Time: September 26, 2009
Place: 1/F, Multi-function Conference Center, Shanghai International Shipping Institute

Zhen Hong (SISI Secretary-General):

The Article 15 of the Opinions of the State Council on Expediting the Development of Modern Service Industry and Advanced Manufacturing Industry as well as Construction of an International Financial Center and an International Shipping Center in Shanghai (the Opinions) focuses on the development of cruise industry. The recent years have witnessed a rapid development of China's cruise industry, especially in Shanghai. After being put into service, the International Passenger Transport Center of Shanghai Port in North Bund frequently receives large cruise liners. Therefore, the development of cruise economy will be an integral part of the construction of Shanghai International Shipping Center.

For the above reason, we invited scholars and entrepreneurs of the cruise industry to jointly discuss the related issue. The participating experts include Xiao Baojia, Vice President of Shanghai Maritime University and Director of the Cruise Economy Institute under SISI; Zheng Weihang, Vice President and Secretary-General of China Cruise & Yacht Industry Association (CCYIA) and Deputy Executive Director of the Cruise Economy Institute; President Xue of Shanghai Sanda University; Lu Qingdong, Director of Shanghai North Shipping Service Cluster Construction & Development Office; and representatives and experts from trade associations, enterprises, colleges and universities.

Address by Xiao Baojia (Vice President of Shanghai Maritime University and Director of the Cruise Economy Institute under SISI):

Today we gather together to discuss the development of national cruise industry. Shanghai is home to shipping services. On behalf of Shanghai Maritime University and Shanghai International Cruise Economy Institute, I want to extend a warm welcome to you all.

Shanghai is recognized as one of the ideal cruise port cities in China. As an integral part of the construction of Shanghai International Shipping Center, the cruise economy is injecting endless vitality into the development of Shanghai, and exerting positive impacts on the social, economic and cultural development of Shanghai and its surrounding Yangtze River Delta region. In the recent five years, Shanghai has achieved a good momentum in developing cruise economy. Relative data show that the development of Shanghai's cruise economy has not been impacted by the international financial crisis, but bucked the market trend with new highs in the numbers of cross-boundary passengers by cruise and cruise liners berthing at Shanghai. The cruise economy is leading the construction of Shanghai International Shipping Center. In this context, the Symposium on International Cruise Economy Shanghai is jointly organized by SISI, CCYIA and Shanghai North Shipping Service Cluster Construction & Development Office. A cruise market research report will also be released at the symposium.

The Cruise Economy Institute under SISI was inaugurated by Minister Qian on the same day when the SISI Council was established in June this year. The institute is a research and advisory institution co-founded mainly by Shanghai Maritime University and CCYIA through a strategic partnership. The Institute is mainly engaged in activities related to cruise economic development, including cruise industry development policies, development strategies, market strategies, etc. In recent years, the institute, together with Shanghai Maritime University, has completed many of China's influential researches on cruise economy, and looks forward to future supports from you. Discussions at this symposium will focus on the development of Shanghai's cruise industry chain, cultivation of cruise market and cruise market policies, and will release a cruise market research report. I believe that with you efforts, China's cruise industry will achieve a rapid development, featuring a fast launch of various activities. At last, I wish the symposium a complete success.

Address by Zheng Weihang (Vice President of CCYIA and Deputy Executive Director of the Cruise Economy Institute under SISI):

I made a special trip from Beijing to attend this symposium mainly for two reasons. Firstly, Shanghai, especially Hongkou District, is the birthplace of China's cruise economy, and has been leading China's cruise economy after years of development. Secondly, I'm here to be enlightened by new ideas of experts on the development of cruise industry. Before that, I would like to make a brief introduction of the dynamic development of China's cruise industry, especially in this year, just for your reference.

Firstly, China's cruise industry began in 1919 when a group of students travelled from Tianjin to France by cruise, such as Deng Xiaoping. At that time, cruise ships were operated mainly for mailing. It was in 1976 when cruise ships were operated not for mailing but for carrying passengers. In that year, Japanese cruise Coral Princess, carrying over 400 Japanese students, visited the Port of Dalian.

The development of China's cruise economy has begun since July 2, 2006, when the first passenger cruise liner of Costa Shanghai set sail. The rapid development of cruise economy in the past two years has gained great attention from local governments and led to the construction of three cruise terminals in Shanghai, Xiamen, and Sanya. The cruise terminal in Shanghai is the most modernized and internationalized in China. The terminal in Tianjin is under construction, while the ones in Dalian, Shenzhen and Guangzhou are under planning. During the past two years, various cruise lines, governments and associations, especially governments, have made great efforts. Being the first promoter, Director Lu of Hongkou District Shipping Service Office also has a large share in promoting China's cruise economy.

