Even under the current climate in Taiwan that causes revulsion and trepidation at the thought of Chinese investment on the island, one globally known Chinese company has rapidly grown in Taiwan with nary a ripple. Moreover, the sector it operates in has long been open to enterprises from China, by virtue of legislation that passed in Taiwan years before the "Cross-Strait Trade in Services Agreement" or "ECFA" became household names across the island.

This allowed for the entry of S.F. Express (SFE), China's formidable "national champion" forged under the crucible of the service industry that has arisen in the two decades since opening and reform.

In the wee hours of the morning over 400 delivery trucks and motorcycles dispatched from depots in 14 counties and cities around Taiwan busily move about from main thoroughfares to alleyways making pickups and deliveries. The distinctive white "SF" logo on the black trucks' sides exudes a feeling of professionalism.

According to Ministry of Economic Affairs company registration records, "Taiwan S.F. Express" is owned by overseas Chinese investors, and its principal shareholder is Wonderful Season Investments Limited of Hong Kong. The company stresses to the public that it is a "Hong Kong-invested enterprise," albeit with headquarters in Shenzhen, China.

However, there has been a major change in the identity of S.F. Express's mother company.

This past August 19 an announcement on the website of CITIC Capital, a private equity firm under the CITIC Group, stated that the group had teamed with two other Chinese partners – the Shenzhen China Merchants Group and Oriza Holdings of Suzhou – to purchase not more than a 25 percent stake in S.F. Express.

In other words, this express delivery company with rapidly expanding operations, whose mother company records turnover of nearly 30 billion renminbi (around NT$150 billion), runs a fleet of a dozen cargo planes, and employs 180,000 people on a scale over 10 times that of Taiwan's entire express delivery service industry, has now become a quasi-State Owned Enterprise of China.

The CITIC Group is a key state operated enterprise whose establishment was overseen by the late Deng Xiaoping, whilst the China Merchants Group is a heavyweight central enterprise directly under the PRC State Council. Every move either of the two makes is seen as an indicator of Chinese policy, and now they have joined forces to invest in S.F. Express.

It is no surprise, then, that the Chinese media described SFE's shocking developments in such terms as "becoming dyed red." Further, media observers averred that this leader of the private express delivery industry, which had refused to become publicly listed and had insisted on remaining independently invested for 20 years, was finally bowing down to the state.

In fact, this marks the second time that S.F. Express has changed identities over the past three years.

In 2010, after 17 years of operation registered in Hong Kong, China S.F. registered as a "mainland-invested" enterprise. At the same time, the company's founder and CEO Wang Wei switched his legal residence from Hong Kong to Shenzhen.

The chief factor behind these changes was the new version of China's Postal Act that went into effect on 1 October 2009, which expressly prohibits companies from engaging in postal business if they are foreign invested, including those from Hong Kong. And postal delivery happens to be SFE's golden goose.

"This was a natural development," explains a seasoned Taiwanese logistics expert with extensive experience in China. Rarely do private Chinese enterprises with over 20 percent market share fail to get the state's attention. It "uses all sorts of tactics to deal with you," he remarks.

But Taiwanese society, which is already mortified by the prospect of Chinese investment, can hardly feel at ease when it watches an express delivery company mutate so dramatically – originally registering in Taipei as a Hong Kong firm in 2007, then changing identities again and again, and finally ending up partly owned by the PRC state itself.

National Taiwan University economics professor Show-Ling Jang, a prominent opponent of the Cross-Strait Trade in Services Agreement, believes that SFE's alliance with the state "indicates that Chinese state-owned enterprises have never relaxed their ambitions to seize Taiwan's market."

Mysterious Logistics Empire Rises from the South

Wang Wei was born in Jiangxi Province. His father, a military interpreter, and mother, a university professor, moved the family to Hong Kong when Wang Wei was seven.

In 1992, when Wang Wei was 21, Deng Xiaoping made his historic visit to Shenzhen, heralding the launch of China's economic reform and opening. In the coming years, tens of thousands of Hong Kong factories would move their operations northward up the Pearl River Delta, and millions of documents and small packages would shuttle back and forth across the Hong Kong/China border. This represented a tremendous business opportunity in the logistics business.

The following year, high school graduate Wang Wei borrowed 100,000 Hong Kong dollars from his family to set up S.F. Express in Shunde, Guangdong. This launched the express delivery business of the burly Wang Wei, who stands more than 180 cm tall and earned an early reputation as the "boss-slash-load hauler."

