1 Chapter One Introduction
1.2 Chinese Economic Development
Blooming economy in Mainland China has been impressed the world in recent years.
As the West has got bogged down in the worst recession, the world’s biggest growth driver has overtaken Germany to become the world’s largest exporter and world’s workplace. Its share of world export jumped to almost 10%, up from 3% in 1999 (The Economist January 9th, 2010). The powerful driver was leading the way to recover after the financial crisis in the second half of 2007 (see Figure 1.1).
-10 -5 0 5 10 15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(Year-on-year; in percent)
Major advanced economies (G7) ASEAN-5
China Japan
US Taiwan
Figure 1.1 Real GDP Growth of China
Source: International Monetary Fund, World Economic Outlook Database and author’s own elaboration
The Economist (January 9th, 2010) released that “Over the ten years to 2008 China’s exports grew by an annual average of 23% in dollar terms, more than twice as fast as world
trade.” The International Monetary Fund (IMF) made a comment on China’s overall economic vigor in Region Economic Outlook (October 2009) noting that:
China is expected to continue leading Asia, growing an 81/2 percent in 2009 and 9 percent in 2010. Investment should continue to expand rapidly, propelled by multiyear public projects and the recovery of private investment.
1.3 Container Traffic in China
The port competitiveness of Mainland China has soared over the past years as a result of its reform policies for market access, while Hong Kong and Taiwan struggled with declining container volumes.
In an attempt to enlarge reform and improve the development of transport industry, the Ministry of Communications in China announced in 1992 a series of policies for market access. Under the strategies, the businesses connected with operating public berths, jointly leasing terminals between Chinese and foreign companies, investing or building special cargo terminals or specialized berths for cargo-owners, investing or operating land, which is allowed to construct and operate specialized area and terminals within the land, were encouraged or permitted (Sun and Zhang, 1999).
Triggered by the reformation and improvement in transport industry as mentioned above, the volume of container traffic in China has registered a continuous double-digit in recent years. Containerisation International (January 2009) attributed the fast growth in container throughput at Mainland China’s ports to three reasons as following:
First, world trade was being rapidly liberalized. Formal and informal trade barriers were disappearing. Second, rapidly improving communications encouraged global sourcing. Third, a large slice of industry in North America and Europe effectively gave up, recognizing it could not compete with low cost production from the Far East, which was itself now well-inform on design by those astute agents of the western
consumer, the retailers. Goods produced in the developing world would, henceforth, more than meet the taste and quality standards required in the West.
In 1999, Chinese ports’ container handling volume, 29,391,551 TEU, for the first time surpassed that of U.S, 25,164,800 TEU, and top the number one in world ranking (Containerisation International Yearbook, 2002). As shown in Table 1.1, its ports’
container handling volumes accounting for the world over the last decade kept on impressing the world by a characteristic of two-digit leap. “Despite a sharp fall in volumes at some ports, China’s share of Asia’s container-handling activity still rose from 57.7% in 2008 to 58% in 2009 (Containerization International March 2010).”
Table 1.1 Container volume handled by China
China World Year
(Thousand TEU) (Thousand TEU)Share world (%) Change rate (%)
1999 29,391 203,207 14% 19%
2000 40,984 231,689 18% 39%
2001 44,726 243,816 18% 9%
2002 55,717 266,337 21% 25%
2003 61,898 299,280 21% 11%
2004 74,725 351,060 21% 21%
2005 67,245 391,883 17% -10%
2006 84,811 429,802 20% 26%
2007 104,559 480,995 22% 23%
2008 115,061 502,388 23% 11%
Source: Containerisation International Yearbook 2002~2010 and author’s own elaboration
1.4 Container Traffics at Chinese Leading Port 1.4.1 Shanghai
Triggered by its surging container handled, Shanghai Port in 2007 replaced Hong Kong as the world’s second-largest container port by accomplishing container throughput of 26.15 million TEU. Hit by the international financial risk in the second half of 2008, Shanghai posted a smallest growth rate equivalent to 7%, or an only one-digit growth rate since 21st century. In 2009, it saw its volume in container traffic slip to 25 million TEU from 27.98 million TEU, or 10%, in comparison with the level of the previous year despite it still kept second place (see Table 1.2).