Shanghai's first cruise liner set sail in July 2006 before CCYIA was established in November 2006. Though being a non-governmental organization, the establishment of CCYIA was officially approved by National Development and Reform Commission and Ministry of Civil Affairs of the People's Republic of China. CCYIA has done a lot of things. The cruise economy has achieved particularly rapid development this year through the promotion by various sectors, gaining increasing attention from the central leadership. On March 25 this year, it was clearly determined for the first time to develop and standardize the development of the cruise industry at the Meeting of the Standing Committee of the State Council. It was not easy to get such result within two years. We have interpreted it as that the State Council has classified cruise as an industry with an industry model and is about to promote and standardize the development of the industry. In 2007 when the necessity of developing the cruise economy was discussed, some considered cruise economy unsuitable for China. In 2008, the State Council issued the guiding opinions on promoting the development of China's cruise economy. At the Boao Forum for Asia on April 18 this year, Premier Wen first said that Chinese citizens may take cruise tours to Taiwan via Hong Kong, which revived the tourism industry in Hong Kong and inspired Hong Kong's cruise industry. Early last year when a ship carried 800 passengers from Hong Kong to Taiwan, it was deemed illegal and was imposed sanctions by the Chinese government. Just a year later, Chinese citizens are now allowed to go to Taiwan by cruise via Hong Kong. What a great change! In this August, the first liner of Star Cruises carrying 800 Chinese mainland tourists set off for Taiwan. Costa Cruises revealed big actions next year. This measure has greatly promoted Hong Kong's cruise industry. On May 8 this year, Premier Wen Jiabao visited Xiamen International Cruise Center which was also visited at a later time by Jia Qinglin on May 19. These are encouraging events for the cruise industry, as the cruise economy has gained the attention from the national leadership.

Secondly, various policies and measures for cruise economy have been issued by various ministries. Early this year, the National Tourism Administration of the People's Republic of China incorporated the cruise tourism in the directory of tourism products. In this January, the Ministry of Education included Cruise Program in the catalog of admission programs and Steward Program in the formal education system. In March, the General Administration of Quality Supervision, Inspection and Quarantine issued “the measures for dealing with health emergencies during cruise voyages”. In that month, in response to 200 passengers getting food poisoning in a cruise ship, China developed pertinent precautionary measures. Based on a special study conducted by CCYIA as commissioned by the Ministry of Transport, we gave a positive conclusion on cruise liners berthing at multiple ports, which passed the examination by the Expert Group of the Ministry of Transport on April 25 this year. The policy of appropriately allowing cruise liners to berth at multiple ports has been submitted to the leadership of the Ministry of Transport for approval and may be announced later this year. The border inspection measures for cruise passengers will soon be issued by the Ministry of Public Security in October at the soonest. The existing differences in procedures, methods and efficiency of border inspections among different places will be narrowed through unified arrangements by the Ministry of Public Security. Central ministries have attached great importance to the cruise industry, and relevant policies and measures have been or are being introduced.

Thirdly, international cruise lines are placing increasing emphasis on Chinese market. According to CCYIA's statistics, in the first half of this year, 43 cruise routes home-ported in China were put into service, providing 76 cruise voyages throughout the year, up 136% over the last year; 38 international cruise voyages visited China, and 62 throughout the year, representing a 3.9% decrease over the last year. Despite a falling number of international travels among foreign passengers under the impacts of international financial crisis, China received five more cruise liners. As for the whole year, 20 cruise liners operated in and visited China, 136 set off from China or visited China, up 12.9% over the last year. The growth rates of world tourism, international cruise tourism and Chinese cruise tourism reached 4%, 8% and 12.9%, respectively. The number of outbound Chinese tourists by cruise was less than 10,000 in 2005. While this year, more than 200,000 Chinese tourists took cruise tours from Mainland, Hong Kong or flied abroad for cruise tours, increasing by 20 times over four years’ time. The cruise economy is leading Shanghai's shipping economy and China's tourism economy.

