Last year, Chinese ports occupied seven of the top ten places amongst leading ports in terms of box throughput according to a statistical report published in Lloyd’s List on 29 August 2014, with Shanghai named as the leading box port of the year once again as in 2012. Besides the well-known ports in Shanghai, Qingdao, Tianjin, Tangshan and Dalian, there are new northern Chinese ports, namely Rizhao, Yantai and Dandong, making it to the top 100 ports for the first time. Among which, the ports of Rizhao, Dandong and Dongguan all achieved double-digit growth in the year 2013. China thus remains at the forefront of the global ports business despite reports of a slowdown in the Chinese economy in recent years.

But according to guidelines published by the Ministry of Transport of the People’s Republic of China (MOT) on 10 June 20141 (the Guidelines), that is not enough. In the past, the government’s policy towards port development has mainly been driven by increasing annual TEU throughput (volume-handling). The newly published MOT Guidelines emphasise that development should shift away from mere quantitative increases in terms of throughput of the kind seen in recent years, to greater qualitative improvements in the level and sophistication of services the ports can offer. The core idea is that each major port will become a more sophisticated service centre (or hub). The Guidelines, which are likely to presage more detailed plans in the near future, encourage Chinese ports to make further investments in Shanghai and the future free trade zones in Guangdong and Tianjin2 to strengthen competitiveness through:

 

  • Upgrading port transportation systems.
  • Promoting the development of green ports.
  • Enhancing the safety at ports.
  • Promoting more effective logistics, data processing and communications for more efficient port operations.

The formal establishment of the Pilot Free Trade Zone in Shanghai (the FTZ) on 29th September 2013 has marked a crucial step in this development.3 The old special economic zones, most famously created in Shenzhen, were created back in the 1990s to allow foreign companies to invest in and build factories in China.

Now this old regime is being re-utilized again as a new idea for bringing forward and promoting cross-border settlement and liquidity of the RMB.

Business entities incorporated locally or overseas (from the banking, leasing, logistics, e-commerce, insurance and/or trading industries) may establish their branch offices in the FTZ and may trade with less stringent financial restrictions, greater freedom and preferential tax treatments. For logistics companies and the port operators, the Chinese government is prepared to open up trades in the FTZ by implementing simpler customs, immigration and quarantine procedures.

These measures will obviously support the opening up of various services sectors at designated ports with lower costs and efficiency. Presumably, these will also attract a wave of investments in the Shanghai FTZ and as well in the Yangshan Bonded Port Area.

All of these changes are expected to create new business opportunities for financiers, insurance providers and logistics companies.