At the turn of the millennium, China’s fabled postal system — it was the subject of much praise even in the 12th century, and impressed the Venetian traveller Marco Polo — was struggling under the weight of new pressures.

With an increasing number of Chinese turning to the Internet — Net penetration rates here increased far more rapidly than in India, primarily owing to the country’s superior infrastructure — the postal service was seeking new ways to stay relevant.

In the early 1990s, the once unwieldy state-run China Post group embarked on an “informatisation” drive. Explaining the changes, Zhang Bailong, director of its Information Technology Bureau, told the Sina web portal in an interview: “China Post is a traditional industry. We have been a labour intensive organisation.” The official postal service today employs around eight lakh people.

By the early 2000s, Mr. Zhang said, the process of “informatising,” or digitising every business system, had been completed. This enabled China Post entirely to reorient the focus of its business. Its core business has shifted from the business of handling letters to facilitating the rapid expansion of China’s e-commerce industry. Last year, China’s online shopping revenue was valued at 800 billion yuan ($126 billion), driving the delivery of an estimated 3.65 billion pieces of express mail and parcels across the country.

Unsurprisingly, half of China Post’s revenues in 2011 — of 7.58 billion yuan, or Rs. 6,600 crore — came from its express business that has grown largely on account of the e-commerce market, according to official statistics. China’s lucrative logistics industry is today valued at 3 trillion yuan ($472 billion), and is growing by 14 per cent annually, according to the official China Daily. On the back of that boom, China Post’s express and logistics business grew 32 per cent last year. Its revenues rose 22 per cent to the equivalent of Rs.13,200 crore.

While China Post is facing competition in the international courier business from players such as DHL and FedEx who are making inroads in this market, it is focussing more on its domestic business.

With an estimated 80 per cent of the business being driven by China’s prosperous eastern coastal region, a 10-year government plan to develop the less industrialised western region is expected to help spread its business more evenly and drive growth.

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Postal systemAugust 28, 2012

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