After the first China Cruise & Yacht Development Summit in Hongkou Shanghai in November 2006, the 4th Summit will be held in Sanya this year. As of today, 16 company presidents (or in higher capacity) from China or Asia Pacific region have registered as cruise guests, 6 more than last summit. Two global chairmen will attend the annual summit: the Global Chairman of Costa Cruises who is concurrently the Vice Global Chairman of Carnival Cruise Lines, and the Global Chairman of Star Cruises. Two senior vice global presidents of Royal Caribbean will also attend the summit. Senior executives in the cruise industry are placing great emphasis on Chinese market, so I am now inviting all of you to attend the summit in Sanya in November, so as to participate in more in-depth and extensive exchanges with experts from the international cruise industry. I wish the symposium a complete success and look forward to valuable advices from all experts on the future development of the cruise industry.

Zhen Hong (SISI Secretary-General):

Many data have reflected the rapid development of Chinese cruise industry. The summit to be held in November in Sanya is of vital importance, and I therefore expect all of you to take an active part. Here follows a brief introduction of SISI which has obtained strong supports from Hongkou District People’s Government. The symposium is operated by SISI's subordinate institute, i.e., the Cruise Economy Institute which is in charge of carrying out researches and discussions on the development of the cruise industry. Now let's welcome the Deputy Director of the Cruise Economy Institute to make an introduction of the market development.

Cheng Juehao (Associate Professor at the Economic Management School of Shanghai Maritime University and Deputy Director of the Cruise Economy Institute under SISI):

Thank you for attending the symposium in spare time. Now I’d like to introduce the background and content of the cruise market report. This report is one of the research reports released annual by SISI, involving various sectors of the shipping industry. This report is also made through joint efforts with CCYIA on the basis of resource sharing. The report is released on a yearly basis. Since this is the first issue, it does not indicate the year 2008/2009, but just focuses on an overview of the overall characteristics and situations of China's cruise market in the past. Future reports will be released irregularly, monitoring annual dynamics of the cruise market. In the process of report drafting, the overall performance of China’s cruise market was sorted out and then analyzed based on the latest development of the global cruise market.

As for the global market, we have obtained all data about various regions worldwide in 2008. The most recent data come from the latest report released by CLIA in June 2009. The issuance of the current report was delayed until now, mainly due to the incompleteness of international data. According to the development of the international cruise market, there were all together 16.4 million cruise passengers last year. North America was the largest market and Europe the second, followed by Asia-Pacific region including Brazil. The world cruise market was still dominated by Europe and America, with Australia, New Zealand, China, Brazil and other regions accounting for merely 9%. The largest European cruise markets were the United Kingdom, Germany, Italy and Spain, taking a lead with over 80% of the European market share. The North America market featured fiercer competition. For example, Florida, the most significant area in the North American cruise economy, has five home ports, the largest three of which are located on the East Coast. Those five ports took up 57% of the North American market, with about 5.1 million cruise passengers departing therefrom. According to the development trends of various regions last year, the North American market was growing at an obviously slower rate of 2-4%. The European market achieved a particularly good growth of over 10%. Specifically, the number of cruise passengers increased from 4 million in 2007 to 4.4 million in 2008. This rapid growth will continue into the next a few years.

In the Asia-Pacific region, Australia & New Zealand, Dubai and India have developed rapidly into emerging markets. The most striking is China, which has realized a gratifying growth. European and American cruise lines have attached great importance to the Asia-Pacific market by deploying additional capacities and constantly opening new cruise routes. Compared with the global cruise market, China's cruise economy is still in its infancy, focusing only on a few regions without forming any dense homeport routes or port-of-call routes. Meanwhile, China's international cruise lines adopt commercial operations, having not formed any economic effects of headquarters. Nevertheless, it is clean from the international trend that the international cruise market has shifted its focus to Europe and Asia. In connection with the development of the cruise industry, China enjoys many advantages in terms of the construction of port facilities, cruise demand, tourism resources and oriental culture. Based on the rise of China on the global arena and the attractive Chinese elements to the world market, the report identifies an irreplaceable position of China in the world cruise industry. Within China, the cruise market development is the most noticeable in five major regions, which feature constantly improved environment, introduction of regional policies, great enthusiasm for developing the cruise economy, fast growth in market supply and demand, energetic construction of cruise facilities, and removed technical and policy constraints. All those facts demonstrate great potentials for the cruise economy, and the cruise tourism has been generally recognized as a new economic growth point in China's tourism industry. Let’s seize this opportunity to make friends, work together to drive China's cruise market towards a better future, and pay more attention to the institute.

Zhen Hong: It is time for free discussions about the development of cruise economy and industry in Shanghai, so as to provide advices and opinions for the government.

