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January 2009 Two prominent foreign manufacturers have selected Wuhan, capital of Hubei province, to become their regional headquarters in central China. Toshiba has opened a branch office in Wuhan, and it will cover the markets of Hubei, Hunan, Henan and Sichuan provinces. Previously, the company worked with Wuhan Steam Turbine Plant in constructing Wuhan No.1 and No.2 metro lines.
CISCO Systems of the US has also selected Wuhan as its regional business headquarters. The supplier of networking equipment and network management for the internet has invested US$8.5bn in China since 2002. It has founded the Cisco Networking Academy with four colleges, including Wuhan University and Huazhong University of Science and Technology.
China International Marine Containers, the world's biggest manufacturer of containers, plans to set up a new truck-making joint venture with two domestic investment holding companies in Wuhu, Anhui province, Reuters reported.
The joint venture will manufacture medium- and large-sized trucks and truck parts. Investment in the first phase of construction will total Rmb2bn. Scheduled to start production in 2011, the Wuhu plant is likely to become the primary truck manufacturer in China, said CIMC.
CIMC estimated a net profit of Rmb1.5bn in 2008, some 40-60 per cent down on the previous year, mainly due to the global economic slowdown.
After a seven-week suspension, Okay Airways resumed operations on 23 January, two days before the Chinese New Year holiday.
The suspension came after some airports, worried about the airline's financial troubles, would only refuel its planes for cash. Management problems and a lack of capital support from Junyao, the airline’s main shareholder, were cited as additional factors in the suspension.
Wang Junjin, board chairman of Junyao Group, pledged to return Okay Airways to profit and to build it into a sound and sustainable company. He added that new strategic partners would be introduced this year.
Okay Airways became China's first private carrier in 2005 and it has 11 aircraft and runs about 20 domestic passenger routes. Its cargo service has been operating as scheduled.
China will invest Rmb21.3bn in the south-to-north water diversion programme in 2009, according to the office in charge of the scheme under the State Council. The programme aims to divert water to the arid regions of northern China and will connect the Yangtze, Huaihe, Yellow and Haihe rivers.
The project comprises three water-diversion channels, although work has yet to begin on the western one. Construction of the eastern route started in 2002, with the middle route beginning a year later. According to the programme office, the first-phase project of the eastern route will begin to provide water in 2013, and that of the middle channel, after the flooding season in 2014.
The city’s executive vice mayor Huang Qifang has predicted that the city’s industrial output this year would exceed Rmb800bn, up 23 per cent from that of last year. The municipal government plans to invest Rmb900bn in nine new industrial sectors to create 300,000 jobs. It is promising a subsidy the equivalent of 30 per cent of the local wages to those companies that are in financial difficulty but are not cutting jobs. The government is also setting aside Rmb100m to help university graduates to start up businesses.
Utilised foreign direct investment in Chongqing stood at US$2.74bn in 2008, an increase of 151 per cent on the previous year. Pledged FDI totalled US$3.3bn. At the end of last year, there were 4,928 foreign enterprises registered in the municipality, an increase of 11 per cent year-on-year, said Chongqing Administration of Industry and Commerce. Chongqing’s utilised FDI reached US$2.7bn last year, up 170 per cent year-on-year, and there were nine new Fortune 500 companies, including HP.
Statistics from the Ministry of Transport showed that, in the 12 days leading up to January 22, the total passenger volume on major national highways stood at nearly 60m, up 11 per cent on the corresponding period in the lead up to the holidays last year. Passenger volume on major waterways almost reached 80m, up five per cent. Within a period of 10 days, the passenger volume by air exceeded 6m, up 12 per cent. Migrant workers returning home and those visiting relatives accounted for the increases, together with university students returning to their parents’ homes.
The central government has set aside Rmb1bn this year alone on dredging projects across the trunk line of the Yangtze. By the year end, 42 major shoals and rapids will disappear altogether, making the journey a lot smoother.
Construction of Suining-Chongqing Railway Line II project started on 18 January. When the line is completed in three years, the journey time from Chongqing to Chengdu via Suining will be shortened from three-and-a-half hours to two hours. The 131km line will have a designed maximum speed of 200kph and will cost Rmb4.81bn to build.
A dedicated passenger line between Chengdu and Chongqing is also being built and is due to be completed in four to five years. The direct line will have a top speed of 350kph and will cut the journey time between the two cities to less than one hour.
