"The establishment of the new company is part of our strategy to further tap the lucrative logistics market," said Ma Junsheng, deputy director of the SPB.

"Logistics will be a key economic growth area in the postal sector in the coming years," Ma emphasized on Saturday during the opening ceremony of CPLC.

He said now that the new company has been launched, a nationwide delivery network will be built up in the coming three to five years to meet the increasing demand for more efficient logistics.

"CPLC will play a leading role in our expansion," Ma said.

He said the registration of CPLC's subsidiary companies at a provincial level was under way and will be completed in the first half of the year.

"Our far-reaching networks and decades of delivery experience are our top advantages," he said.

The SPB has 57,000 postal outlets and 201 processing centres in addition to an expansive air, road and rail delivery network. The bureau provides a delivery services for a variety of goods, ranging from household electrical appliances and cosmetics to information industry products, auto accessories, medicines and publications.

China's sustained economic development will help the bureau profit from its expanding logistics business, Ma said.

According to Ma, the SPB is expected to achieve a sales volume of 3 billion yuan (US$363 million) from logistics services this year.

Revenue from logistics is also expected to reach 10 billion yuan (US$1.2 billion) by the end of the bureau's 10th Five-Year Plan (2001-05), accounting for more than 10 per cent of the postal sector's total earnings.

China's postal sector earned 51 billion yuan (US$6.1 billion) last year. Its profit stood at more than 100 million yuan (US$12 million).

Nevertheless, analysts pointed out that the SPB's logistics business is facing growing threats from both domestic private firms and overseas delivery providers.

Foreign delivery giants Fedex, UPS and DHL, and many small local companies, have started package delivery businesses in the major cities.

Currently their businesses, especially those from abroad, are restricted because the government still protects the SPB.

But the SPB has to accelerate its restructuring as China has promised to open service industries, including delivery businesses, to overseas players three years after China's entry into the World Trade Organization in December, 2001, said Tian Xuejun, executive deputy director of the Logistics Institute at Beijing University of Science and Technology.

(China Daily January 20, 2003)