2008 saw the strongest developing trend, the highest profit and most experiences for China port industry in the last 30 years. With 30 years’ development, now China has become a strong port, shipping and container shipping country, with a reasonable distribution, fully-structured and functioned sea and river ports, with a completed supplementary facilities and related high level of modernization. The construction of large-scale and specialized deepwater ports infrastructure has made great progress, and the ability of sustainable development is strengthened. Five transportation system including coal, ores, oil, container and grains have been formed at sea ports, and two horizontal and one vertical lines’ waterway net of nation grade has been established in inner waters. The port throughput and container throughput have held the first position for five years in line. The port container throughput grows by 30% per year in average, and the annual throughput topped 100 million TEU in 2007. Though the financial crisis sourced in USA suddenly hit world economy, and shipping market slowed down, the growth rate of port container throughput dropped, the total throughput in 2008 in China was 126 million TEU, still at the top of the world. The Agreement of Cross-Straits Direct Shipping will begin the period of direct shipping between mainland and Taiwan. Bonded Zone in ports further expands the function of the port, and strengthens the ports’ competitiveness. Till now, China has 12 Bonded Zones, five container ports of 10 million TEU per year and 17 ports with a throughput of 100 million tons per year, meaning China has the largest number of ports with a throughput 100 million tons per year of more. In 2008, the M&A trend spread among ports in coastal areas of China. The construction of Shanghai international shipping center is now underway, which is centering on Shanghai, with ports in Jiangsu and Zhejiang as wings. The construction of shipping center Tianjin, Qingdao and Dalian is making the market competition fiercer. Liaoning Province has made it clear that the government will integrate the port resources in Dalian, Yingkou, Dandong, Jinzhou and Huludao, and construct Dalian Port the most import international port in Northeast Asia.
The competitive advantage of Chinese ports is shown in the following four aspects: the strong competitive advantage from infrastructure of huge investments, the strengthened risk-bearing and emergencies-handling ability, the ports with plenty cash flow have interested the investors, and M&A among ports brings scale effect, multiplying the ability of financial risk resisting.
The power to maintain competitive advantage comes from innovation. In the background of in global market, the competition level between port companies in China will decide their competitive ability against other international ports. Only if they win the competition in domestic market, these ports in China can survive from fierce global competition, and complete the transformation from a large port in China to a strong international port. Now the profit sources of Chinese ports are limited, and therefore it is a big challenge for port industry in China to find new profit sources and how to maximum the value, and how to change the situation that loading and discharging fee make up the profit of ports.
The economic reasons for decreases in 2009 port throughput
The performance of ports and shipping industry is closely related to international trade, and then the interest rate, foreign exchange rate, export tax rebate, trade policy and macro economy. The trade policy for 2009 by China and the price effect will not have a clear push. The value of foreign trade in China will decrease considerably as the economic environment in Europe, America, Japan and areas around China is deteriorating, maybe by 9% to 17% from a year ago, meaning 240 to 340.1 billion US dollars. For this, the container throughput could decrease by 20 million TEU. 2008 saw the sharp hike and down in shipping industry, and the possibility of decrease in port and shipping industry in 2009 is 80%, and the possibility to maintain the level of 2008 is only 10%, and it is also 10% for an increase. The quick development in port and shipping industry has come to an end and weak tone will play its role in 2009 shipping industry.
Proposals for policies
As to the influence caused by financial crisis, to maintain a sustainable competitive advantage, experts give proposals as follows.
I. Investment, the forever driving force for economic development
With a progressing science and technology and deepening globalization, now it is a common sense that port has no long been just a point of the logistics chain, but energy of the value chain in the chain. The upsurge in investing and constructing large ports in China seems to come to an end, but there still is certain potential in this field, as the economy in different areas is not balanced, and the port construction, either. So, take the chance of weak economy, strengthen the investment in ports, and build up the core competitiveness. Reasonable layout of ports, improved port capacity and amended port condition is the base for port-based industries in China. The Department of Transportation should focus on construction of coastal ports with a fundamental and public role, and dredging and improving the public infrastructure in Yangzi River waterway, Beijing-Hangzhou Grand Canal, the Pearl River Delta and Yangtze River Delta.
II. Upgrade the risk-bearing ability
Shenzhen Port, Shanghai Port, Qingdao Port and Guangzhou Port are facing an opportunity to upgrade their competitive ability and for strategy integration. With years’ quick development, port and shipping companies in China have accumulated a great deal of good assets, which can stand the hit from USA financial crisis. Facing the downturn risk in port and shipping market, Shenzhen Port, Shanghai Port and Ningbo Zhoushan Port should challenge the market with an active measure, for a series of merge and acquisition to gain a development and expansion, lift the market share and position in international market, and realize the target of varying the companies’ operation, grouping and listing. The government should encourage the port and shipping companies and other listed companies in need of fund to issue convertible bonds, in order to ease the tight cash flow in these companies, the influence from the financial crisis, and learn the capital operation.
III. Strategic integration of ports
The comprehensive competitive ability of port companies in China is weaker that of shipping companies. To push to development of ports, and then boost local economy, the governments turn their eyes to ports. But due to financial problems, they can only sell out the ownership and operation right of the ports. Local governments and companies are weak in operation and development of ports. The retention of state-owned assets nationwide is 78%, while that of ports is only 52%. So, we suggest that the ports should learn a lesson from the failed Europe and USA port structure, and form regional share-holding port group as the listing companies, by holding a certain share in accord with the assets. For example, Guangzhou Port and Shenzhen Port can form Pearl River Delta Port Group, Shanghai Port, Ningbo Port, Nanjing Port and Lianyungang Port can form Yangtze River Delta Port Group, while Tianjin Port, Qingdao Port, Yingkou Port and Dalian Port can form Bohai Sea Port Group.
IV. Modernize the operation mode
The ports in China should no longer be dependent on loading and discharging fee, but earn profits from full supply chain service. The continuously increasing competition in the market has caused the reform in profit mode, and the port companies enter the period of supply chain, meaning ports need to develop other services, like land economy, logistics, barge transportation, banks, ship repair, logistics financial services and so on.
V. From bonded zone to free port
In June 2005, the first bonded zone in China, Shanghai Yangshan Bonded Zone was established in Shanghai. Till the end of 2008, the number of bonded zones in China came to 12. In the two and half years from 2005 to 2007, four such zones were licensed, while eight were constructed in 2008. However, due to a limited area (the largest one covers no more than 10 square km), these zones can not play the role of a port. Bonded zone is the base to expand the function of a port and carry out the open policy, but it needs an area of no less than 50 square kilometers to secure the targets, and then change into a free port. Therefore, establishing bonded zones with a larger area is the base for free ports.