Reform of China’s National Postal Service in Light of the Ukraine War
The normal operations of Ukrposhta, Ukraine’s national postal service, came to a screeching halt in the predawn hours of February 24 when the first Russian bombs and missiles struck Ukraine.
On the morning of the war, Igor Smelyansky, the CEO of Ukrposhta, went to his office after being awakened by phone calls. He took his computer and destroyed sensitive data. Since then, he has been on the move from one undisclosed location to another, running Ukrposhta’s operations with a phone and a laptop, in constant communication with his teams.
Ukrposhta has over 3,000 vehicles and several airplanes, 60,000 workers, and over 10,000 post offices. Some of Ukrposhta’s trucks have been used to carry food and medicine in what Smelyansky calls the “humanitarian bridge from Slovakia, Poland, Romania, and Poland”, which ensures the basic needs of Ukraine and maintains the stability of the cities.
Over a million senior citizens have not received their monthly pensions or necessary medications 10 days into the Russian invasion. Nearly a third of the population. i.e., 13 million Ukrainians, live in rural villages. The pension money is delivered on a rolling basis throughout the month, with retirees getting their payments on different days. Right now, Smelyansky’s focus has been on maintaining delivery schedules of cash pensions to 3.5 million elderly retirees. This is done by hand, to their homes, every month through the postal service.
“Before the war, we knew where everyone lived,” Smelyansky explained. With so many people displaced by the fighting, “we created a hotline for them to call and let us know where they are, and we’ll bring the money to them”. On March 5, only a short time before the war broke out, they restarted the essential disbursements.
National postal service should be a ready-made, mature, socially underpinned network system, and this is exactly how the national postal service in Ukraine works. On March 5, 2022, Liudmyla Yatsykiv, a post office worker at the Nove Selo village branch, which sits on the main road between the western city of Lviv and the Polish border, counts money in preparation for its distribution to retirees. On the other side, on March 5, 2022, Maria Lukashevych, the youngest employee to join the local post office after graduating from college just three months ago, is accompanied by an armed driver and is on her way to deliver cash pensions and groceries. “I didn’t even want to know how much money we carry! But now I’m not so scared,” she said and displayed the pepper spray that she carries in her jacket pocket. Typically, the van is on the move every morning with stacks of newspapers for subscribers, bags of groceries, as well as parcels and letters. Now that it’s wartime, they do more. She also has to deliver a few bags of pasta to residents. Because there aren’t many stores either, Ukrposhta also sells and delivers food at prices that are subsidized by the state. In fact, since the COVID-19 pandemic began, Ukrposhta has been delivering prescriptions from pharmacies.
“It’s important for our people to receive a note or a package from their relatives abroad. The Postal Service gives the feeling that you can still have a normal life”, Smelyansky asked post offices around the world not to stop sending their mail to Ukraine. “We will deliver it,” he assured them.
Whenever there is a war, an emergency, or a major disaster, the national service tends to reveal its fundamental value. That is why the British postal service is called the “Royal” Mail. Similar to the British army or the Her Majesty’s Armed Forces, they are equally respected and have not been changed in 500 years of history. This is related to the stability of the underlying social network system. In another example, even in the turbulent war years of China’s history, China’s postal service and railroads have been maintained, for the same reason.
However, China’s postal reform has taken a detour, and the postal system reform scheme released by the State Council in September 2005 put forward the plan of reorganizing the State Post Bureau. The scheme also includes reforming both the postal industry and the postal savings controlled by China Post Group Corporation, which does not rule out getting listed in the future. Its reform content includes dividing universal service business and competitive business, segmenting the business between China Post Group Corporation and other courier companies, and steps to be taken in the transformation of the Postal Savings Bank. It also encompasses aspects like stamps with certain monetary value and so on.
