Foreign funds float ports

PUBLISHED : Monday, 26 September, 1994, 12:00am
UPDATED : Monday, 26 September, 1994, 12:00am

CHINA has been building and developing ports at breakneck speed for the past decade, but it is finding that it cannot build ports fast enough to keep pace with the level of imports.

The limitations of the port infrastructure mean that backlogs and delays have become a regular fixture for vessels off-loading at Chinese ports.

The problem has been worsened because of inadequate back-up on land, such as poor roads and terminal infrastructure.

Some of the changes needed to improve this situation are already being undertaken, with 19 new deepwater coastal berths built last year and another 59 scheduled for the coming year.

But this is still too slow for many ports handling the mainstay raw materials like iron ore, grain and fertiliser.

Against this background, China is doing everything it can to encourage foreign investment in its ports.

Last year, it turned its already relatively liberal 1985 rules on foreign port investment into 'a shop window of opportunities', says Morgan Grenfell Asia in a recent report on the China Shipping industry.

A score of new deep water coastal berths were built last year, and 59 coastal and inland berths are expected to be completed this year. Ministry of Communication officials said even this would not meet demand as China's economy and trade continued to grow.

Cargo flow through main ports last year increased 8.3 per cent during 1992 to 950 million tonnes, of which 250 million were foreign shipments, up 14 per cent from a year earlier.

The nation's 1,800 berths, of which 373 are deepwater, can handle 550 million tonnes a year. The ministry estimates the new facilities will boost capacity by 34 million tonnes.

The ministry plans to add 210 berths in main coastal harbours between 1991 and 1995, including 100 deepwater sites. That would immediately add an estimated 24 million tonnes of handling capacity.

In the port of Qinghuangdao, the fourth phase in expanding the world's largest coal terminal, is well underway.

The project is scheduled to be completed by the end of 1996 and will boost handling capacity by 91 million tonnes. Two 35,000-tonne berths and a 100,000-tonne berth are being built.

Six coal berths are being built at Shanghai, while others are being constructed at ports in Nantong, Zhangjiagang, Zhenjiang, Wenzhou, Shantou, Xiamen and Guangzhou.

By the end of next year, the coal-loading capacity in the north will hit 152 million tonnes, while the unloading capacity in the east and south will reach 139 million tonnes.

Container docks are also a development priority. By the end of next year, an extra 15 container berths handling 1.9 million containers a year will be ready for use in 10 ports in coastal areas and the lower area of the Yangtze River.

Most of the funds for container ports comes from foreign investment, particularly from Hong Kong.

In line with the government's reform direction, price caps are being lifted and foreign investment encouraged in many areas of the transportation industry.

In shipping, this has included listings on both Hong Kong and Chinese stock exchanges for port facilities, and Sino-foreign joint ventures involving companies such as Hutchison.

In the past 10 years, more than US$2.3 billion in overseas investment has been placed in the port sector, far outweighing the amount injected into railways, highways or aviation.

About US$2.7 billion in loans from the Japanese Government, the World Bank and the Asian Development Bank have been poured into port construction since 1979.

Hong Kong firms have also expressed interest in developing ports in the southern half of China as an alternative to Hong Kong's crowded container terminals.

Last November, Swire Pacific and Peninsular and Oriental Steam Navigation Co bought 50 per cent of Shekou Container Terminal in Shenzhen from China Merchants (Holdings) and China Ocean Shipping Co (COSCO) for $615 million.

A month earlier, Hong Kong International Terminals (HIT), a unit of Hutchison, took 70 per cent of Yantian port, which is three kilometres from the Hong Kong border, for $3.4 billion.

Ports and docks in Shanghai, Wuhan, Shenzhen, Nanjing and Tianjin have drawn foreign investment. There are at least 16 major joint ventures investing in, or managing, Chinese port facilities.

In Shanghai, for example, Hong Kong-based Hutchison Whampoa has acquired an effective 40 per cent stake in the container port and will invest substantially to increase capacity and efficiency there.

But this does not include opening the domestic shipping market to foreign companies.

Shanghai deserves a special mention, for it is not just China's largest port but is a major port by international standards - the third busiest in the world last year.

It serves two key functions: one domestic; one international. China's raw material wealth is concentrated in the north of the country, and is brought by sea to Shanghai for local use or transshipment to barges for transport up the Yangtze River. Shanghai is also China's main port for import and export goods.

The Shanghai Port Authority is forecasting that coastal handling into Shanghai will grow from 45 million tonnes last year, to 60 million tonnes in 2000 and 80 million tonnes in 2020.

This is not the explosive growth seen in other sectors, such as containers, but it does suggest an increasing demand for tonnage.

Coal is largely handled at newly built dedicated terminals and port delays are less of a problem here. Some of the growth will be absorbed by greater port and ship productivity.