LI & FUNG RESEARCH CENTRE China Distribution & Trading IN THIS ISSUE : Part III: Water and Air Transportation I. Water Transportation 1 1. Overview 1 2. Development Plans 3 II. Air Transportation 8 1. Overview 8 2. Development Plan 8 3. Case Studies 11 Transport infrastructure development in China Part III: Water and Air Transportation I. Water Transportation 1. Overview Demand for transportation in China has been growing rapidly due to the robust national economic growth. In Issues 43 and 44, we study the current situation and future plans of the road transportation, which includes highway and railway. Besides road transportation, water transportation also plays an important role in supporting the communications of the country. In general, China s water transportation could roughly be divided into ports and inland waterways. Ports China has one of the world s most extensive network of coastal ports, the largest ones are Shanghai and Ningbo in the Yangtze River Delta (YRD); Shenzhen and Guangzhou in the Pearl River Delta (PRD); Tianjin, Qingdao and Dalian in the Bohai-rim region; and Xiamen on the Fujian Coast. With robust export growth, all of these major coastal ports recorded rapid growth, particularly the ports situated in Ningbo, Shenzhen and Guangzhou. The throughput of the ports recorded significant growth in 2006. The cargo throughput was 5.6 billion ton, with a year-on-year (yoy) increase of 14.8%. Among the total, the coastal ports handled 3.5 billion ton, up 17.3% when compared to 2005; while the inland ports handled 2.0 billion ton, up 10.6% over the previous year. 13/F, LiFung Centre 2 On Ping Street Shatin, Hong Kong Tel: (852) 2635 5563 Fax: (852) 2635 1598 E-mail: lfdc@lf1937.com http://www.lifunggroup.com/ The container throughput increased tremendously in 2006 as well. The total throughput was 93.6 million TEU, with a yoy increase of 23.8%. In fact, China has been handling the largest container throughput in the world for four consecutive years. Exhibit 1 shows the latest rankings in 2006. Six of the top-20 ports in the world were located in Mainland China last year. Among the total throughput in China, the coastal ports handled 85.8 million TEU in 2006, up 22.5% when compared to 2005; and the inland ports handled 7.8 million TEU, up 39.1% when compared to 2005. 1
Among the various types of freight carried by water transportation through ports, the total amount of coal, petroleum, metal ores, steel and iron, mineral building materials and machines and facilities accounted for more than 60% of the total freight. Exhibit 1 Top-20 Ports Handling the Largest Container Throughput in the World in 2006 Ranking Container Port 10 000 TEU in 2006 2005 2006 1 1 Singapore 2480.0 2 2 Hong Kong 2323.4 3 3 Shanghai* 2171.8 4 4 Shenzhen* 1846.8 5 5 Busan ( ) 1203.0 6 6 Kaohsiung ( ) 977.4 7 7 Rotterdam 960.0 8 9 Dubai 892.3 9 8 Hamburg 886.1 10 10 Los Angeles 847.0 11 13 Qingdao* 770.2 12 11 Long Beach ( ) 729.0 13 15 Ningbo* 706.8 14 12 Antwerp ( ) 701.9 15 18 Guangzhou* 660.0 16 14 Pakistan Port ( ) 632.6 17 16 Tianjin* 595.0 18 17 New York 512.8 19 19 Tanjung Pelepas ( ) 477.0 20 20 Bremen ( ) 445.0 * Ports in Mainland China Source: China Ports & Harbours Association ( ) Inland waterways China s inland waterway system is dominated by the Yangtze River ( ), which is the main transportation link for inland China. Though Yangtze River is one of the world s most used inland waterways, only a fraction of navigable capacity is being utilized at the moment. Nanjing ( ), Wuhan ( ) and Chongqing ( ) are the main inland ports along the Yangtze River. While the navigable river stretches from Shanghai to Chongqing, most activities occur between Nanjing and Shanghai. The total length of navigable inland waterways in China climbed to 123 400 km in 2006. The capital injected to coastal and inland waterways construction in 2006 amounted to 86.9 billion yuan, up by 26.2% over the previous year. Among the sum, the amount of investments in coastal and inland waterways projects was 70.8 and 16.1 billion yuan respectively. 2
2. Development Plans (1) The 11 th Five-Year Development Plan for Road and Water Transportation ( ) i. Objectives The achievements of water transportation were impressive during the past few years. However, the Chinese government is committed to stepping up its efforts to develop water transportation to alleviate the heavy and growing demand for freight and passenger traffic as a result of the rapid-growing economy. Last year, the Ministry of Communications (MOC) promulgated the 11 th Five-Year Development Plan for Road and Water Transportation (the Plan). For the guiding principles and objectives of the Plan, please refer to Issue 43, Part I: Road Highway and expressway (http:// www.lifunggroup.com/research/pdf/china_dis_issue43.pdf). Exhibit 2 shows the development goals for water transportation in the 11 th Five-Year Program (FYP) period (2006-2010) set by MOC. The Ministry aims to construct 639 coastal deep-water berths providing capacity of 2.1 billion ton and 340 inland berths providing capacity of 64 million ton during the 11 th FYP period. Exhibit 2 The Development Goals for Water Transportation during 11 th FYP period (2006-2010) Indicator Unit Increase during 11 th FYP I. Coastal Port Deep-water berth unit 639 Capacity 0.1 billion ton 21 II. Inland Waterway Class III or above Waterway km 2000 Class IV Waterway km 1800 Berth unit 340 Throughput 10 000 ton 6400 Source: MOC ii. Highlights of the 11 th Five-Year Development Plan for Road and Water Transportation with respect to water transportation a. Speeding up the construction of infrastructure Coastal Ports The followings are some initiatives of the MOC to further develop the coastal ports in China: To formulate a more well-organized plan for the large coastal ports specially designed for handling coal, crude oil, liquefied natural gas (LNG), metal ores, containers and etc. For instance, more piers will be built for handling LNG in ports such as Putian ( ), Qingdao ( ), Shanghai ( ), Ningbo ( ), Tangshan ( ); and the total handling capacity of costal ports for LNG shall reach 18.3 million ton by 2010. 3