Table 1.2 Top 15 Container Ports in 2009 Unit：Million TEU Rank
(2008) Port Country Volume
(2009)
1(1) Singapore Singapore 25.87 29.92 -4.05 -13.5
2(2) Shanghai China 25.00 27.98 -2.98 -10.7
10(9) Rotterdam Netherlands 9.74 10.80 -1.06 -9.8
11(14) Yianjin China 8.70 8.50 0.20 2.4
12(12) Kaohsiung Taiwan 8.58 9.68 -1.10 -11.4
13(13) Antwerp Belguim 7.31 8.66 -1.35 -15.6
14(15) Port Klang Malaysia 7.30 7.97 -0.67 -8.4
15(11) Hamburg Germany 7.01 9.74 -2.73 -28.0
Source: Containerisation International March, 2010
1.4.2 Hong Kong
Hong Kong again lost a second place world ranking competition in 2007 to its rival counterpart, Shanghai, after a heavy defeat in container contest against Singapore in 2005 (see Figure 1.2).
Facing the fierce competition from Shenzhen Port and the slump in demand resulting from the global recession, the container throughput of Hong Kong, the major transshipment gate for exports in South China (Slack and Wang, 2002), have plunged to a new low in recent 5 years. In 2009, it plunged by 14.3% to 20.98 million TEU from 24.49 million TEU in previous year.
0 5 10 15 20 25 30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year
Volume(Milliom TEU)
Hong kong Shenzhen Guangzhou Shanghai Ningbo Qingdao
Figure 1.2 Container traffic at top 6 ports in China from 2000 to 2009
Source: Containerisation International (C.I.) Yearbook 2002~2010, C.I. March, 2010 and author’s own elaboration
In particular, Hong Kong has seen its container market share in Far East decline over
the past decade as Table 1.3 addressed. In the end of 20th century, Hong Kong sliced 15.6%
of container market share in Far East. In the same year, the throughput gap between Hong Kong and the other ports in Mainland China was 16.6 percent. Yet, in 2008, Hong Kong saw its container market share in Far East plummeted to 9.5%. The gap in 1999 at the same time swelled to around 33.3%.
Table 1.3 Container market share in Far East from 1999 to 2008 (Unit: %)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Taiwan 9.4 8.4 8.1 7.7 7.3 6.9 6.1 6.2 5.7 5.0
China 28.2 32.9 34.7 36.9 37.3 39.4 42.5 40.3 43.0 44.8
Japan 11.6 10.5 10.2 8.9 9.1 8.7 8.2 8.8 7.9 7.3
Hong Kong 15.6 14.5 13.9 12.7 12.3 11.6 10.9 11.2 9.9 9.5 Singapore 15.4 13.7 12.1 11.3 11.1 11.3 11.1 11.8 11.6 11.6
S. Kora 7.0 7.2 7.2 7.8 7.9 7.6 7.3 7.4 7.2 6.9
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 NA: not available
Source: Containerisation International (C.I.) Yearbook 2002~2010 and author’s own elaboration
1.4.3 Shenzhen
In 1980s, Shenzhen Port put emphasis on its development of the special berths and general terminals for general and bulk cargo to match up with the need of the large scaled infrastructure and the economy growth of Shenzhen. Until the end of 1980s, Shenzhen Port took the first step in the container terminals. Thanks to a dramatic increase in foreign trade
cargo and fast economic development of Shenzhen and Pearl River Delta, the container terminals started in 1933 its large-scaled development with the inflow of foreign capital, advanced management experiences, and experts by adopting a number of ways like exclusive investment, joint venture and share holdings. Ranking the top 10 Chinese domestic ports, Shenzhen Port step forward a prosperous stage in 1990s.
In the beginning of 21st century, Shenzhen Port recorded a highest growth rate equivalent to 50% in 2002. Although its volumes slumped by over 14% to 18.25 million TEU in 2009, and that its growth rate posted a declining tendency after 2002 owing to a hard hit by the global economic downturn, Shenzhen still has been kept a record of number 4 among the world container ports since 2003. It was worth noting, however, Shenzhen seemed to be challenging its neighboring competitor, Hong Kong. The volume gap between them has shrunk from more than 14 million TEU in 2000 to less than 3 million TEU.
1.4.4 Ningbo-Zhoushan
Ningbo-Zhoushan, which was widely regarded as the China’s finest natural deep-water port (Cullinane, Teng, and Wang, 2005), has had impressive performances in the number of container in recent years since Beilun opened in 1985.
