The State Postal Bureau (China Post) is progressing with its scheme to merge its two sub-businesses, the express mail service (EMS) and China Post Logistics Co Ltd.

"The merger is still in the preparatory stage, and we are considering how to restructure the businesses and the personnel involved," a spokesman for China Post Logistics, who declined to be named, told China Daily yesterday.

The planned merger was announced at the end of last year.

The spokesman refused to comment on when the merger would be completed, but Beijing Morning Post reported that substantial moves will be taken by the year's end.

Media reports also said that the merger started earlier this year from the Beijing branch and is expanding into branches in other provinces and municipalities.

The merger is part of a reform of the country's postal systems, said the spokesman. He did not elaborate.

Wang Jilu, spokesman of the State Postal Bureau, declined to comment as "the reform is ongoing."

The State Council, China's cabinet, recently approved reforms for the country's postal system.

Under the scheme, the bureau will be restructured into a regulator that will supervise the sector and set rules and standards. Meanwhile, a China Post Group Corp will be set up to run various postal services, including the mail service, express deliveries and logistics.

In addition, a postal savings bank will be established.

As China Post's first subsidiary to split from the group to become an independent, market-oriented operation, China Post Logistics was set up in early 2003.

EMS, China Post's express delivery business, however, remains part of the fixed businesses that include the profit-making logistics section and postal savings, as well as money-losing basic postal services.

Overlapping businesses have resulted in controversy between the two, and dispersed resources in logistics and express services have increased the cost of each.

The merger is expected to solve this problem, thus helping the future China Post Group Corp better compete with its foreign counterparts.

This move is also a response to the expected opening up of China's service sectors at the year's end, said the spokesman at China Post Logistics.

Foreign investors will be permitted to set up fully-owned logistics and express delivery companies in China from December 1.

Global express delivery and logistics giants, including FedEx, United Parcel Service (UPS), DHL and TNT, all have taken aggressive steps during the past year or two to strengthen their presence in China.

FedEx has recently decided to move its Asia-Pacific hub from Subic Bay, in the Philippines, to Guangzhou.

And UPS will set up a hub in Shanghai by 2007 for its China business.

China Post began to record a profit in 2002, generating a total profit of 220 million yuan (US$27.1 million). The corresponding figures for 2003 and 2004 are not available.

EMS this year is expected to achieve a growth of around 10 per cent of its revenues. And China Post Logistics could double the business volume of its provincial subsidiaries.

(China Daily August 11, 2005)