?Prof. Zhen Hong, Secretary General of Shanghai International Shipping Institute, Professor & Doctoral Supervisor of Shanghai Maritime University,?

 

On April 29^th, 2009, the State Council issued “The Opinion on Promoting the Development of Modern Service Industry and Advanced Manufacturing Industry in Shanghai, and Building Shanghai International Financial Center and International Shipping Center (hereafter referred to as “The Opinion”)”. The Opinion stipulates that by 2020, we will initially complete the construction of an international shipping center featuring highly concentrated shipping resources, completed shipping service functions, excellent shipping market environment, efficient modern logistics, and capacity of international shipping resource allocation. We will basically formulate an international pivotal port groups, featuring differentiated function within the groups and close cooperation with other ports in China, in which Shanghai function as the center, Jiangsu and Zhejiang Provinces as the two wings, and the Yangtze River Delta Region as the hinterland. We will initially complete the modern port collection and distribution system featuring large scale, intensification, high efficiency and optimized structure; and an international aviation hub to realize the integrated development of multiple transportation means. We will initially form the modern shipping service system featuring high quality service and complete functions, as well as port environment and modern international shipping service environment featuring convenience, efficiency, safety and order. We will improve the integration of international shipping resources, overall competitiveness and service quality. The Opinion of the State Council is another important framework document guiding the construction of Shanghai international shipping center, after the central government proposed building Shanghai international shipping center in 1996. The Opinion works as a booster for the construction of Shanghai international shipping center. As a researcher paying long-term attention on the construction of Shanghai international shipping center, I’d like to share with you some of my understanding on some issues related to the Opinion.

 

1?The Opinion for the first time specified the objective of the establishment of Shanghai International Shipping Center

In the past 13 years, the issue of what kind of international shipping center we should build Shanghai into remained in the center of debate. Some professionals proposed the London Model, Hong Kong Model, and Rotterdam Model respectively. This question actually involves the basic understanding of “international shipping center”. However, during the debate, people came to realize that there is no unified model for shipping centers in the world. Some of the centers are logistic centers featuring immense throughput capacity; while others focus on the allocation of shipping resources, which are further differentiated by spatial dimension. After long-term debate on the construction model, industry professionals gradually reached consensus. For Shanghai, the initial stage of capital-intensive international shipping center featuring deepwater port and handling capacity is completed. However, such a shipping center model steered by cargo throughput is but a transition instead of the ultimate goal for Shanghai. The model of international shipping center of long-term strategic significance for Shanghai should be an advanced knowledge-intensive international shipping center steered by capital and information flow. What this type of advanced shipping center focus on is the construction of “soft power”. Besides this consensus, we still have one more question, regarding whether Shanghai international shipping center should be regional or global. The governmental document, “China’s Plan for Coastal Port Layout”, stipulates that Chinese mainland will have three international shipping centers, with Dalian as the Northeast Asia international shipping center, and Tianjin as the North China international shipping center. In that case, what should be the nature of Shanghai international shipping center? It seems that Shanghai should be the South China international shipping center, which should obviously conform to the important status of Shanghai in the shipping industry. A regional shipping center is mainly concerned from the perspective of logistics, for each region may have a regional logistic center, but it doesn’t possess the capacity to become an international shipping center, which is characterized by the capacity of cross-region cargo flow instead of handling capacity. The notion of international shipping resources allocation surpasses the traditional notion of handling capacity, and views the status and function of a city in shipping industry from the perspective of resource allocation.

For Shanghai, this problem is now solved. The Opinion of the State Council explicitly stipulates that Shanghai international shipping center should be one with the capacity of international shipping resources allocation. Such stipulation complies with the exiting advantageous status of Shanghai in the shipping industry, and serves as a complement to “China’s Plan of Coastal Port Layout”. Such complement further manifests the status of three international shipping centers, and leads further construction of Shanghai international shipping center.

Of course, we should be fully aware that the next stage of building Shanghai international shipping center with the capacity of global shipping resource allocation is far more arduous than the current stage featuring handling capacity. Construction of shipping centers based on logistic centers is relatively easy, but such shipping centers can also easily lose their status to others; shipping centers backed up by “soft power” take longer time to build, but they have a more solid status. This point is already proved by shipping centers such as London. 

