VZCZCXRO3951
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #1074/01 2640813
ZNR UUUUU ZZH
R 210813Z SEP 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6486
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 001074 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECPS ECON ETRD EIND PGOV CH
SUBJECT: Express Delivery Services Face Prospect of "Harmonious 
Competition" in Guangdong 
 
 
¶1. (SBU) SUMMARY: U.S. Postal Regulatory Commission Chairman Dan 
Blair emphasized to Guangdong officials and businessmen his belief 
that vibrant competition and consumer choice in the express delivery 
service (EDS) market would provide greater benefits than government 
regulation.  Chinese government and trade association 
representatives responded that controlled, regulated, "harmonious" 
competition would be the model of EDS development in Guangdong.  In 
spite of the challenges ahead, major U.S. EDS providers remain 
committed to expansion in south China and believe long term 
prospects for market development are good.  END SUMMARY 
 
A Preference for Regulation 
--------------------------- 
 
¶2. (SBU) Guangdong Postal Administration Director General Luo 
Jianqing and his deputy, Li Qingxi, shared the official vision of 
the future of the Guangdong EDS market with U.S. Postal Regulatory 
Commission Chairman Dan Blair and his delegation September 19. 
Noting that the service quality of Chinese EDS companies varied 
dramatically, Li said the administration planned to develop minimum 
service standards for the industry.  In his opening comments, 
Chairman Blair emphasized that consumers themselves were the best 
regulators and that vibrant competition and consumer choice -- not 
regulation -- would allow for strong growth by the south China EDS 
market. 
 
¶3. (SBU) During the meeting, Chinese officials evinced a deep 
misunderstanding of the U.S. EDS market.  Lin Shufen, another Deputy 
Director General at the Guangdong Postal Administration, was 
surprised to learn that the U.S. EDS industry was completely 
unregulated.  When the puzzled Lin asked how service standards were 
maintained, Chairman Blair reiterated that an unbeatable combination 
of competition, price and service would drive bad players out of 
business. 
 
A (Very) New Association 
------------------------ 
 
¶4. (SBU) In a separate meeting, Guangdong Express Association (GEA) 
President Wen Shaoqi said his organization, which was established 
August 15, 2007, and includes Chinese and foreign EDS companies, 
hoped to serve as a bridge between government, industry, and the 
public. In addition to promoting "fair and orderly" competition -- 
the mantra, as noted above, of the Postal Administration -- GEA also 
hopes to acquire advanced EDS technology for the Chinese market. 
Wen's presentation was upbeat, but it is unclear with GEA in its 
infancy, just how its plans, policies, and organization will 
develop. 
 
"Vibrant" Competition is Good, But . . . 
---------------------------------------- 
 
¶5. (SBU) When asked about the difference between "vibrant" and 
"harmonious" competition, GEA Deputy Secretary General Wu Weixin 
said that "vibrant" competition was desirable, but warned that 
competition could not be allowed to become excessive or disorderly. 
As justification for "harmonious" competition, Wu called U.S. 
companies "giants" and Chinese companies -- including state-owned 
enterprises -- "babies," saying that "babies need to eat, too." 
 
¶6. (SBU) Wu tried to allay fears that GEA meetings would include 
discussions of service levels, such as minimum delivery times, or 
price fixing.  He emphatically said GEA would "definitely not" 
engage in price setting, noting that prices should be determined by 
the market.  Wu admitted that GEA still needed to research and 
analyze the EDS market's service levels, but said that service 
standards would ultimately be consistent with international 
practices while also taking into account China's special market 
conditions. 
 
¶7. (SBU) As he did in the meeting with the Guangdong Postal 
Administration, Chairman Blair called the discussions "a good 
start," and encouraged continued dialogue between all parties from 
the U.S. and Chinese governments and industry. He noted that there 
were certain kinds of conversations that U.S. companies could not be 
a party to (noting discussions of pricing).  Both the Chinese 
officials and GEA officers responded enthusiastically to Chairman 
Blair's invitation to visit the United States to better understand 
the U.S. EDS market. 
 
U.S. EDS Companies Wary, but Committed 
-------------------------------------- 
 
¶8. (SBU) Following the meetings, representatives of two large U.S. 
EDS companies discussed with Chairman Blair the need for the U.S. 
industry to engage GEA and other similar associations to influence 
the future development of the industry in Guangdong.  Apparently 
 
GUANGZHOU 00001074  002 OF 002 
 
 
still skeptical of GEA's promises not to discuss prices or service 
levels, one U.S. industry representative worried about the awkward 
necessity of U.S. members of GEA having to walk out of meetings if 
such subjects were raised. Even considering the difficulties, 
however, the U.S. executives were generally optimistic about their 
expansion into the south China market. 
 
¶9. (U) The delegation did not have an opportunity to review this 
cable before transmission. 
 
GOLDBERG