Just a few years later S.F. Express practically had a lock on courier business between Hong Kong and the Guangdong region. According to Chinese media reports, SFE handles 70 percent of surface shipments between Shunde and Hong Kong.

A few years ago countless anonymous couriers huffing away on bicycles, their darkly tanned skin covered with sweat, were a common sight as they wended their way through Beijing and Shanghai traffic. That has since been erased by electric tricycles and small delivery trucks, most of which carry the steel gray "S.F." livery.

SFE's rapid ascendance in just a few years from boss of the South to dominant national express carrier can be largely credited to Wang Wei's bold leap from the ground to the air, with rapidity and quality that put a large gap between the company and its competitors.

With air cargo prices tumbling during the SARS scare of 2003, Wang Wei seized the chance to ink a long-term contract with Yangtze River Express. The deal, which included five cargo planes, made SFE China's first and only privately run express delivery company operating dedicated cargo planes.

Wang Wei hit the market again during the 2008 financial crisis, purchasing a used Boeing 737. Today S.F. Air Cargo operates 12 dedicated cargo planes.

180,000 Couriers: the Face of the Company

SFE is China's only express delivery company to run on a direct operations structure, directly overseeing 180,000 employees and 5000 depots. The company even recruits and trains its own air cargo fleet's captains.

As can be imagined, management is highly dictatorial. To this day, Wang Wei calls the shots on matters big and small – his own form of "management with Chinese characteristics."

S.F. Express is known across China's logistics field as the "mysterious empire." Wang Wei never shows his face, and rumor has it that even Alibaba Group founder and Executive Chairman Jack Ma has been rebuffed in his efforts to meet with Wang.

Wang Wei's approach to corporate management is as difficult to fathom as he is. SFE has never run advertising, and carries no sales representatives to make customer calls. Even if such staff existed, they would surely have no leeway to perform: when it comes to pricing, SFE treats both the one-time customer sending a small packet the same as a corporate client moving over 10,000 items a year. This no-discounts policy goes against all established precedent in the express delivery business.

The heart of the company, or SFE's "face" to the world, is its more than 100,000 delivery personnel in gray black uniforms. Living advertisements for S.F. Express, they also function as the company's hardest-working salespeople.

S.F. Express's salary structure is similar to that for insurance salespeople in Taiwan, under which the results that the couriers achieve on a daily basis within their assigned jurisdiction are directly reflected in their income. The hardest SFE workers can make over 10,000 renminbi a month.

In order to develop potential customers, some SFE couriers even use their free time to sweep the floors at the company service counter within their jurisdiction.

In the effort to keep the S.F. Express empire's management from spiraling out of control, Wang Wei solicited the assistance of IBM to develop a high-tech management operations system.

Each one of SFE's 5000 distribution depots around China is outfitted with video monitors, overseen 24/7 by staff at the Quality Control Center at company headquarters to ensure service quality.

Dr. Robert Tseng, former vice president of SFE in charge of southeastern China operations after spending the earlier part of his career at DHL in Taiwan, recalls that he once witnessed a distribution depot staff member that had forgotten his identification badge and was immediately set straight by a phone call from the corporate Quality Control Center.

Aircraft, high salaries, high tech – these investments are reflected in SFE's acclaimed service quality.

According to statistics from the PRC's Postal Service Department ranking complaints in the express delivery industry, S.F. Express generates an average of 2.9 complaints per million units, a superior ratio to its Chinese peers and just slightly behind global express service giants FedEx and DHL.

According to a 2012 survey by China Reality Research, a market research firm, 19 percent of Chinese consumers rank SFE's service as the best, outstripping even the two global leaders.

70% of Cross-strait Package Volume

Robert Tseng reckons that S.F. Express claims 70 percent of cross-strait volume for packages.

A million Taiwanese business people send packages and documents back to their homes and company headquarters in Taiwan through SFE's more than 5000 depots across China. When family and colleagues need to send something, they naturally give the same courier their business. The chain reaction that spreads on down the line is frighteningly powerful.

When S.F. Express formally entered Taiwan in 2007 as its first base for globalization, Tseng's intuitive response was "Taiwan had better watch out." Especially given the rapid development of cross-strait e-commerce, "the combination of SFE and Taobao will surely upset everything in Taiwan."

Government Impotent against Chinese Investment Inroads

According to the website 104 Manpower Bank, SFE currently has 740 employees in Taiwan, making it only a medium-scale operation in the island's logistics sector. Yet it has already stirred up a tempest among its industry peers.