Eight highway projects in Chongqing with a total length of 412km will be completed in 2009, taking the total highway length in the municipality to 1,500km, according to a local government website. The new highways include Shuijiang-Wulong, Wulong-Pengshui, Pengshui-Qianjiang, Shizhu-Zhongxian and Jiangjin-Hejiang, as well as the south, north and east sections of outer ring highway. The outer ring highway, the second ringroad in Chongqing, will be 186km long and will have a maximum speed of 100-120kph.
Overall, China added 6,433km of expressways last year, bringing the total of operational expressways to 60,003km, second in the world ranking behind the US which boasts about 100,000km.
China National Aviation Holding Co, the parent company of Air China, has been in talks with Wuhan-based East Star Airlines to acquire all or part of the private carrier in a bid to strengthen its presence in central China, reported China Daily.
A source from East Star was reported as saying that the private carrier had long suffered from cashflow problems and had previously been in talks with other airlines. It started business in 2006 and operates about 20 routes from Wuhan, capital of Hubei province. The airline is owned by China East Star Group, which is involved in tourism and real estate business and is one of the largest private enterprises in Hubei.
Chinese private airlines have fared particularly badly since the start of the global economic downturn. Okay Airways, China's first private airline, suspended services in December due to an internal management dispute. Another private carrier in Sichuan province, United Eagle Airlines, grounded two jets in November due to rising losses. State-owned airlines have performed better, although Air China’s passenger numbers fell 1.7 per cent in 2008 to 34.2m, its first decline in five years. Its cargo and mail volume dropped 3.8 per cent to 898,962 tons.
Wuhan hopes to become an air transport hub in central China. The airport transported nearly 10m passengers in 2008, up from 6m in 2006.
Wal-Mart, the world’s largest retail chain, has opened its first wholly-owned outlet in Wuhan, capital of Hubei province. Situated in the Hanxi area of the city, the store is Wal-Mart’s third in Wuhan and its fourth in Hubei.
Taicang terminal, one of three terminals under the umbrella of Suzhou port, reached a new high in handling 1.45m teu last year, up by 42.4 per cent year-on-year. Despite this impressive increase, the total throughput figure was below the port’s own forecast for the year of 1.6m teu.
Along with Nanjing, it was one of two Yangtze ports in 2007 to break the 1m teu barrier. Zhangjiagang terminal recorded a 32.3 per cent rise to 814,200 teu in 2008, while Changshu terminal posted an increase of nearly 17 per cent to 305,300 teu.
Investment in the Port of Nantong reached an all-time record of nearly Rmb1.7bn in 2008, up 7.6 per cent year-on-year and 13 per cent more than the planned budget. Twelve new terminals were under construction in the year and five of them were completed.
A framework agreement was signed on 18 January between the local governments of Chengdu and Leshan. Chengdu, the capital of Sichuan province, is landlocked while Leshan, a small tourist city in southwest Sichuan, lies on the Minjiang River, one of the major tributaries of the Yangtze and famous for being home to the world’s largest sleeping Buddha.
The two governments have agreed that Leshan port, 120km from downtown Chengdu, will become part of Chengdu Economic Zone and renamed as Chengdu port. The transport network in Leshan will also become part of this Greater Chengdu Area, with the development of Leshan port being a joint priority.
Until now, Leshan port has specialised in handling oversize cargo on the upper reaches of the Yangtze. The expansion project boasts a planned throughput capacity of 50m tons of general cargo and 300,000 teu of containers, together with a capacity to handle 10m tons of railway cargo. Vessels of 1,000dwt will be able to sail from Shanghai all year round and 3,000dwt vessels can reach Chengdu port directly on tide.
Cosco said its subsidiary in Zhoushan, Zhejiang province, had cancelled an order for two bulk carrier vessels, while postponing the delivery of another two vessels until 2010. Caijing reported that the shipping line had cancelled orders for four vessels in a month, while extending the delivery of 12 vessels. In a new measure that forms part of the central government’s Go West policy, graduates who find jobs in towns and villages in central and western China will have their tuition refunded. Chen Guangjin of the Chinese Academy of Social Sciences told China Daily that this was the first time the state had offered to refund tuition in this way.
New graduates are finding it increasingly difficult to find work. Of China’s 10m new graduates in 2008, more than one in eight had failed to find a job by the end of the year.
