China mulls opening up domestic feeder market to foreign lines

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Oct 2007

China may allow foreign lines to feed cargo between Chinese ports in what would be a significant policy change, according to a senior port executive.Chen Xuyuan, president of Shanghai International Port, said China's ministry of communications was seriously studying the possibility of permitting non-Chinese-flagged vessels to carry export cargo from one Chinese port to another before transhipment to ocean-going vessels.Chen said he supported the possible change in the regulations which, if allowed, would have a positive effect on Chinese ports, especially those aiming to boost the levels of transhipment cargo. He said a breakthrough is needed and the practice that foreign operators running local feeder services should be allowed.Shanghai Port said one of its three main growth strategies was to become an international transhipment centre in northeast Asia. At present about six percent of its container volume comes from international transhipment traffic.Shanghai-listed SIPG is the largest operator in Shanghai with interests in all container terminals in what is expected to become the world’s second busiest box port this year.Mediterranean Shipping Company moved its transhipment centre from east China's Ningbo port to Pusan in South Korea in April this year because it was banned from carrying domestic Chinese cargo. As a result Ningbo lost 400,000 TEUs of transhipment cargo.Many international liner services start at northern Chinese ports and then call at Shanghai, Ningbo or Xiamen before leaving for other countries. However, shipping lines are not allowed to carry cargo from north China for transhipment at another Chinese port and have to rely on domestic shipping lines even though their vessels are running on the same route.Shipping lines would like to carry that cargo themselves. But some international lines have broken the rule further by carrying non-export cabotage cargo just to fill their ships. The communications ministry has kept a high profile eye on striking down those illegal cabotage services.The chairman of China Merchants Holdings International, Fu Yuning, said the policy change will improve the efficiency and lower the costs of marine transport and have a positive effect on coastal ports. He said the issue involves not only ports but also the whole shipping industry.Fu confirmed the ministry of communications was studying solutions for the problems concerning foreign lines running local feeder services.He said China was not likely to open the market when other countries refused to do so. How Customs could ensure foreign lines would not carry non-export cabotage cargo if the policy changed was also a problem. He believed the ministry would come up with a solution where Chinese shipping lines did not suffer.Vincent Wang Zhixian, chief executive of China Merchants International Terminals Ningbo Daxie, said the policy change would bring huge volume growth to Chinese ports, but it also involves the issue of China's sovereignty.The policy shift would also have a negative impact on local feeder operators who were already suffering losses. Wang said lack of resources in the local shipping industry had hampered the development of China’s domestic feeder network.Chen admitted that opening of the feeder market would affect China's domestic shipping companies. However, he thought the influence would be limited as there were other barriers foreigners had to overcome apart from regulatory hurdles when entering the local market.The existing ban on feeder services does not affect foreign-flagged vessels which call at a north or east China port and then sail to Hong Kong or Shenzhen to load or unload transhipment cargo. This is because they have to sail through Hong Kong waters, which is considered to be foreign territory, before reaching the ports.