Lu Qingdong (Director of Shanghai North Shipping Service Cluster Construction & Development Office):

The convocation of this symposium carries great significance. Growing out of nothing, China's cruise economy has achieved a sound momentum of development, represented by the opening of more than 3 scheduled homeport routes in Shanghai and a substantial growth from 100,000 international cruise passengers last year to 150,000 now. Against the backdrop of the overall downturn in the international shipping market, the cruise market has outperformed the freight market. This year has witnessed a significant YoY decline in port throughput and container volume, both in Shanghai and in China as a whole. The cruise market, on the contrary, has made significant progresses. China’s port cities are greatly enthusiastic about developing the cruise economy and building cruise terminals; some terminals are under construction while some have already been built up. The understanding of the cruise economy, especially the construction of terminals and the communication between cruise lines, has been improved from the central government to local governments, indicating a good momentum.

First of all, I'd like to extend sincere thanks to SISI and CCYIA for holding this symposium. We need to constantly appeal for joint efforts and conduct continuous discussions, practice and government communication before finally promoting the development of China's cruise economy. Though having achieved certain progresses, we can never neglect the problems in relation to the understanding, policy bottlenecks, and infrastructure of our cruise economy. The convocation of various forums and symposia will allow us to meet together to discuss issues, raise questions and give feedback to the government, so as to study and solve the problems. Therefore, I look forward to more large meetings of this kind in the future.

In recent years, we have achieved noticeable results in developing the cruise economy through constant promotions.

Firstly, at the meeting of the State Council on March 25 this year, a document on the construction of the shipping center in Shanghai was passed to clearly support the development of cruise economy. The International Passenger Transport Center of Shanghai Port serves as an integral part of Shanghai International Shipping Center to promote the development of cruise economy. Being a controversial issue a few years ago, the cruise economy has been included in the Opinions this year and deemed an important part of Shanghai International Shipping Center. That’s one of our achievements through promotion.

Secondly, among the 59 tasks recently defined for the construction of Shanghai International Shipping Center, some are related to the cruise economy. This reflects a change in the understanding of cruise economy and an improvement in concrete actions.

Thirdly, there are three scheduled homeport routes in Shanghai this year. With great determination, cruise lines have been enlarging their ships and improving their facilities, e.g., Allegra, Classica, and Legend of the Seas. There will be more scheduled routes in each season in Shanghai. Though small in quantity without many route choices at the present stage, the cruise ships are bound to offer more and more choices and stay increasingly longer in Shanghai after continuous promotion.
Fourthly, Shanghai's modern international passenger transport terminal built by Shanghai Government through huge investment was put into service last year, offering good infrastructure and facilities. It is one of the cruise terminals with best facilities in the world. Its surrounding environment will be further improved, with more supporting commercial and shopping facilities to be built. After the Commercial Street comes into service next year, it will be more convenient for cruise passengers to go souvenir shopping.

At last, various cruise research and promotion organizations have been set up. CCYIA has held three national cruise economy summits in Hongkou Shanghai, Xiamen and Beijing on a yearly and subsequent basis since its establishment. The fourth summit will be held in Sanya. The District Mayor of Hongkou District attended the last three summits and will also attend the fourth. Questions will be raised through discussions. Secretary-General Zheng is very influential and charismatic among government-related participants. Officials at the ministerial level will all come to the summit in person, delivering keynote speeches and listening to the voice of cruise lines. It is planned that the "China Cruise Industry Development Report" by CCYIA will be published annually in the future, serving as a real powerhouse of the cruise economy. The Cruise Economy Institute established by SISI, with President Xiao being its Director, also published a cruise market research report today. Meanwhile, Shanghai International Cruise Economy Institute was co-founded by Shanghai Municipal Tourism Administration and Shanghai University of Engineering Science this year. The 1st Seatrade All Asia Cruise Convention held last year was very influential; the cruise convention used to be held in Miami every March. These forums and newly established research institutions are very meaningful.

As for the current cruise economy, it is time for us to invest; the harvest season is still a long way off. In the process of investment, we need the participation and support of all communities. Major market players should pay more attention to this matter. Schools and research institutions can help enterprises appeal for the settlement of problems so as to bridge the communication gap between enterprises and governments. We should work together to support such activities.

Lu Mingqi (Director of Baoshan District Leading Group for Development of Huangpu River Banks General Office):

Sincerely I'm here, to learn from you all. First of all, I'd like to thank CCYIA and SISI for providing us with the opportunity to participate in the symposium to learn related information, meet so many experts and friends from various communities and exchange ideas with them. This will help us accelerate progresses within a year or two. Then I want to express our supports for CCYIA and promise active participation in all activities.