Rail cargo volume in 2009 would be unchanged from last year, predicted the Ministry of Railways. The ministry said it would rely more heavily on passenger transport to offset any weakness in cargo, reported Xinhua. It will also seek new growth in the northeastern, northwestern and southwestern regions, outside the traditionally buoyant areas in the south and southeast coastal areas. Shanghai maritime authorities have recently announced two sections at the Yangtze mouth that can accommodate the simultaneous passing of two large vessels in opposite directions. They are the section between buoys D28 and D42 with a total width of 85 metres and the section between buoys D28 and D34 with a total width of 90 metres. Originally, the rule was that the combined width of the passing vessels had to be less than 78 metres. This meant that one of the two large vessels would have to give way and in the process lose time and pay waiting fee. Baoshan Iron and Steel, which regularly imports iron ore from abroad, has already claimed that the new rule will save it US$9m a year in mooring fees.
In another development, the third phase of the dredging programme at the mouth should be completed by September. The waterway up to Taicang will have a depth of 12.5 metres, compared with the current 10 metres, allowing the passage of 100,000 dwt loaded bulk carriers all year round and 200,000 dwt vessels on tide.
Provincial officials said on 12 January that river cargo would reach a new high in 2009 on the back of its aggressive investment in waterway, port and other transport infrastructure projects. Last year, total cargo carried through the various waterways in Hunan exceed 100m tons, up 23 per cent year-on-year, giving a total of 21bn ton-kilometres, up 12.4 per cent. The Songyanghu Terminal in Yueyang, scheduled to start operation by the end of January, will for the first time enable Hunan to handle containers in dry season, which it previously was unable to do because of low water level. Officials are already predicting that container throughput will exceed 300,000 teu within the next two to three years.
Yueyang is Hunan’s only port city on the Yangtze trunkline. But the Xiangjiang River and Dongting Lake, both capable of accommodating 2,000-3,000dwt barges, are among the Yangtze’s most important tributaries. Changsha, the capital of the province, is one of the key feeder ports to Wuhan.
The Ministry of Transport has announced that Mr Tang Guanjun is to be the new director of Yangtze River Administration of Navigational Affairs. Before that, Mr Tang was Director of the Yangtze Waterway Bureau under the Yangtze River Administration, in charge of modernising the waterway, with the goal of promoting safety and good sailing conditions for all shippers.
Mr Tang was involved in the management of Gezhouba Dam Shiplocks for over 10 years before being transferred in 1996 to the Three Gorges Dam project, responsible for navigational affairs. Between January 1998 and October 2003, he was first the chief of director’s office and then executive deputy director of the Administrative Bureau of Navigational Affairs of the Three Gorges Dam. In April 2000, he was promoted to the position of deputy director of the Yangtze River Administration of Navigational Affairs under the ministry. He became director of the Yangtze Waterway Bureau in July 2005, spearheading the multi-million-dollar ‘digital waterway’ programme. He has been a member of the steering committee of the Yangtze Business Network since 2007.
More than 40 international vessels had to cancel departure from Yangshan, Waigaoqiao and Wusong terminals in Shanghai over a period of three days from 11am on 9 January because of strong winds. The winds reached gale force seven to nine on the Beaufort scale in Yangshan and eight to 10 at the coast of East China Sea. According to a local weather forecast, the blustery weather was set to stay for a few days to come. Emergency plans have been activated to look after displaced crew and dispatch the vessels as soon as the weather allows in an attempt to minimise cost to shippers and terminal operators. China has approved dredging work on a 122km stretch of the Grand Canal in Zhejiang province, costing approximately Rmb10bn. Regarded as an important tributary of the Yangtze, the Zhejiang section of the Canal will be connected to the Qiantang River via a new shiplock so that the waterway links Zhejiang better with the waterway network in the Yangtze River Delta, the most vibrant part of the Chinese economy. Work has begun on a 264km section of Chongqing-Shanghai Railway Line that connects Chongqing and Lichuan, Hubei province. It is the most challenging of the entire line as it winds its way through mountainous terrain. About 80 per cent of the section will comprise bridges and tunnels. The construction will cost more than Rmb27bn, shared by Chongqing government and the Ministry of Railways. Upon completion in 2013, it is expected to give a big boost to the local economies along the line, which have long been inhibited by poor transport connections.
The 2,082km Chongqing-Shanghai Railway Line, via Wuhan, will be a landmark project connecting east, middle and west parts of the country. By 2013, the journey time between Chongqing and Shanghai will be more than halved to eight hours.
Chongqing municipal government has vowed to speed up its road building and protection campaign. It plans to spend Rmb17.6bn this year on 20 expressway projects, completing 10, starting four and speeding up the remaining six. It has also allocated Rmb10bn to establish a citywide management system to crack down on overloading on expressways. The system, already in use in some parts of the city, stores data and is capable of analysis and automated search. Full integration will be completed by the end of 2009 to allow relevant authorities and toll stations to share data. Trucks caught overloading on three occasions would be blacklisted and information about the offending vehicles and their owners will be shared and traced to bear penalties.