The Taiwan Route-Permitted Truck Transportation United Associations, whose members include Taiwanese logistics companies Hsinchu Transit Co. (HCT) and Takkyubin, have repeatedly submitted complaints to the Ministry of Transportation and Communications that S.F. Express has been "illegally" running express delivery operations in Taiwan without having received the requisite licensing.

Other industry operators accuse S.F. Express of "jumping the gun" by operating in Taiwan in the guise of a "Hong Kong-invested company."

"The government does nothing about it," laments a mid-level executive in the local express industry.

In fact, the "route-permitted truck transportation" industry, under which express delivery and courier services fall, was opened to mainland investment a decade ago under Taiwan's obligations as a member of the World Trade Organization (WTO).

Ti-chi Hu, section chief at the Department of Railways and Highways under the Ministry of Transportation and Communications, who oversees the cargo industry, stresses that the revisions to Article 35 of the Public Roads Act explicitly opened up operations in the field to "non-ROC citizens," which in essence includes Chinese funding. "Only no one spent any extra time talking about this at the time."

Section Chief Hu adds that China, which joined the WTO the same year as Taiwan, also promised to open up without restrictions. Accordingly, Taiwanese businesses have long been allowed to run express delivery operations in China. "Make no mistake about it, joining the WTO meant opening up," Hu states.

Then why do we see S.F. Express vehicles parading all around the streets of Taiwan, whilst local companies like Taiwan's HCT and T-Join have not made inroads into China?

When we posed this very question to Pablo Lee, general manager of HCT Logistics, his eyes widened as he snapped rhetorically, "Would you dare to venture there?"

"That's a tall task!" he exclaims as he lists a litany of "hidden barriers" like geography, the nature of competition, and licensing. Rather than focusing on the coast being clear for going in, he says "what really matters is whether or not you have the means to run that kind of business."

Industry veterans all know that a gap exists between China's "parity opening" and common understanding of what such a term would ordinarily mean. Even FedEx and DHL have taken hits despite decades of global operation.

China's newly amended Postal Act of 2009 placed the express shipment industry under clear legal regulations for the first time, while at the same time cleverly excluding foreign-invested firms from handling local enterprises' documents. This also just happens to be the biggest piece of the profit pie for overseas firms.

FedEx founder and CEO Fred Smith, 69 with a full head of white hair, went on record criticizing China's protectionism in an interview with the Wall Street Journal, adding that China was damaging the international trading order by propping up its own "national champions."

The "national champion" he was referring to in this case was S.F. Express, the biggest beneficiary of the new regulations.

Is SF Express the Next Huawei?

A secretive leader, competitiveness on par with foreign firms, and state policy support are some of the traits SFE shares with another "Chinese national champion," Huawei Technologies, which has now become the world's second largest supplier of telecommunications and networking equipment.

Both companies made a point of not going public for years, and Huawei founder and CEO Ren Zhengfei is famous for refusing media interviews.

Propped up by Chinese state policy, Huawei has swooped into cities across the globe on the strength of low pricing, striking fear in competitors wherever it goes. The situation has been severe enough for certain Western countries to put a ban on Huawei equipment in the interest of "national security."

In late October a local legislator revealed that the ROC Office of the President had purchased WiFi cards made by Huawei, possibly compromising sensitive information. This prompted the National Security Bureau to disclose that it had "privately urged" Taiwanese telecom operators to refrain from purchasing Chinese-made telecom equipment several years ago.

Do the express shipment and logistics industries have legitimate national security concerns?

Scholars believe they do.

National Taiwan University professor of economics, Show-Ling Jang, notes that due to economy of scale and the prohibitive costs of setting up networks, the logistics industry naturally tends to become monopolistic, as can be seen in the oligopolistic operation of the mature European, Japanese and American markets. "If only two or three players remain in the Taiwan market in the future, and one of those is Chinese-invested, wouldn't that pose national security issues?"

One executive at a major Taiwanese express shipping company that requested anonymity, agreed. "We can see everything about the shipments and performance of manufacturers that partner with us. Wouldn't that be national security?"

For that matter, the PRC government agrees, which is precisely why it added an "empire provision" to the Postal Act, which reads in part: "…review of applications for permission to operate express delivery business should take into consideration such factors as national security, and seek the counsel of relevant government agencies."

Huawei, which exercises control over the flow of information, has been excluded from Taiwan. Meanwhile, how should we approach S.F. Express, which commands control over the flow of goods?

Translated from the Chinese by David Toman