Now I want to make a brief introduction to Baoshan. We have two missions ahead: first, we will develop a cruise port area, including not only terminals, but also facilities, environment and transportation, in order to develop supporting services for the industrial chain; second, we will cultivate the water tourism market in Shanghai. Terminal construction only fulfills city functions. Providing necessary facilities is crucial for Shanghai as a city. But when it comes to the industry, we also need to develop the tourism industry, especially the water tourism. Since the second half of last year, we have mainly focused on two aspects: one is the construction of the water tourism service cluster; the other is the building of a platform for the water tourism trading center. As for the construction of the functions and terminal facilities of the cluster, two berths reaching 800 meters will be built up in April next year, and waiting rooms of 20,000 square meters will be completed in August or September of the same year. With two thirds completed, the construction of the supporting building of 20 square meters and green landscape of 100 square meters will be finished by next Spring Festival. The construction of the rail transportation connecting with A30 will be completed by the first quarter of next year. Other plans include a bonded warehouse supporting the cruise berthing. Now we are developing a cruise port area rather than terminals. The government plans to invest RMB 1.5 billion by the end of next year, 600 million of which will be invested this year, so as to develop a water tourism service cluster. We believe that it is important to develop facilities for cruise economy, but the market is the key. Relative systematic measures should be taken for gaining market supports and gathering of tourists. There are four measures. First, the water ticketing system shall be based in Baoshan Shanghai, connecting with the traffic information center. Second, we want to build thousands of square meters of buildings to accommodate major travel agencies and cruise lines. Third, we will build a product R & D center. Cruise is a high-end option of water tourists. Presently, China's tourists mainly visit the Yangtze River, coastal areas, land Islands and Huangpu River, which will also support the cruise tourism. There are four cruise routes through the middle & lower reaches of the Yangtze River, making us confident of the breadth of the market. As for round-island tours, the cruise ships on the Huangpu River have extended their routes to Wusongkou. Fourth, we will build a management service center under sound supervision. We will realize water-and-water transport, water-and-land transport, as well as water-and-air transport, so as to enlarge the market. Cruise lines care most about shipping spaces, which need the linkage between the above forms of transport. We have set up the Water Tourism Promotion Center, where a forum is planed to be held. The Promotion Center is a cross-industry and cross-region organization to provide services to governments and enterprises, covering not only Shanghai, but also Chongqing and other costal areas. In a nutshell, the Promotion Center will do whatever the governments are unable to do and whatever enterprises are not allowed to do. The market research is important, but what's more important is policy breakthrough, such as how to make enterprises achieve progress with the support of CCYIA during the process of developing the cruise industry. We are now most lacking in talents. After the completion of the port area, we're still way short of professionals. We will work together to develop the cruise service industry in Shanghai Port through informational interactions, North Bund positioning, complementary advantages and staggered development. What's more, we need a mechanism to balance the development, but the signing of the mechanism relies further on CCYIA’s supports.

Yin Mingfa (Deputy Director of Shanghai Institute of Water Tour):

I witnessed the development of the cruise industry from 2004 to 2009 and was involved in related activities during its early stage.

Firstly, we should begin to comb through the basic policies for the development of cruise economy. There should be policy breakthroughs to ensure the development of the industry and the improvement of the industrial chain; otherwise the industry would achieve no solid development at all. The cruise industry has its inherent laws, represented by the policies for cruise lines, cruise routes and cruise consumers. Shanghai Municipal Tourism Administrative Commission divided the cruise industry into 9 sectors, and put forth 28 corresponding policies, including: 3 cruise coordination policies covering the Ministry of Transport, Shanghai city and coordination organizations involved in the industry; 4 policies about cruise lines; 2 about cruise routes; 3 about cruise consumption; 5 about cruise terminals; 5 about cruise inbound/outbound ports; 3 about cruise publicity; 2 about cruise talents; and 2 about cruise laws and regulations. The Development and Reform Commission divided it into 5 sectors and put forth 15 corresponding policies, including: 6 about cruise lines; 5 about cruise routes; 2 about cruise operation; 1 about cruise talents; and 1 about cruise laws and regulations. Priorities should be first given to admittance policies, then to preferential policies, so as to lay a solid foundation for cruise development. Opinions raised by Star Cruises at the symposium will be forwarded to the National Development and Reform Commission to consider whether the legislative perspective is meaningful. Reviewing the process, we need to comb through policies related to the construction, admittance and preferential treatment; otherwise a lot of policies can not be implemented.