 

2?The Key to optimizing shipping collection and distribution system is to realize river-sea combined transportation

The construction of optimized shipping collection and distribution system is the key of new round of Shanghai international shipping center construction. Effective collection and distribution system is an important guarantee of the performance of pivotal ports. The special geographical location of Shanghai makes it possible to set up a system consisting of multiple collection and distribution methods; yet the economy and social life of metropolis bring difficulties to the choice of collection and distribution methods. The advantageous location enables Shanghai to choose from a variety of transportation means, such as river-sea intermodal transportation, river transportation, highway transportation and railroad transportation. Previous developments determined that the major means of collection and distribution of containers for the current stage is by highway. The door-to-door transport service through highway is now favored by many shippers, but such model also brings huge pressure on urban traffic and the environment. Currently, the international community is paying great attention to “ecological logistics”, or logistics placed in the ecological system with regard to the resource conservation and environmental protection. We view logistics as a component of the entire ecological system, and pay attention to resource conservation and environmental protection. It adopts scientific logistics planning, management tools and modern information network technology to construct logistic systems that are resource-efficient, environmental friendly, economical, efficient and sustainable. Among all means of collection and distribution, the water borne method best fill in the requirement of ecological protection. Water borne transportation utilizes natural river system and does not occupy non-renewable land resources. This is in accordance with sustainable development. Therefore, the priority of optimizing Shanghai international shipping center collection and distribution system is to develop river-sea intermodal transport and to settle the technical issues regarding river-sea direct transfer, in order to enable ships from Yangtze River to reach Yangshan Port directly. Nowadays, railroad collection and distribution system can reach the port-adjacent logistic park, but still needs motor vehicle transportation to reach the port. I believe that railroad collection and distribution system has advantages such as large volume, low pollution and low cost; if the island is well linked to land by railway, which will serve as an important means of collection and distribution for Shanghai international shipping center in the long run. However, the railroad container transportation network in China is not yet effectively established, for the “sea-rail combined transportation” only accounts for less than 0.5%. Therefore, we should strengthen the research on railroad collection and distribution, instead of being over-hasty in conducting sea-railroad transportation. Recently, we should give special attention to the utilization of the rich inland river network in the Yangtze River Delta, which could serve as a low-cost, environmental-friendly means of collection and distribution. After river dredging in the Yangtze River Delta, the major river ways now satisfy the requirement for the 3^rd level Ship Chanel, and can carry 1000 tonners. Therefore, when we optimize the collection and distribution system, we should give priority to developing inland river transportation to ease the pressure on middle and short-distance collection and distribution.

 

During the construction of Shanghai international shipping center, we are aware that the Yangtze River Delta should have rational job division and coordinated development. We also tried to coordinate the development of the Yangtze River Delta by establishing Managing Committee of Group Port and the joint conference system for the ports. However, the problem still remains. The root cause is that we haven’t established a cross-region coordination system. We mentioned in one of our reports that the integration of resources of Yangtze River Delta should abide by three principles, namely equity and mutual benefit, information sharing and coordinated construction. To achieve these three principles, a coordinating system is necessary. We propose to set up an institution with coordinated capacity in the shipping administration of Yangtze River Delta, and this institution should lead the development planning and policy coordination for the Yangtze River Delta, and maintain the market order. Administrations at all levels should be able to plan and regulate the shipping development in different areas according to unified plan. Hence, the construction and development of each region will be in accordance with the requirements of overall development of the Yangtze River Delta. It will also help to enhance Shanghai’s international competitiveness as an international shipping center. In the Opinion issued by the State Council, the task of integrating port resources in Yangtze River Delta is officially listed on the agenda.

 

On July 5^th, 2008, Premier Wen Jiabao pointed out that Shanghai should firmly cling to the goal of becoming a pivotal port in Northeast Asia, vigorously develop modern shipping service system, build shipping service center, and accelerate the construction of international shipping center. As afore-mentioned, now the shipping community in Shanghai has reached consensus that the key to the success of new round of construction is to vigorously develop shipping service industry. In Shanghai, the North Bund area has a municipal-level service industry clustering zone of shipping industry. Due to historical reasons, many essential factors of shipping are gathering here. Now, though some ports (except for the cruise port) have moved away, more essential factors for shipping service are present here. For example, headquarters of shipping corporations and national shipping exchange are both located in this area; the newly-founded International Shipping Institute is also here to provide consultative and information service. However, driven by the construction of shipping center, some other areas are also busy constructing their own clustering zones by developing shipping-related industries. But in this way, the layout of shipping service industry is likely to be stranded in disorder. Each region should find its position on the shipping industrial chain according to their geographical advantages and industry characteristics, and develop differentiated functions for the healthy growth of Shanghai’s shipping service industry. We proposed in an report that the target of integrating shipping resources is to efficiently utilize the advantages of Shanghai’s resources, to make rational arrangement of time and space, so as to turn the advantages in resource into competitive edge. We should optimize the use of resources in order to build Shanghai international shipping center and to promote harmonious development of the shipping industry. In the final analysis, the target is to improve the core competitiveness of Shanghai as an international shipping center, and to promote the regional economic development. Here are included specific suggestions in our report. For example, in terms of the overall planning, we can build six major shipping clustering zones with different functions. The North Bund shipping service clustering zone should utilize its established advantages in shipping service industry and build a high-end industry chain by becoming a base for headquarters of shipping companies, a turnaround port to international cruises, a shipping trading center, and the best location for shipping consultative and information service as well as maritime law and arbitration organizations. The Waigaoqiao Bonded Zone should utilize the Waigaoqiao deepwater port and develop international trade, modern logistics and advanced manufacturing in the Waigaoqiao Bonded Zone, Bonded Logistic Park and adjacent areas. In Lujiazui shipping financial service zone we should vigorously develop shipping services closely related to financial service industry, such as shipping finance, insurance, and accounting. Lingang New City and Yangshan Bonded Port (including the comprehensive pilot area of international shipping) should make full use of their advantageous location and favorable policies of bonded port, and develop into a bonded logistic center and comprehensive shipping service center which connects Shanghai, the Yangtze River Delta, the Yangtze River Valley and the other parts of the world. The Baoshan shipping clustering zone should focus on three functions, namely bulk-cargo logistic center, international cruise service center and logistics warehousing center. The Changxing Island should be constructed into a shipping equipment island, focusing on the development of modern ship-building, port machinery building and logistic equipment. The clear distinction among the functions of the six shipping service clustering zones will facilitate the differentiated development in each area, and avoid waste of resources brought by unnecessary internal competition.

