Locking horns

For many a generation, the northeast of China, once upon a time called Manchuria, has been a rust bucket, lagging behind other more dynamic areas of the country such as Shanghai and the Pearl river delta.

But this perceived imbalance has changed and will continue to do so, particularly as the current regime – president Hu Jintao and premier Wen Jiabo (who hails from Tianjin) – are determined to make the area around Bohai Bay the final part of the economic tripod to go alongside the Pearl and the Yangtze river delta.

Indeed, the Binhai New Area of Tianjin has been earmarked as this decade’s Pudong. Pudong, opposite the Bund in Shanghai, was the lovechild of former Shanghai mayor and ex-supremo Jiang Zemin in the 1990s, like Shenzhen was to Deng Xiaopeng in the 1980s. Binhai, Beijing’s maritime artery, will be Hu and Wen’s economic legacy. The area stretches for 150km along the northern coast and is far bigger than either Shanghai’s or Shenzhen’s development zones.

Binhai’s port, already north China’s largest, is due to double its container-handling capacity by 2010. On June 6, a central government document declared Binhai to be an “experimental zone for comprehensive reform”. Hitherto only Pudong New Area had enjoyed this title, which it acquired last year.

All of which means that unlike some of its counterparts, Tianjin’s container port development goals for the medium term are all achievable.Overseas Orient Container Line,APM Terminals,PSA International and DP World are the four foreign operators in the city. Tianjin Port listed on the Hong Kong stock exchange this year in order to raise funds so that it can layout the infrastructure necessary to achieve its 10m teu capacity target by 2010.Port operators suggest the figure will be nearer 12m teu by then.

Meanwhile, Qingdao, to the south in Shandong province has its own ambitious expansion plans.

Currently it is the leader of the pack up north with throughput likely to be above 6m teu this year and a goal of having some 14m teu by 2010 which once again is likely to be surpassed by 2m teu. Qingdao got the leap on its regional rivals by signing a $1bn mega deal with what was P&O Ports plus APM Terminals and Cosco Pacific back in 2004. China Merchants this year committed to building a four berth facility in Qingdao too. Since then its rivals have signed similarly large deals. Qingdao gets its cargo not just from the manufacturing stronghold of its immediate hinterland, Shandong province, but also far further inland to the likes of Inner Mongolia via dedicated rail services it has negotiated.The wholesale shift of the port from the city centre to Qianwan 20 nautical miles away in time for the sailing regatta of the 2008 Beijing Olympics has proved a success with lines preferring the new, long berths at Qianwan.

Finally, up in the north is Hong Kong-listed Dalian. Here is where the threat of overcapacity manifests. A massive construction is underway at an island just offshore which will help bring capacity by 2010 to somewhere in the 12m teu region which is patently far too much for this city whose hinterland – Liaoning province – is largely heavy industry.

Dalian itself is changing towards a greater IT savvy with heavy Japanese investment but still not nearly enough to warrant such large capacity additions. PSA, Cosco Pacific, AP Moller are among the leading investors in the city.

Though it might be a maritime word of sorts, rare is the day that one hears a port operating executive use the word ‘bargepole’ in reference to investing in Chinese terminals, yet that is exactly what Port Strategy was told by one senior executive in regards to investing in Dalian. In the short to medium term, Dalian, whose throughput this year will cross the 3m teu mark, is a risky investment.