Chinese domestic container traffic multiplied by 10 between 2001 and 2011, but there is little hope Beijing will open the rapidly expanding market to foreign carriers anytime soon.
Domestic container volume skyrocketed from less than 5 million 20-foot-equivalent units in 2001 to 52.53 million TEUs in 2011, according to Huidian Research, a marketing and consulting firm focused on Chinese industries. Domestic volume rose 15 percent year-over-year in the first four months of 2012, with coastal ports seeing a 5.9 percent in domestic traffic, according to the Huidian report.
Domestic container traffic by the end of the year is expected to be up 14 percent from 2011, and volume is forecast to jump 33 percent to 80 million TEUs by 2015, according to the report. Paralleling the westward shift of manufacturing to avoid rising labor costs on the costs, inland waterway volume rose 37.2 percent annually on average between 2003 and 2011, compared to a 24.5 percent growth rate for coastal shipping.
The Chinese government is helping support the shift by doubling waterway investments to about $30.5 billion through 2015, with the aim of raising the average vessel load by 80 percent to 800 metric tons, according to the Chinese media.
But foreign-based based carriers aren’t able to tap the burgeoning domestic market, forcing them to contract domestic loads to Chinese carriers. Hong Kong’s status as a free trade hub — where the Chinese restrictions on domestic shipping don’t hold — has helped offset the shift of cargo to competing ports in South China.
The opening up of the domestic shipping market “is the biggest policy change we would like to see in the coming five years — being able to participate in the international relay business,” wrote Tim Smith, Maersk CEO of North Asia, in a KPMG study.
Unfortunately, there is little sign that China plans to open up the domestic ocean shipping market. Beijing aims to further protect Chinese carriers by blocking foreign firms from selling services on domestic waterways, according to Reuters. The new rules that take effect Jan. 1 will also forbid Chinese carriers from using foreign-made vessels without permission from the government, and the new restrictions apply not only to mainland China but also to vessels registered in Taiwan, Hong Kong and Macau.
The new rule requiring Chinese carriers to use domestically built vessels pushes the country’s cabotage policy closer to that of the U.S., rather than the less restrictive European market. The opening up of the market to foreign carriers would produce billions of dollars in savings, Tom Behrens-Sorensen, Navisino Advisors co-founder and partner, said at The Journal of Commerce’s TPM Asia conference in Shenzhen, China, last month. Instead, Beijing appears to be encouraging Chinese carriers to cooperate more, with the most recent development being Cosco and China Shipping’s new jointly operated domestic service.