Ports ride wave brought by boost in foreign trade

To many international port operators, investing in China’s port facilities is like tapping into an inexhaustible money-making machine.

When ports in other parts of the world have reached their saturation point, those in China are handling over 4 billion tons of throughput a year, maintaining a double-digit growth rate annually.

This has been mainly due to the country’s blistering growth in foreign trade. China’s trade volume exceeded $2 trillion last year. Exports volume grew 25.7 percent from a year earlier to reach $1.22 trillion while imports increased 20.8 percent year-on-year to $955.8 billion. The country has emerged as the world’s third largest trading power and the world’s fourth largest economy with a GDP of 24.66 trillion yuan last year.

Driven by its strong export growth and huge domestic market demand, China is expected to become the world’s second largest economy, second only after the United States in 2011, according to the International Monetary Fund.

To maintain a smooth flow of imports and exports, the government has set a target of increasing China’s port throughput volume by at least 80 percent during the 11th Five-Year Plan (2006-10). The country will construct 164 new deep water berths and 69 container berths during the period. China’s container throughput volume is expected to surge 70 percent to reach 170 million TEU (twenty-foot equivalent units) by 2010.

Chinese port operators are vying to construct new berths and upgrade old ones to remain competitive. Shanghai appears to be leading the way. The city could overtake Singapore as the world’s largest container port with its throughput volume expected to grow 15 percent this year. Boosted by Yangshan Deepwater Port’s third-phase expansion, Shanghai’s throughput will exceed 30 million TEUs in 2008. Shanghai International Port Group Co plans to invest about 4.5 billion yuan in expansion this year, excluding investment in the Yangshan project. The company is also considering an overseas listing.

Seeking initial public offerings has been a popular way for Chinese port operators to raise funds for expansion. About 20 ports around China have gone public either in Shanghai, Shenzhen or Hong Kong.

They are also courting foreign investors for their capital and advanced management.

China’s port industry was one of the first in the country’s infrastructure sector to welcome foreign capital. Overseas investment used to be allowed to hold up to a 50 percent stake in a port. But with the country’s accession into the World Trade Organization, foreign investors are now allowed to hold controlling stakes in Chinese ports.

Denmark-based shipping conglomerate AP Moller-Maersk Group is clearly a forerunner in China. It has invested in over 10 Chinese ports, including Dalian, Tianjin, Qingdao, Shanghai and Shenzhen.

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