In a separate development, Chongqing said it would check and renovate all the municipality’s 400km of highways at national and provincial level this year. One reason for the measure is the huge increase in traffic, said Qian Dun, head of the Chongqing Highway Bureau. A large number of overloaded vehicles and poor quality construction were additional factors, he added.
Shipping capacity through theThree Gorges Dam on the Yangtze River reached a record high in 2008, said the Three Gorges Navigation Administration. The amount of freight transported through the dam increased to 102m tons in 2008, breaking the 100m ton mark for the first time. The Three gorges project will be completed in 2009. Container shipping volumes at the mainland's two largest ports plunged in December, with throughput in Shanghai dropping 6 per cent and in Shenzhen by 15.7 per cent, South China Morning Post reported.
Shenzhen's performance was actually worse than this indicates because of the number of containers carrying goods, or ‘laden’ containers. Last month, Shenzhen's outward-bound throughput of laden containers fell 23 per cent year-on-year, while its inward-bound throughput of laden containers decreased 27 per cent. By contrast, the throughput of empty containers passing through Shenzhen fell only 3 per cent, explained Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council. "The deceleration has become very rapid and horrifying," he said.
Shenzhen's container throughput growth has been negative since last September, when the financial crisis struck, shrinking demand for Chinese goods.
Shanghai's container throughput grew 6.8 percent to 28m teu TEUs last year, compared with 20.5 per cent in 2007 and 21.4 per cent in 2006. Shanghai remains the world's second-busiest container port behind Singapore.
Shanghai International Port reported that its unaudited net profit in 2008 rose 27 per cent from 2007. However, the company missed its 2008 targets, reported Cargonews Asia, as a result of the global financial crisis and the consequent slowdown in China’s economy.
Early statistics from the Ministry of Transport showed that cargo throughput in 17 of the country’s ports exceeded 100m tons in 2008. Apart from Shanghai, the Yangtze ports of Suzhou, Nanjing and Nantong were among them. Jiangyin port, one of the very few on the Yangtze owned by its employees, recorded an increase of 66.7 per cent to more than 500,000 teu in its container throughput in 2008, one of the biggest growth rates on the river.
Cargo throughput has slid drastically since September, following a sudden decrease in demand for coal, imported steel and export goods. Between January and August, cargo throughput rose by 15.2 per cent but the growth between September and December was only 5.2 per cent.
The Yangtze Waterway Bureau has announced that it plans to replace all buoys on the entire navigable length of the Yangtze with patented solar-charged minimum-maintenance uniform buoys within the next two years, comprising some 5,700 buoys in total. Designed by a local waterway maintenance worker, the solar buoys have already been used in the Wuhan section of the river. Compared with the traditional battery-charged buoys, the solar ones only need maintenance once every five years, saving a total of Rmb35,000 for every single buoy. The savings for the entire length of the river will exceed Rmb10m.
In another development, waterway officials announced that by the end of September 2008, night sailing had been made possible for the first time throughout the entire navigable 2,688km Yangtze trunkline. This should shorten journey times and therefore reduce logistic costs for shippers.
The Yangtze water level at Wuhan Customs at 8am on 2 January stood at 14.56 metres, the lowest level since the dry season started in November and a fall of 9.65 metres from the peak tide on 9 August. The navigable water level guaranteed by the Yangtze Waterway Bureau has been reduced to 3.2 metres, suitable for vessels of 3,000dwt. During the wet summer season, the guaranteed water level is usually 4.5 metres, allowing the passage of vessels of 5,000dwt.
The middle reaches of the Yangtze have historically been difficult to maintain due to the numerous shoals and shallows. The completion of the Three Gorges Dam has improved shipping conditions in the upper reaches but has made the maintenance of the middle reaches even more complicated as the regular cycle of storing and releasing the water is changing the features of the river bed. Wuhan’s new low water level is closely monitored by the local government and businesses alike as the city strives to emerge as a regional hub.
The third phase project of Chongqing’s Cuntan container terminal has begun, according to a municipal government website. The Rmb2.95bn third phase project covers about 66 hectares and is expected to be completed by 2012. The project will involve the construction of four multipurpose berths and 260,000 sq metres of container yard.