Secondly, efforts should be made to resolve policy issues for the development of cruise industry. The international shipping center should incorporate freight and passenger transport. The World Expo will lead to a transportation of 70 million people in total, 400,000 to 500,000 daily, and 600,000 to 800,000 on peak days. Cruise tourism is a very important part of the leisure tourism in Shanghai. Shanghai is a metropolis. Then we need to know how to position its metropolitan tourism. One way is to develop the water tourism and the demand for tourism products in Shanghai.

The following policies are more pressing: (1) cruise route policies that allow foreign cruise lines to operate routes and scheduled voyages open to foreigners on inland rivers, coastal areas and ports. A city's international cruise liners are not all about ocean sail, but also include inland-river cruise. The policies and regulations for the extension of the international cruise industry chain should be examined and approved by the Ministry of Transport. If approved, the development of cruise tourism would not only promote the economy of the coastal areas. (2) Convenient customs clearance policies that allow local tourists to board international cruise liners for marine tours with boarding cards issued by border inspection organs. Cruise revenues of Singapore and Hong Kong mainly come from on-board activities for local residents, including consumption, leisure, tours and conferences. (3) We can make an analysis on two of the cruise tourism policies. First, allowing Chinese art performing groups to perform on foreign cruise liners is an inevitable trend for Shanghai's culture industry. Our international cruise liners should have Asian and Chinese characteristics. Second, the international cruise sales network and marketing network should be established as soon as possible. The cruise lines have not been mutually integrated. Cruise lines need a marketing platform to approach common people in order to form a large network. There are no less than a hundred magazines in the United States. I hope there will be one or two international cruise magazines in Shanghai. Without any Chinese cruise magazines, we could only learn about cruise via the Internet and travel agencies.

Zhang Shaode (Vice President of the Passenger Transport and Tourism Working Committee under China Association of Communication Enterprise Management):
We spent a lot of efforts in discussing the cruise economy in 2004. With the government's determination and enterprises' investment, we are looking forward to building a successful cruise industry. In China, nearly 200,000 tourists fly to take cruise tours, indicating increasing interests among the middle class and travel enthusiasts in marine tours. While travel agencies are generally suffering from a lack of unique selling propositions, cruise tours have come into vogue by virtue of high values and low costs, with demands even exceeding supplies in summer. The offshore passenger transport and logistics should be developed simultaneously. Some companies intend to import foreign cruise ships to temporarily substitute for the imperfect China-made cruise ships. It is hoped that routes linking the two sides of Taiwan Strait invested by enterprises on both sides can be opened as soon as possible. In December this year, Shanghai Tourism Promotion Center will hold a forum to serve the World Expo, and we invite you to listen to our speeches about the Expo water transport economy.

Xue Xingguo (Vice President of Shanghai Sanda University):

Let me talk about the cruise tourism from the perspective of cruise tourism products. Cruise tours are CTS' top itineraries in Southeast Asia. Though distributed extensively, the routes of global cruise lines are mainly concentrated in three regions, with the Asia-Pacific region taking a slim proportion. Boasting a long coastline and abundant resources, China has just begun to develop its cruise market. We used to launch an outbound cruise tour featuring Rose Wedding and other on-board activities. When vigorously developing inbound tourism, the cruise tourism means a big business for travel agencies.

The development of cruise tourism requires the following advantages and favorable conditions: (1) favorable geographical locations, a long coastline, large coastal cities, and many good ports; (2) location advantages, sound transportation network and facilities; (3) a support system for specialized cruise services When talking about developing cruise economy at a certain place, we have to consider whether it has the potential of gathering cruise tourist sources and/or has cruise destination resources. Large cruise lines often locate their headquarters and homeports in Europe and America, just for the above reasons. More than 70% of tourists are concentrated in North America and Europe. We can start to develop Chinese cruise tourism because the tourist source market has begun to take shape. Different from traditional inbound tourism which takes China as a tourist destination and needs to attract foreign tourists, we are now expecting foreign large cruise lines to locate their headquarters or homeports in our cities.

Understanding the consumption characteristics of cruise passengers are of vital importance to the construction of port of call. Now cruise liners often berth at a port of call for 1-2 days, and at the destination for a longer time. We need to provide one-stop reception services for tourist groups, including visa services (the visa policy has not yet been determined), sightseeing, shopping, dining, entertainment and leisure arrangements.

