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Foreign investment boosts port industry

By Xin Dingding (China Daily)
Updated: 2007-06-22 08:37

Companies in China are foregoing investment opportunities in overseas shipping ports in favor of a commercially lucrative domestic industry, significantly boosted by foreign capital.

The Ministry of Communications forecasts that movement of goods in China's ports will exceed 6 billion tons by 2020, up from 3.95 billion tons last year.

Foreign investment is expected to continue to flow into the industry, having already "accelerated" its development over the last two decades.

"The government wants domestic companies to develop into something bigger and stronger, and investing abroad is a way of achieving that goal," Peng Cuihong, counsel to the ministry's water transport department, said.

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However, so farChina Ocean Shipping (Group) Company(COSCO) is believed to be the only one to have invested significantly in ports abroad, with berths in the United States and Italy.

The trend is an encouraging one that reflects the buoyant state of China's port industry.

"China is developing very quickly and there are huge demands for port capacity building," Peng said.

Analysts predict foreign capital flow into the port industry will remain unchanged in the next few years.

James Jixian Wang, an associate professor with the University of Hong Kong, said the port industry was attractive to overseas investors for its "stable returns".

"Though the most lucrative ports have already been grabbed by the early comers, more and more foreign investors will still come," Wang said.

The industry was one of the first in China to welcome foreign capital. Most coastal ports have received foreign funds, after Shanghai's port first attracted overseas capital in 1992.

Container ports attracted 25.3 billion yuan ($3.3 billion) in foreign capital between 1979 and 2001, according to a Xinhua News Agency report.

Foreign investment has prompted big changes and improvements in China's ports.

"Their entry has accelerated the infrastructure construction at ports, improved port management and brought advanced operating concepts," Peng said.

"Our initial expectations for foreign capital have all been fulfilled. The ministry welcomes foreign investment as usual, and there is no restriction for foreign capital into the port industry."

By the end of 2006, China's coastal ports had about 15,000 productive berths, including 1,257 deep-water berths for 10,000-ton vessels.

Cargo and container movements last year increased by 17 percent and 22 percent, respectively over 2005.

The A.P. Moller-Maersk Group said China's container movements would increase by 14 percent until 2011, compared to 8 percent average growth for the rest of the world.

The challenges ahead for China's ports include the need to expand fairways to accommodate the ever-increasing size of cargo vessels, and improving logistics for smoother distribution and transportation of goods.