September 24, 2014 / 12:30 PM / 5 years ago

UPDATE 1-China to free up domestic courier market

(Adds details)

BEIJING, Sept 24 (Reuters) - China said on Wednesday it would allow qualified foreign couriers to deliver packages in its domestic market, potentially hotting up competition in a fast-growing business already marked by bruising price wars.

The State Council, or cabinet, said it had decided to “fully liberalise” the Chinese market for parcel delivery and would let in foreign firms that met certain criteria, but gave no details of the conditions to be met.

The measure will allow global players such as FedEx Corp , Deutsche Post’s unit DHL, and the world’s biggest courier company, United Parcel Service Inc, to compete in a market forecast to be the world’s largest within two decades.

China will also encourage mergers and acquisitions between companies and will improve the review process for deals involving foreign firms, the cabinet said in a statement on the government’s website following a weekly meeting.

The announcement aims at promoting fair competition between domestic and foreign firms, it said.

Chinese law forbids foreign companies from delivering packages between locations in the country, although they can courier overseas parcels to sites in China.

Helped by a boom in e-commerce, revenues in China’s express delivery market more than doubled to $13 billion over the five years to 2011, and are expected to overtake the $70-billion U.S. market, now the world’s biggest, by 2032.

But the booming market is also highly fragmented and characterised by cut-throat competition.

There are some 35,000 express delivery companies in China that can ship packages for hundreds of miles for less than the cost of a standard U.S. letter.

Such rock-bottom prices, and the earlier bar on foreign couriers from delivering parcels, had forced out some companies in the past.

DHL exited the market for about a year in 2011, saying its inability to deliver parcels was one of the reasons. (Reporting by Koh Gui Qing and Li Hui; Editing by Clarence Fernandez)

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