As a cruise destination, Shanghai Port is attracting cruise liner. A homeport must have a good tourist source market. The major promoters of the cruise industry are travel agencies which are intermediaries between cruise lines and tourists. Tourist resources abound in Shanghai and the Yangtze River Delta in particular. Shanghai enjoys a railway network consisting of five channels and three centers as well as a two-hour commuting circle, leading to the emergence of the cruise destination products. The problem is how to suggest travel agencies to plan tourism products. Tourism products are not like individual pearls, but like a pearl necklace; they carry values only when linked together. Once integrated together, the tourism resources of the Yangtze River Delta will greatly improve the attractiveness and competitiveness of the destination port. Therefore, we should promote not only Shanghai but also the Yangtze River Delta. There will be an integration of tourism resources of the two provinces and one city, as well as three circles around Shanghai center: circum Hangzhou Bay, circum Taihu Lake, and circum costal region of the East China Sea. The Yangtze River Delta and the Pearl River Delta are in competition with each other, with the former enjoying a greater advantage over the latte. That’s why more destination products are developed along the route from Shanghai to the Yangtze River Delta.

Rather than being limited to Shanghai, the tourist sources shall also include Jiangsu and Zhejiang provinces. The Yangtze River Delta is the most economically developed region, and people there are relatively affluent. Shanghai focuses on promoting the Yangtze River Delta, while Guangzhou promoting the Pearl River Delta. When first entering China, most foreign cruise lines choose Beijing, Shanghai and Guangzhou to set up offices, mainly for tourist sources; those three regions are also the most likely to form tourism products and itineraries. Outbound tourists are also distributed in these three markets. It is easy for tourists within the two-hour commuting circle, i.e. Jiangsu and Zhejiang provinces, to go to Shanghai for taking tours. Cruise tours are considered the most suitable for the elderly. As quoted from a newspaper, by the year 2040, one-fifth of the world population will be over the age of 65, with one-fourth of the world's elderly or one half of the Asian elderly being Chinese. Cruise tours are very suitable for the elderly market.

The cruise economy cannot be fully developed if only relying on large foreign cruise lines to bring their cruise liners to China, or home-port in Shanghai for travelling to Jeju Island, South Korea. China's coastline is very long, with 14 cities open to tourists and abundant resources in neighboring cities. We should take advantage of our domestic tourist sources and cruise destination resources, to transform our passenger ships into cruise liners. It will be very suitable for the student market, with good prospects and good economic benefits.

The cruise tourism is highly seasonal. The best cruise season is the third quarter, followed by the fourth quarter, then the second quarter. The second quarter falls on summer vacation, while the first quarter on winter vacation. Therefore, if we have good domestic cruise routes, the huge markets for both students and the elderly will be activated, including the Yangtze River Delta and Pearl River Delta. Now it is also convenient to visit the Taiwan Strait, so we should not underestimate the markets on the western side of the Strait. In addition to the driving effect of the cruise economy, we also have to consider how to develop the cruise tourism.

Huang Haidong (Assistant to General Manager of Shanghai Port International Passenger Transport Center Development Co., Ltd.):

At the 1st Seatrade All Asia Cruise Convention last year, it was asked whether the rapid development of Shanghai cruise economy was driven by demands or supplies. There are clear signs of cruise lines shifting eastwards to Asia and the reasons are three: (1) RMB appreciation. The costs of cruise lines are denominated in Euros or U.S. dollars. Their ships are basically made in European shipyards, with costs in Euros; and their companies are basically operated in the United States, with all administrative expenses and crew wages in U.S. dollars. Given a fixed price in RMB, the appreciation of RMB against USD and EUR will result in more foreign currencies annually. (2) The middle class in China and the Yangtze River Delta. The number of outbound tourists has been increasing year by year. (3) Cruise leisure and its component elements are relatively suitable for Asian people, including duty-free shops and casinos. In brief, the development of China's cruise economy is mainly driven by supply. The Costa Allegra is the real trigger of China's cruise economy.

For so many cruise ports in China's coastal areas, how are we supposed to increase supplies? The supply can be divided into two categories: the supply of cruise ships and the supply of routes. However, there are two policies hindering the supply of cruise ships, i.e., the constraints on berthing at multiple ports and Taiwan-related routes, which have limited the investment of foreign cruise lines in Chinese routes.