In 2001, the container throughput at Ningbo Port set a newly high record, more than one million TEU. Four years later, its handling container throughput picked up to over 5 million from 4 million, or 30 percent, ranking one of the top 15 container-handling ports in the globe. In 2007, it leapt 32% of container handling volume to 9.4 million TEU, a little less than Kaohsiung Port’s volume, 10.3 million TEU. Ningbo Port made a continuously big breakthrough next year in its box volume by a dramatic increase to 11 million TEU from less than 10 million ones, or nearly 20 percent of growth rate, making it jump from 11th in previous year to 7th place around the world as the container handling volumes’
rapid growth in spite of the global recession. In 2009, Ningbo Port slipped one place to number eight among the ports in the world.
1.4.5 Guangzhou
Lay on the Pearl River around 125 kilometers northwest of Hong Kong in the People’
of China, Guangzhou Port is not only a major seaport and comprehensive port in South China but also a key transport and economic hub for the Pearl River Delta region. It consists of four terminal districts on the Pearl River, including the new deep-water Nansha Terminal that will be the centerpiece for the new container business. Additionally, it’s shipping linked reach out to over 100 domestic and 300 foreign ports in more than 80 districts and countries. At the present time, the port made an effort to renovate and expand its facilities to achieve a goal of becoming an international hub for containerized cargo by 2010.
Guangzhou has soared in container traffic in recent years. It made a 28.56 % of leap every year in average since Mainland China accessed the WTO. It jumped two places to 6th position as its box throughput increased to 11.19 million TEU in 2009. Also, in the same time, it was the only port posting a gain in change rate among the top ports around the world too.
1.4.6 Qingdao
Qingdao Port, near to Busan Port, has been an outstanding player in container competition in the world. Situated in the Yellow River basin and on the western Pacific Rim, Qingdao Port is a natural deepwater port, which is free of silt and freezing, as well as a key hub of international trade and sea-going transportation in north China.
In the early of 21st century, Qingdao Port took part in top 25 container ports around the world and ranked the 24th number. The port’s amazing performances in recent years,
however, impressed the world. It set a record volume of 10 million TEU in 2008. Although Qingdao saw its throughput sink by 0.6% from 10.32 million TEU to 10.26 million TEU, it and Guangzhou were the only two ports in 2009 jumping the world raking among the top 10 ports in the earth.
It was noticeable that Qingdao Port has posed a threat to Busan Port and challenged it’s the number one transshipment hub in North East Asia as Busan Port’s declining transshipment share (Figure 1.3).
Figure 1.3 Transshipment share in Busan port
Source: Anderson, C. M., Park, Y. A., Chang, Y. T., Yang, C. H., Lee, T. W., and Luo, M. (2008)
1.5 Container Traffic in Taiwan
Taiwan’s container throughput in 2009 recorded historic decline in its box volumes since 21st century.
Hit by a mixed result from local industries’ moving away, a sharp slump in the global
demands, and keen competitions from the ports across Taiwan Strait, Taiwan’s container traffics shook over the last decade. The containers handled in Taiwan dipped as the global recession took hold (see Figure 1.4). Its volume in 2009 slumped by 9.8 % to 11.7 million TEU from the level in previous year, posting a biggest drop range in the past decade.
10.5 10.4 11.6 12.1 13.0 12.8 13.1 13.7 13.0 11.7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-15%
Figure 1.4 Container traffic in Taiwan during the period from 2000 to 2009
Source: Ministry of Transportation and Communications R.O.C. and author’s own elaboration
In incoming container traffic, Taiwan saw an over 9% fall in 2009 to less than 6 million TEU from 6.5 million TEU in previous year (Figure 1.5). Additionally, in the same year it also posted 10.1 percent slide in its outgoing container activity, cutting around 0.7 million TEU (see Figure 1.6).
5.2 5.2 5.8 6.1 6.5 6.4 6.5 6.9 6.5 5.9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-15%
Figure 1.5 Incoming flow in Taiwan during the period from 2000 to 2009
Source: Ministry of Transportation and Communications R.O.C. and author’s own elaboration
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-15%
Figure 1.6 Outgoing flow in Taiwan during the period from 2000 to 2009 Source: Ministry of Transportation and Communications R.O.C. and author’s
own elaboration
Interviewed by Cargo Systems, an official from port made an explanation why Kaohsiung Port has posed a consecutive decline pointing out that “as well as a sharp slump in US demand, there was keen competition among the region’s ports and local industries have been moving away” (Cargo Systems August 2009).
