Coastal Port Reform in China

1
Coastal Port Reform in China

• Min Qiu
• The University of Western Australia

2
Outline

• Economic background
• Reform of the governance system of the port
  industry
• Centralisation
• Semi-decentralisation
• Decentralisation
• Diversification of industry ownership
• National and regional port developments after the
  decentralisation
• Discussion and conclusion

3
Economic background

• Chinas economy in terms of GDP was developing at
  an average growth rate of about 10 per annum
  between 1978 and 2005
• Freight volumes in major coastal ports increased
  with an elasticity w.r.t. GDP has been above 2
  in recent years

4
Economic background

• Freight throughput in all ports in year 2005 was
  4.854 billion tonnes and in coastal ports 3.009
  billion tonnes
• Container throughput in year 2006 in the top ten
  coastal ports was 77.2 million TEU (twenty-foot
  equivalent units), 83 of the total TEU handed in
  all ports in China

5
Economic background

• By the end of 2006, China had in total 35,453
  berths, including 978 10,000-tonne-class public
  berths in coastal ports

6
Reform of the governance system of the port
industry

• Centralisation prior to 1984
• 13 coastal ports and 25 ports along the Yangtze
  River were under the direct control of the
  Ministry of Communications
• All aspects of business in the ports were
  centrally determined by the Ministry of
  Communications
• Each of the ports carried out its operations
  according a plan endorsed by the Ministry of
  Communications
• All operation revenues went to the Ministry of
  Communications
• The Ministry of Communications controlled funding
  for the innovation and development of the ports

7
Reform of the governance system of the port
industry

• Semi-decentralisation/dual-administration after
  1987
• 37 of the 38 ports were jointly managed by the
  Ministry of Communications and the local
  governments
• The local government managed human resources
• The Ministry of Communications was in charge of
  operation planning, procurement, infrastructure
  /equipment enhancement, development, and finance
• Each port could retain certain proportions of the
  profit as the port production development funds
• The proposed projects needed to be approved by
  the Ministry of Communications

8
Reform of the governance system of the port
industry

• Decentralisation after 2002
• All the 38 ports were transferred to local
  governments by March 2002
• The previous port authorities were split into two
  parts administrations and corporations
• A municipal/provincial port administration looks
  after all ports within its jurisdiction boundary
• All port corporations were incorporated under the
  Corporation Act of the Peoples Republic of China
  1999
• Have strategic objectives specific to themselves
  and the local situations
• Be financially independent from the Ministry of
  Communications, paying corporate taxes to the tax
  offices

9
Reform of the governance system of the port
industry

• Decentralisation after 2002 (cont.)
• A generic model of port governance

10
Reform of the governance system of the port
industry

• Decentralisation after 2002 (cont.)
• The Shanghai model of port governance

11
Reform of the governance system of the port
industry

• Decentralisation after 2002 (cont.)
• The Shenzhen model of port governance

12
Reform of the governance system of the port
industry

• Decentralisation after 2002 (cont.)
• Diversifying the industry ownership
• In addition to the government, China needs to
  source investment in ports from the private
  sector, the public and overseas corporations
• Sino-foreign joint ventures
• China Merchants Holdings Company Limited
• Dubai Ports World
• Hutchison Whampoa Limited
• PO
• Raising funds on stock exchanges in China
• Beihai Municipal Port Co., Ltd
• Shanghai Port Container Co., Ltd
• Shanghai International Port (Group) Co., Ltd

13
Reform of the governance system of the port
industry

• National and regional port development plans
  after the decentralisation
• National Layout Plan for Coastal Ports
• Justification
• Avoiding facilities duplicated
• Optimising use of coastlines
• Being consistent with the regional transport
  network
• Five port clusters (based on 8 freight
  categories)
• Bohai port cluster
• Yangtze River Delta port cluster
• Southeast port cluster
• Pearl Delta port cluster
• Southwest port cluster

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Major coastal ports in China
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Discussion and conclusion

• The Baird port administration models
• Land ownership, regulation and cargo handling

16
Discussion and conclusion

• Features of the port industry in China after 2002

17
Discussion and conclusion

• The reform has laid a foundation for the local
  governments to proactively to expand port
  infrastructure and to improve operational
  efficiency
• The reform has allowed some diversification of
  the industry ownership, which in turn widens the
  avenue of sourcing investment for port
  infrastructure expansion and technology
  innovation programs
• The National Layout Plan for Coastal Ports
  ensures that the local port industry can be
  developed sustainably and that the local interest
  derived from ports can be coordinated and
  balanced against national/regional interest

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Discussion and conclusion

• Consequently, volumes of freight handed in
  individual ports have in general been able to
  keep pace with the fast growth of Chinas economy
• From an individual ports perspective, the
  development is equally impressive.

19

• Thanks