The first consequence of berthing at multiple ports is that, cruise lines can not design optimized cruise products. Cruise passengers are impossible to be turned into repeat customers as long as the cruise routes remain unchanged, thus exerting huge marketing pressure on cruise lines. Cruise lines have once raised the concept of reciprocal homeports, so as to halve the pressures on the tourist source market of both sides and diversify their products. This concept has been applied extensively in European and American routes. The second consequence is that coastal ports cannot transform from competition to cooperation. The cruise economy has a big impact on various aspects of cities, including real estate, aviation, hotels, catering, tourism, labor export, and ship supply. Currently, only Shanghai Port can serve as the cruise homeport. Xiamen operates special routes to Taiwan, and more often it handles ferries for the purpose of transport rather than tourism. In a nutshell, having a foreign cruise liner berthing at multiple Chinese ports during a voyage is equivalent to having 2 or 3 additional foreign cruise liners visiting China.

The policy for routes in relation to Taiwan does not allow foreign cruise liners departing from mainland China to head directly towards Taiwan. According to regulations on cross-strait routes, only Chinese-funded-and-registered and Taiwanese-funded-and-registered cruise lines can operate cross-strait routes. In August this year, the central government agreed to allow mainland tourists to take a cruise to Taiwan via Hong Kong. This route is very beneficial to Hong Kong, but very detrimental to domestic ports, especially to Sanya Port.

The development of cruise economy relies on the berthing of cruise liners at our ports. Only in that way can we expect an industrial chain to be formed in China's cruise economy. Therefore, the admittance policy must be implemented first.

Liu Chenjun (General Manager of the Shanghai Office of Costa Cruises):

Mr. Huang just voiced the concerns of international cruise lines operating in China. I'd like to share our experience of five years’ cruise operation in China since 2006 when we made our first entrance and home-ported in Shanghai..

As an industrial chain, the cruise economy requires four supports. First, government supports: the macro support of the government is very important for international cruise lines to operate in China. Fortunately, cruise tourism was a promising industry when we first entered China, and we obtained government supports from the Sunshine Policy. Second, the promotion by the port: Shanghai International Port Group, especially the International Passenger Transport Center, truly acts as a center to coordinate with the government departments governing customs declaration, commodity inspection, animal and plant quarantine, as well as health quarantine. In order to perform government functions, cruise lines need related enterprises such as International Passenger Transport Center to help coordinate and communicate with government departments. Third, marketing: cruise lines follow essentially different rules when choosing homeports and ports of call. The former is based on basic market-driven points; in addition to the tourist source, it also takes into consideration the construction of distribution network. We have established a distribution network with 90 domestic travel agencies. We must thank China's major travel agencies for the distribution of Costa and their generous supports for the entire marketing plan. This is a very important driving factor of the market. In the fourth year of operation in China, Costa invested more than RMB 100 million into the market for marketing and publicity, which was unprecedented by any brand in the services sector. Fourth, cruise lines' future market layout: based on the route planning, we can clearly determine whether a cruise line has focused its operation in Shanghai, China. Costa operated 28 voyages in 2008 and 36 voyages in 2009. In 2010, it plans to operate 68 voyages, over 40 of which will depart from Shanghai. In the recent three years, there were only up to 10 voyages departing from Tianjin. On January 31 next year, there will be 15 Costa scheduled voyages from Hong Kong to Taiwan. From the layout of routes, you can see the basic development direction of cruise lines in Asia. The construction of two cruise terminals in Shanghai is a conspicuous signal of policy supports and preferences for the development of cruise economy.

Wu Wen (General Manager of Shanghai Wanbang Cruises Co., Ltd.):

As the first cruise company in China, Shanghai Wanbang Cruises Co., Ltd. owned China's first luxurious cruise ship, operating between Beihai and Vietnam. We began cruise operation in 1996, and saw many obstacles in domestic business operations. We focus on considering cross-strait routes. I hope President Zheng may submit an application to the Ministry of Transport for introducing oversea cruise ships. The existing national policy allows us to introduce foreign cruise ships less than 10-year old, which is actually very difficult. We expect the period to be extended to 20 years. Cruise financing needs policy supports. If convention tours and incentive tours were operated by domestic cruise lines, many of the existing problems could have been resolved. Currently we are operating routes related to foreign countries. There is a special border policy in Beihai, i.e., tourists are allowed to go to Vietnam by boat without visas and passports. The ships are always full, sailing for Vietnam every two or three days. We suggest more supports for domestic cruise lines. The development of regional cruise economy needs the driving force of local cruise lines, so we should attach great importance to domestic cruise enterprises.