Looking back the last decade, Taiwan’s container service has unveiled a relative poor performance in the wake of a hard hit of the global recession (see Figure 1.7).
-10%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Taiwan World
Figure 1.7 Change rate of container handling in Taiwan during period from 1999 to 2008
Source: Containerisation International Yearbook 1997~2010, Ministry of
Transportation and Communications R.O.C., and author’s own elaboration
The United States was trapped deeply into a biggest financial risk after The Great Depression. This financial storm in the United State has quickly swept across the world, leading to a slowdown in global economy.
Japan, one of the key trading partners of Taiwan, experienced its “lost decade” in the
wake of banking crisis in 1990s. So far, Japan still failed to free itself from the long-term impact led by “lost decade”.
In short, Taiwan’s container traffic was heavily hit by the global downturn over the past years.
Moreover, Taiwan used to the one of the three world’s busiest regions in 1990s.
However, it has witnessed its share of container activities in Far East slip when facing the keen competitions from the ports across Taiwan Strait, and the ocean carriers’ more port options in neighboring region.
Most importantly, since the late 1980s, the rising domestic production cost in Japan and in newly industrialized economies (NIEs) in Asia, like Taiwan, South Korea, Hong Kong and Singapore, has push the manufacturers in them to relocate their factories abroad because of local rising labor costs and the upgrading sense of environmental protection.
According to the official figure from Taiwan, the indirect mainland investment approved by Taiwan government climbed 8 fold to 10.69 million US$ from 10 years earlier as Figure 1.8 illustrated.
1.25
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year
billion US$
Figure 1.8 Statistics on approved Taiwan’s indirect mainland investment
Source: Department of Statistics, Ministry of Economic Affairs, Taiwan (R.O.C.) and author’s own elaboration
Although Taiwan authorities has ever dissuaded the Taiwan’s manufacturers from relocating their plants and made a lot of effort like opening up cross-strait direct shipping links between Taiwan and China, loosening regulations, setting up a free trade area, and lowering costs to make its ports stay appealing and competitive; however, the declining development at them seemed to be continued.
1.6. Container Traffic at Kaohsiung Port
Kaohsiung Port, the biggest port in Taiwan, dropped out of top 10 busiest ports in 2008 (Cargo System August, 2009).
It used to be the world's consecutive third busiest container port in 1990s; however, Kaohsiung harbor also was the only port in the Far East region’s top ports to post a decline in container traffic in 2008 resulting from its plunge in volume from 10.3 million to 9.7
million, or a 5.7% down. In 2009, Kaohsiung Port still saw its throughput sink 11.4% in its container volume even though it remained its world ranking.
Throughput of import traffic at the port in 2009 plummeted to 2.2 million TEU from 2.5 million TEU in previous year, or 12.2%, owing to Taiwan’s deep economic recession.
This recorded a highest decline level in recent decade (see Figure 1.9).
0.0
2000 20012002 2003 20042005 2006 20072008 2009
-20%
Figure 1.9 Kaohsiung Port’s import traffic during the period from 2000 to 2009
Source: Kaohsiung Port and author’s own elaboration
Similarly, thanks to the turmoil in financial market in America and a collapse in global consumer spending, the export flow of Kaohsiung Port softened 0.4 million TEU, a drop of 14.1% from the previous year as Figure 1.10 illustrated.
In terms of the transshipment traffic at the port, it has been in the doldrums for years.
This paper was about to illustrate it in following section.
0.0
Figure 1.10 Kaohsiung Port’s export traffic during the period from 2000 to 2009
Source: Kaohsiung Port and author’s own elaboration
1.7 Transshipment traffic at Kaohsiung Port
The proportion of transshipment container throughput of Kaohsiung Port plummeted to a new low in 2008. The transshipment service accounted averagely for more than half of Kaohsiung harbor’s container throughput over the past years. Yet, the proportion in 2008 has plummeted to a new low equivalent to 46%, followed by a 1% recovery in 2009 (see Figure 1.11).
