The past 65 years have brought significant changes to China’s economic and political landscape. The changes in China’s economic policy brought by Deng Xiaoping in 1978 were followed by a long transition period towards a market-based economy. Chinese national reforms and the transfer of power from the central government to local governments had an impact on the governance of seaports which evolved in several phases:
- Period 1979-1984: The first phase was characterized by a centrally planned economic system with strongly centralized decision-making. The combination of insufficient funds for port development and lagging efficiency improvements caused severe port capacity problems in the early 1980s.
- Period 1984-2004: The second phase brought a process towards decentralization. With the exception of Qinghuangdao, which stayed under central government control, all other ports ended up being controlled either by central and local governments or by the local government alone. The port authorities received regulatory powers, but at the same time their status as state-owned enterprises (SOE) pushed them to become more market-oriented, for instance in terms of investment decisions. The new governance system resulted in a gradual entry of foreign private investors in Chinese ports, particularly in the container business as exemplified by the investments of HPH and PSA. However, the government de facto remained in the driver’s seat when it came to port planning and secured the biggest share of the revenues collected from port terminal operations.
- The Port Law of 2004 forms the cornerstone for today’s port governance. The new policy led to further decentralization of port governance in China and opened the path to the corporatization of port authorities and the introduction of modern corporate governance principles in the seaport system. In order to end the dual role of port authorities as both regulator and port operator, the new governance framework aimed at strictly separating these functions via the establishment of so-called Port Administration Bureaux and separate port business companies or groups. Moreover, the Port Law put an end to port ownership by the central government. The ceiling of 49% for foreign investors was abolished which in theory opened possibilities for foreign players to invest in and operate ports, even without needing a local Chinese partner. Policy formulation and strategic port planning fall under the responsibility of the central government and the respective provincial governments, so any plans of local governments need to be approved by these higher authorities.
In more recent years, the decentralization policy brought by the 2004 Port Law shifted to large-scale port integration at the provincial level. Port cooperation and integration has become a hot topic in China against the background of slower traffic growth, increased competition and growing international opportunities. We can interpret this result in two ways. One approach concludes that the port devolution process to the more local level has not resulted in the excessive self-interest and ambitions of individual ports, but has actually enhanced their sense of cooperation and coordination. Another possible perspective is that the port devolution process made government agencies at higher levels (i.e. national and provincial) work out schemes to avoid duplication of facilities, overcapacity and excessive competition in a seaport system characterized by a highly decentralized governance structure. In our view, both perspectives have played a role, although regional differences exist in the relative contribution of each perspective.
Integration and cooperation schemes are currently rolled out in almost all coastal provinces:
- Liaoning Province. Dalian port group and Jinzhou port, both located in Liaoning Province in the Northeastern part of China began to cooperate in 2006. In June 2017, it was announced that Liaoning province would form a new company to run its ports, with China Merchants Group purchasing a controlling stake. The new Liaoning Port Group was set up to integrate the coastal ports in Liaoning province.
- Hebei Province. Hebei Port Group Co. Ltd, the largest bulk cargo handling company in the world, owns Qinghuangdao port, Caofeidian port and Huanghua port. The company is controlled by Hebei province. In December 2015, the Tianjin Port Group Co. Ltd and Hebei Port Group Co. Ltd signed an agreement to form a 50/50 joint venture company Jinhaiyi port investment. The company is planning to purchase some berths in Tianjin port and Huanghua port. In May 2016, Hebei Port group subsidiary Qinghuangdao Co. Ltd and Tianjin Port Group established Bohai Jinyi port investment development Co. Ltd.
- Shandong Province. In April 2009, the ports of Qingdao, Rizhao and Yantai signed a strategic alliance agreement. It was agreed that Qingdao port act as the leading port and Yantai port and Rizhao port act as assistant ports with a view of establishing a regional shipping center. The resulting Shandong Port Group Co Ltd. is not only active in the Shandong Province. Through Shandong Port Overseas Development Group Co Ltd, the company concentrates on overseas development. Its overseas involvement includes Vado Ligure Port in Italy and Kimbo Port in Guinea, and it also has projects on a fiduciary basis such as Qasim Port in Pakistan and Boffa Port in Guinea.
- Jiangsu Province. In 2017, Jiangsu Port Group Co. Ltd. was established by integrating Nanjing port, Lianyungang port, Suzhou port, Nantong port, Zhenjiang port, Changzhou port, Taizhou port and Yangzhou port.
- Zhejiang Province. At the end of September 2015, the port complexes of Zhoushan and Ningbo in Zhejiang province merged to form the largest port group in the world. The Ningbo port group was renamed to Ningbo-Zhoushan Port Group Co. Ltd. Next to the creation of Ningbo-Zhoushan Port Group, Zhejiang Province has set up a company named Zhejiang sea-port group, which is devoted to integrating the five ports of Zhejiang province (i.e. Ningbo- Zhoushan port, Wenzhou port, Taizhou port, Jiaxing port and Yiwu International Dry Port).
- Guangxi Province. In 2007 the Guangxi Beibu Gulf International Port Group Co. Ltd. was established, including Qinzhou port, Beihai port and Fangchenggang port.