Sitting at the point where the Yangtze River feeds into the Pacific, Shanghai is endowed with a natural edge in the global shipping trade. With the rise of China's manufacturing sector as the world's paramount supplier of goods over the past 30 years, the city's port has been elevated to stardom. Now, with Beijing's recent blessing of an ambitious dual-goal road map for the metropolis, Shanghai is aiming to transform into both a global shipping hub and a financial centre by 2020. Despite the equal weighting given to both goals, shipping has not aroused much public interest because of the nature of the sector, and has easily been outshone by the more glamorous financial industry. On the ground, however, the shipping story has greater potential to become a blockbuster sooner. The shipping hopes are built around the 30 billion yuan (HK$34.04 billion) Yangshan Port, which was completed last year after six years of construction. Though the port is still being trial tested and more works are in progress, deep-water berths capable of handling the world's biggest container ships have firmly stamped it on the global map. Yangshan, originally a cluster of deserted small islands south of Shanghai on the East China Sea, is already standing on the shoulders of giants. Last year, despite the economic downturn from the second half, the Shanghai port with its advantage of being situated relatively close to downtown, topped the world in cargo throughput at 528 million tonnes and handled 28 million containers, second only to Singapore. Already, a strategic shift to Yangshan is taking place, leveraging on the deeper berths which are also closer to the international shipping route, and will ensure Shanghai's long-term edge in the industry - provided the authorities get it right with the associated infrastructure and services. To achieve those goals, insiders say, the administration has to take up a bigger co-ordinating role among the mainland's competing government agencies, take into account cargo owners' changing demands and be more innovative and liberal in serving shipping agencies, logistics companies and related industries. 'In the past, some of us would set off fireworks in celebration whenever a symbolic numerical mark in tonnage [of throughput] was surpassed,' said Ren Xianzheng, one of the designers of the Yangshan Port and now a member of the city's municipal political advisory body. 'But now our business has reached a point where the ability to discern future challenges and quality of service matters most for the bid to become a truly international shipping business hub, not only in loading and offloading containers.' Traditionally, a disproportionate part of cargo - whether imported raw materials or outbound export products - going through the Shanghai port either from or to the Yangtze Delta River cities has been transported between the docks and the inland through highways. With the mainland's manufacturing moving inland from the coastal areas, the relatively expensive road transport is becoming less of a viable choice for cargo owners. That said, though, infrastructure in railway and waterways, the two transshipment alternatives, are not nearly ready to meet the potential demand. Recent research by a group of Shanghai Municipal People's Political Consultative Conference members suggested that less than a third of cargo going through Yangshan Port's facilities are transported to or from the port by waterway, while less than 1 per cent use rail, an even costlier and time-consuming means. Cargo owners have a reason for sticking to the often-congested highways. Most mainland ships travelling on inland waterways are not seaworthy to negotiate the deeper offshore water between the mainland and Yangshan, which is connected to the coast by a 32km-long bridge. In addition, there is currently no direct rail link to the port. These shortcomings inevitably increase costs for cargo owners using Yangshan. 'It is no more a port business alone and no more a Shanghai issue alone ... It's tied in with the shipbuilding industry and the national railway authorities,' said Liu Wei, a professor with Shanghai Maritime University. 'Especially the railway, which lags far behind in providing container services.' Freight has long been low down on the priority list of the state-controlled railway system, which perennially grapples with the task of meeting the demands of a massive migrant domestic population. It was not until very recently that container transport made its way into the Railway Ministry's agenda. 'It is a quirk of how things work in China that the railway authorities and their port counterparts, two separate arms of the bureaucracy, would have a lot of teething problems in a joint effort,' said Mr Ren. 'So a lot of co-ordination work needs to be done by the higher echelons of government.' And the co-ordination does not end here. Mr Ren submitted a bill to the annual conference of the city's political advisory body earlier this year arguing for better access to public information in the Yangshan Port area. In his proposal, he urged the administration to aggregate all types of statistics that are now monopolised by different government departments and make them available to the public. 'Easy access to information is not a problem specifically pertinent to shipping but if you want to have a free port, as Shanghai aspires, it's a must,' said Mr Ren. Every other free port in the world, including Hong Kong, is equipped with services for shipping and logistics companies to hedge their risks, arbitrators to settle their disputes and markets to raise funds for their operations. These are nearly non-existent in Shanghai at the moment. According to the Shanghai government website, shipping-related financial services including shipping insurance account for less than 1 per cent of the total annual revenue generated by similar industries worldwide, which seems eerily minimal in the light of the unparalleled tonnage going through the Shanghai port. In one of the latest moves to plug the gap, the Shanghai Shipping Exchange announced on May 19 that it would soon roll out a national shipping transaction platform along with a shipping trading index. An international shipping arbitration court, the first of its kind on the mainland, was also launched last month. The Shanghai municipal government also struck a memorandum with the national insurance regulator last month to push for wider liberalisation, on a trial basis, of the shipping insurance market in Shanghai. On top of the progress in such shipping-related service industries, the government has removed business taxes - levied at a rate of 3 per cent of the carriers' sales under normal conditions - on all shipping and logistics agencies registered in the Yangshan Port area. The Shanghai government also promised to facilitate quicker delivery of export tax rebates in conjunction with departure ports upstream on the Yangtze River. 'The preferential tax policy, though not having a significant impact on freight operators' financial health at the moment, would encourage more China-related international shipping deals to be signed on the mainland instead of overseas [where tax rules are more lenient than China's],' said a shipping agency manager based in Shanghai. 'That way, it would boost shipping business activities in Shanghai.' The easier delivery of export tax rebates would also encourage increasingly cash-flow-sensitive cargo owners to use Yangshan as their transshipment port before sending their goods on to the high seas, providing a boost to Shanghai's port business. Declining exports as a result of the global crisis have hurt the turnover both at the old Shanghai Port and Yangshan, as reflected by first-quarter figures from the Shanghai Municipal Statistics Bureau. The total throughput for the first three months of the year dropped by up to 13 per cent year on year. At the same time, the total national port throughput slid by a much smaller 3.3 per cent year on year. 'The preferential tax policies might have been designed for a long-term strategy,' said Mr Liu. 'But they are having a short-term impact for goods as well.' Interestingly, these tangible shipping-related sweeteners have provoked some envy from the city's bankers and brokers, who are still craning their necks for any meaningful breakthrough in the city's more headline-grabbing ambition to enhance its profile in the global financial markets. Without a timeline for the full convertibility of the yuan and the prevailing caution about the development of derivatives trading, the city's financial professionals do not hide their frustration. 'The ultimate realisation of an international shipping hub requires liberalisation in financial markets,' said a banker working with the Shanghai branch of one of the Big Four state-owned banks. 'But, at least at this stage, shipping hogs the limelight.'