42%
44%
46%
48%
50%
52%
54%
56%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Figure 1.11 Share of transshipment flow at Kaohsiung Port during the period from 2000 to 2009
Source: Kaohsiung Port and author’s own elaboration
As the surging development of Mainland China, its ports shared the containerized cargo market in East Asia. Furthermore, several carriers started direct-call service to or from Mainland China without a transshipment call at Kaohsiung Port, resulting in a plunging transshipment flow at it. The transshipment container throughput of the port in 2009 went posing a 9.1% fall after recording a biggest down size equaling 13.2%, in previous year (see Figure 1.12).
0.0 1.0 2.0 3.0 4.0 5.0 6.0
200020012002 2003200420052006 200720082009
-15%
-10%
-5%
0%
5%
10%
15%
Volume(Million TEU) Change rate
Figure 1.12 Kaohsiung Port’s transshipment traffic during the period from 2000 to 2009
Source: Kaohsiung Port and author’s own elaboration
Examining the major contributors to Kaohsiung Port’s transshipment container traffic in 2009, Asia and North America respectively took responsibilities for 73% and 19% as addressed in Figure 1.13. The former was mainly composed of Mainland China, Japan, and the ASEAN countries (See Figure 1.14). The United States and Canada respectively sliced the latter with 17% and 2%.
73%
19%
5% 3%
Asia North America Europe Others
Figure 1.13 Distribution of Kaohsiung Port’s transshipment traffic in 2009 Source: Kaohsiung Port and author’s own elaboration
19%
6%
3%
12% 23%
7%
6%
5%
8% 6% 5%
Japan S. Korea Hong Kong China Vietnam Thailand Malaysia Singapore Philippines Indonesia Others
Figure 1.14 Asian distribution of Kaohsiung Port’s transshipment traffic in 2009 Source: Kaohsiung Port and author’s own elaboration
It was worth noting that the containers originated Hong Kong, Thailand, and Philippines in 2009 tumbled the most in decade, while Vietnam saw a great leap at the port since 2007 (see Figure 1.15, Figure 1.16).
0 100,000 200,000 300,000 400,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 Year
TEU
Hong Kong China
Figure 1.15 Kaohsiung Port’s transshipment traffic involving Hong Kong, and Mainland China during the period from 2001 to 2009
Source: Kaohsiung Port and author’s own elaboration
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 Year
TEU
Vietnam Thailand Malaysia Singapore Philippines Indonesia
Figure 1.16 Kaohsiung Port’s transshipment traffic involving ASEAN during the period from 2001 to 2009
Source: Kaohsiung Port and author’s own elaboration
After a plunge to 66 thousand TEU, or 35%, the number of Hong Kong’s containerized goods transshipped through Kaohsiung Port declined by 34% to less than 44 thousand TEU in 2009, marking the fifth consecutive year of drop and hitting historical low since 2001.
As the surging development of Shenzhen, near to Hong Kong, the containerized cargos from South China can be directly moved between China and North America or the other regions without transshipment through Hong Kong or Kaohsiung. For this reason, the total of containerized cargos handled by Hong Kong has partly grabbed by Shenzhen, associated with a year-on- year decline at Kaohsiung’s transshipment flow in recent years.
Besides, the transshipment service associated with ASEAN posted a fall in 2009 as well. In particular, Thailand, Philippines, and Indonesia saw their throughput in Kaohsiung slip in last 3 years. Their box traffics in Kaohsiung in 2009 fall 14%, 31%, and 6% in order.
The boxes from Singapore also performed poorly. In the past three years, excluding a 1%
recovery in 2008, it registered a slip equal respectively to 24% in 2007 and 15% in 2009.
Chapter Two Literature Review
2.1 Transshipment Cargo’s Characteristic
When it comes to transshipment activity at ports, the studies on it had a general belief that “The volume of transshipment cargo in each port is believed to be influenced by the number of the carriers choosing the port as their transshipment hub. (Sohn and Jung, 2009)” However, carriers’ preferences for transshipment hubs were in relation to the maritime tendencies in recent years. Besides, ocean carries’ port choices led to transshipment cargos’ footloose characteristic. Consequently, the following section was about to provide a literature review before starting the research work.
In general, the literatures relevant to ports have had a general assumption that ports with advantage conditions were appealing to shippers and shipping lines. So, the various criteria like geographical location, port facilities, delivery distance, cargo size, etc. have been emphasized when it came to the factors that might influence the shippers’ or carriers’
port choices.
Based on Fleming and Hayuth (1994), Tongzon and Sawant (2007) said
Based on Fleming and Hayuth (1994), Tongzon and Sawant (2007) said