 

In the process of accelerating the construction of shipping center, people contributed many constructive ideas; however, many of these ideas can not be implemented due to the constraints of existing system. The competition of shipping centers in East Asia is now intensifying; since time waits for no one, we can not expect to achieve our goal by the conventional plan. Therefore, system innovation poses an important task in promoting the construction of shipping center. The comprehensive pilot area proposed by the Opinion will help us to testify some new ideas; even though if unfavorable consequences occur, they do not affect the whole situation. If it succeeded, the experience can then be benefitial to a larger scale. These experimental measures can include those proposed by our institute, such as preferential taxation policy, the 2^nd ship registry, port of departure tax rebate, offshore finance, integrated information platform and so on. These issues can be experimented in the comprehensive experiment area, where the possible risks will not affect the overall situation. In this regard, we must get rid of the restrictions of the current mindset, draw from successful experiences of foreign shipping centers, and work out a new institutional environment which complies with China’s national condition.

 

Shipping finance industry is an important symbol of modern shipping service industry. For example, one of the reasons that London is known as an international shipping center is that London has the world’s most advanced shipping financial service system, covering shipping financing and marine insurance. Currently the global total ship mortgage is around $ 300 billion, the global trade volume on ship leasing is around $ 70 billion, and the total volume of equity and bond financing in shipping is around $ 15 billion. The international ship credit and financing services are controlled by the three shipping financing centers, namely London, Hamburg and New York.  The construction of shipping center and the construction of the financial center are interrelated and promote each other. When the construction of shipping center is updated into the shipping service area, there will be requirements for shipping finance service. The shipping industry is capital-intensive, and has a large demand for financial services such as capital settlement, ship insurance, cargo insurance, financing, and financial derivatives related to shipping. These financial services are highly professional and are prone to risks, and therefore have a high demand for the legal environment. If we can not achieve breakthroughs in these aspects, the construction of both the financial center and the shipping center will be hindered. For this reason, the Opinion’s two-pronged emphasis on the construction of the two centers manifests the close interactive effects between the two constructions. The shipping finance service needs innovations in financial system, and the improvement of financial system will provide strong growth momentum for the shipping center.

 

Cruise economy has entered the phase of rapid development in Shanghai. People realized the advent of Cruise Era when four cruises pulled in North Bund international terminal at the same time. It is estimated that 32 international cruises will have Shanghai as their turnaround port this year, an increase of 21% over the last year. Over 50 international cruises will call at Shanghai, with a record high of 150, 000 arriving and departing passengers. Still, we should be aware that Shanghai still has a long way to go in developing cruise economy, as the world’s cruise capital Miami has an annual passenger volume of nearly 4 million. The scale merit also applies to cruise industry. Attracting cruise companies to have Shanghai as their turnaround port is conducive to extending the industry chain and generating greater benefit for Shanghai. In the future, the cruise industry will be an important symbol of Shanghai international shipping center and an important part of Shanghai’s city image. The benefit of cruise industry will not be limited to the passengers, but will extend to related industries. For instance, we can build a cruise city with recreational and catering functions, which will radiate the economic benefit to a larger scope. Meanwhile, we should vigorously develop the cruise industry chain, provide more services tailored to the needs of cruise passengers, and give full play to cruise in the construction of Shanghai international shipping center.

The initial stage of the constructing Shanghai international shipping center, featuring the world-class handling capacity, is completed. Now we are at the advanced stage of establishing excellent shipping service system, which is even more arduous task than the previous stage. The central government has issued specific timetable stipulating that Shanghai should be initially constructed into an international shipping center featuring the capacity of international shipping resource allocation by 2020. We should seize this excellent development opportunity, shoulder the responsibility and make our contribution to the cause of “four centers^?” and “four leads”.  

 

?”Four Centers”: Shanghai should be constructed into international economic, financial, trade and shipping centers

?“Four leads”: Shanghai should take the lead in adjusting economic growth pattern, in improving the capacity of independent innovation, in promoting reform and open up, and in constructing socialist harmonious society.