This reform is carried out in the trend of market-oriented reform, although the scheme certainly has numerous models as its reference points. These would include the German model (joint-stock company), the British model (state-owned joint-stock company), or the Japanese model (government agency). That being said, the necessities of China’s existing circumstances at the moment would still be a vital factor in spite of these reference points. The ultimate option, regrettably, is still heavily skewed toward the market-oriented course.
In reality, the most crucial definitional question is, “what is national post”?
According to China’s official definition, the State Post Bureau is a deputy-ministerial-level state bureau managed by the Ministry of Transportation of China, which is responsible for postal administration. The State Post Bureau is responsible for formulating policies and plans for the postal industry, as well as for the supervision and control of postal services (including express delivery companies). Accordingly, China’s official definition of “national post”, other than possessing some limited power and financial status, focuses on delivery service.
If reform is an issue involving a major strategy, then from the war in Ukraine, the other side of the problem has become obvious, i.e., the strategic definition of postal reform. In this sense, the definition of “postal system” in China in the past has become problematic. The correct strategic definition should be that the national postal system is a unique transportation system network that involves and covers China’s grass-roots society, and mails are but one of the many things that this system delivers. The national postal service should be the statutory service for the national administrative region in such a national system. Thus, it must have three important characteristics: legal status, stable employment, and integrated service.
Yet, China’s postal reform did not go in this direction.
I remember a long time ago, around the end of the last century, I wrote a short article analyzing the reforms of several large state-owned enterprises. They are mainly China Railway, China Post, China Guodian, China Energy, and Air China. Of course, there are also China Communication Construction Company (CCCC) and China National Nuclear Corporation (CNNC), which are all state-owned enterprises crucial for China to ensure its national security and national stability. As a matter of fact, they just cannot carry out market-oriented changes. Their reforms can only be at management levels to achieve greater efficiency, but not comprehensive market-oriented reforms.
In retrospect, one of the reasons why the reform of China’s state-owned enterprises was not successful is because it was putting the cart before the horse. It is noticeable that the institutions that require market-oriented reform have not done so. Conversely, the entities that should not be marketized were desperately being marketized. In this area of reform, state-owned enterprises are at one level, and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and National Development and Reform Commission (NDRC) are at another level. Moreover, the relationship between these two stages of transformation is inverted. At the level of state-owned enterprises, certain stable employments must be guaranteed, which cannot be marketized. On the other hand, marketization should be implemented at the level of SASAC and NDRC, where all policy issues should be handled according to the principle of market fairness and justice. When the situation becomes inverted, a significant number of gigantic mega-firms will appear, and nearly no enterprise can compete with them. This so-called marketization has actually caused confusion in the market. State-owned enterprises, since then, have acted as a sort of “secondary central bank”. The phenomenon of engaging in capital redistribution, in fact, is just a microcosm of the whole picture.
The problem is that I was the only one who held this view back then. Countless professors, scholars, and economists were actively “contributing plans and suggestions” on how to vigorously promote the reform of state-owned enterprises and how to divest them so as not to take a “turning back”. There is no other voice calling that certain things cannot be reformed, and the end result is the situation today. In my opinion, if China’s state-owned firms face a catastrophe on the scale of the conflict in Ukraine, they may not be able to perform as effectively as Ukrposhta.
Final analysis conclusion:
Looking at the performance of the Ukraine Postal Service during wartime, a lesson for China is that its national postal service should be positioned as a unique transportation network involving and covering grass-roots society, rather than as a market-oriented company. In fact, a number of fundamental areas of national security and national stability should be retained as state-owned enterprises that can play a bottom-up role. Such state-owned firms should not be subjected to premature market-oriented changes. On the contrary, at the level of government departments such as SASAC and NDRC, market-oriented reforms should be carried out in the regulatory system and the way of supervision. Policy issues, after all, should be dealt with according to the principles of market fairness and justice.
Writer by Chan Kung
Founder of ANBOUND Think Tank (established in 1993), Mr. Chan Kung is one of China’s renowned experts in information analysis. Most of Chan Kung‘s outstanding academic research activities are in economic information analysis, particularly in the area of public policy.
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