said on Wednesday.

The State Council, China's Cabinet, decided at a meeting chaired by Premier Li Keqiang to fully open the country's domestic package delivery business to qualified foreign companies.

The country will streamline license approval procedures and encourage mergers and acquisitions, even those launched with foreign capital, within the necessary review system.

China's international delivery business has become basically open to overseas capital, while domestic markets in major cities have gradually become available to foreign players.

The authorities believe that allowing in foreign competitors, a move promised when China entered the World Trade Organization, will push homegrown delivery businesses to up their game.

The country is relying on the sector to power the development of the whole tertiary industry, driving demand and propping up employment amid the economic slowdown.

China's delivery sector is booming with annual growth surpassing 50 percent in recent years. About 8.16 billion deliveries were made in the first eight months of this year and combined revenue amounted to 123.04 billion yuan (20 billion U.S. dollars).

However, hidden peril still lies in the way along with fast expansion.

"Rapid growth is not good phenomenon all the time," said Xu Yong, industrial analyst from cecss.com. "Service quality may be sacrificed as express companies pursue nothing but business volume, which has led to cut-throat competition."

Driven by a export-oriented economy, China has made its goods available in around 230 countries and regions in the world, but an embarrassing fact is that no Chinese express companies can deliver merchandise among all those countries.

"However, the four international express giants have the capability. So the domestic enterprises still need much improvement to establish a global network," said Wei Jigang, researcher with the Development Research Center of the State Council.

Experts believe Chinese homegrown enterprises can learn the ropes from their international peers that have already had their own mature business mode.

"Those big international companies only focus on business of high added-value and trust the less profitable one to a third party," Xu said.

Another option may be market segment, as the companies have to establish their own expertise in delivering a certain kind of goods, such as electronics and clothes.

"Large companies can specify their business division, while small firms can also provide customized services," Xu said, stressing more subdivisions will result in the better quality in the sector.

The good news is some of China's leading express companies including SF Express and Yunda have started to build up their advantages in their specific fields.

In addition, experts have urged companies to innovate their structures, business models and technologies to keep abreast of changing market demands.

"We need a market which is unified but open, competitive but in good order, and can protect the interests of consumers so that the sector can be strong, not only in China, but also in the world," said Yong Hu, an industrial insider.