The first phase project was completed in 2006, involving the construction of two 5,000-ton container berths and one automobile ro-ro terminal. The second phase project started in September 2007 and is expected to be completed this year; it comprises three 5,000-ton container berths and one automobile ro-ro terminal.
When all the projects are completed, Cuntan will have nine container berths with an actual handling capacity of 2m teu a year.
China has approved the establishment of Wuhan Dongxihu bonded logistics centre. It will act as a bonded warehouse and export supervision warehouse and will offer a number of preferential policies for international trade.
It is the fourth bonded logistics centre along the Yangtze and is situated 18km from central Wuhan, 13km from Hankou Railway Station and 24km from Wuhan Tianhe International Airport.
Chongqing’s bonded area will result in annual savings for the municipality’s motorcycle and auto industries of Rmb30m in freight charges and Rmb10m in purchase costs, said Chongqing Foreign Trade and Economic Relations Commission. Auto and motorcycle manufacturers can directly import and export their products from Chongqing. In the first 10 months of 2008, Chongqing exported more than 3m motorcycles for US$1.178bn, accounting for 60 per cent of the municipality’s export value, said the commission.
Construction of the Hefei-Wuhan Railway, the first high-speed line in central China, has been completed after three years, said the government of Wuhan. The 350km line cost Rmb16.8bn to build and it will reduce travel time from eight and a half hours to two hours. Trains will run at 200 kph, the Wuhan government said.
The line is the middle part of China's first east-west high-speed rail link, the Shanghai-Wuhan-Chengdu Railway.
Sichuan provincial government has announced that all the roads destroyed by the May earthquake have reopened. According to media reports, the massive quake affected or destroyed 22,000km of roads in Sichuan. Since then, all the 2,384 affected roads in the province have resumed operation, it said. Cargo volume on mainland Chinese airlines plunged 11.3 per cent year-on-year in November, reported Cargonews Asia, as a result of a downturn in consumer spending in Europe and North America. Shipments bound for Hong Kong and Macau fell by as much as 22.4 per cent. Hong Kong is an important re-export hub for mainland goods before they are shipped overseas.
Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council, said factories in the Pearl River Delta were mainly working on old contracts, since no new contracts have been signed recently. Mr Ho predicted that the market would not show any sign of recovery until the third quarter of 2009, as the lead time for contracts for delivery is from six weeks to six months.
Chen Daqian, the vice-president of China Cargo Airlines, which carries 18 per cent of air cargo to and from Shanghai, said demand for high-end products, such as electronics and high-fashion goods, was withering. “We have secured no guaranteed contracts from freight forwarders this year because they lack confidence in demand,” he continued. Guaranteed contracts accounted for half of cargo space sold by the carrier in 2008.
Freight forwarders usually order partial cargo space from airlines on a yearly contract to secure lower rates and space during the peak season. But this year they expect rates to fall because of softening demand.
Mr Chen said China Cargo had trimmed services on US, European and regional routes amid weaker demand. China Cargo Air and Air China Cargo, the mainland's biggest cargo airline, might try to combine some services to save on costs, he said.
Shanghai port’s container throughput increased 7 per cent to 28m teu in 2008, maintaining its number two world ranking behind Singapore. Waigaoqiao handled 15m teu last year, accounting for more than half of the municipal total.
Yangshan deepwater terminal recorded 8.2m teu; last month the last phase of its northern section was completed and became fully operational, adding 2.2m teu to its annual capacity. In 2007, Shanghai’s container throughput stood at 26.1m teu.
Work has begun on the Chongming-Qidong Expressway, an important part of a regional project that will nearly halve travel time between Shanghai and Jiangsu province.
When finished in 2012, the expressway will link Chongming Island in Shanghai municipality with Qidong, a coastal city in Jiangsu. It is the final phase of the Shanghai-Chongming-Jiangsu connection that will link downtown Shanghai, Chongming Island and Jiangsu province with a series of bridges, tunnels and highways.
Taiwan-based technology manufacturer Hon Hai Precision Industry Co plans to shift production to third-tier Chinese mainland cities in order to reduce costs and take advantage of preferential tax policies, reported China Sourcing News.
Hon Hai is the parent company of Foxconn, the world’s largest manufacturer of electronics and computer components, mostly on contract to other companieswill. It will reduce the number of its employees in its Shenzhen Longhua plant from 260,000 to 100,000 and will transfer its focus to inland areas such as Wuhan, Hubei province and Jincheng, Shanxi province. Edmung Ding, a spokesperson for Hon Hai, said the aim was to cut 2009 operating costs by up to 20 per cent. The company currently has 13 plants on the mainland.
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