To encourage the use of advanced technology with a view to increasing the capacity of the coastal infrastructure. To build major regional ports as well as small- and medium-size local ports in major coastal cities such as Shanghai, Tianjin and Dalian. Inland Waterways Major initiatives of the MOC to improve the inland waterways include: To upgrade the high-class inland waterways along Yangtze River Link ( ) and the YRD, Xijiang River Link ( ), Beijing - Hangzhou Grand Canal ( ) and the PRD in terms of quality and handling capacity of the waterways. To upgrade the scale, technology level and efficiency of major inland ports. b. Emphasizing coordinated development As mentioned in Issue 43 of road transportation, coordinated development of transportation network across the country is another major focus of the Plan. For instance, to strike for a more well-coordinated urban-rural development, more efforts will be made to address the problem of difficult access to water transportation in rural parts of China. It is envisaged that all rural ferry points will be linked up with roads and other modes of transportation by 2010. c. Enhancing efficiency and service quality The MOC is also very ambitious to improve the efficiency and service quality of the water transportation. It is committed to building an integrated multi-modal transportation system that links all the ports to other modes of transportation. d. Ensuring safety Another major focus of the Plan is to establish a safety and assistance mechanism. Moreover, the MOC will put more efforts in preventing and monitoring the waterway accidents and it will upgrade its existing system for monitoring waterway conditions. e. Others Similar to other modes of transportation, the MOC will implement various effective measures to modernize the transportation facilities, informatize the transportation system, develop innovative technology, enhance training and education of the industry, and achieve sustainable development. (2) National Plan for Coastal Port Layout Following the 11 th Five-Year Development Plan for Road and Water Transportation, the State Council further announced another development plan on coastal ports, the National Plan for Coastal Port Layout (the Layout), in August 2006, which is the highest-level port plan of China. The Layout provides guidelines on the coordinated development of coastal ports of China, as well as development rules for relevant sectors. The ultimate goal is to improve the overall competitiveness of the coastal ports of China. 4
With reference to the characteristics, economic development stage of different regions, and the current situation of all major ports, the Layout divides the coastal ports across the country into five clusters, namely the Bohai Sea Area port cluster, the YRD port cluster, the Southeast coastal area port cluster, the PRD port cluster and the Southwest coastal area port cluster (see Map 1). For more details, please refer to our Newsletter Issue 39 China s Logistics Update (2006-07) (http://www.lifunggroup.com/research/pdf/china_dis_issue39.pdf). Map 1 National Plan for Coastal Port Layout Source: MOC 5
(3) National Plan for Inland Waterways and Ports i. Objectives Following the National Plan for Coastal Port Layout, the MOC announced the National Plan for Inland Waterways and Ports Layout in June 2007 laying out the development plans for inland waterways and ports by 2020. The Chinese government realizes that their input in inland water transport has been insufficient, especially when compared to those in coastal ports, and they are now putting more resources in developing the inland transportation as they see inland water transportation as an integral part of the comprehensive transportation system in China. ii. Highlights of the National Plan for Inland Waterways and Ports Layout Inland waterways According to this layout, inland waterways are classified into two categories: high-class waterways and other waterways. This layout will focus on high-class waterways only. About 19 000 km of high-class waterways are covered, accounting for 15% of the total mileage of inland waterways in China. As stipulated in the layout, a waterway network comprising the mainstreams of the Yangtze River and the Xijiang River, the Beijing-Hangzhou Grand Canal, the high-class waterways networks of the YRD and PRD, and another 18 major tributaries of rivers ( ) will be formed. Please see Exhibit 3 for more information. Exhibit 3 The layout of inland waterways ( ) Two horizontals ( ) Yangtze River ( ) and Xijiang River ( ) One vertical ( ) Beijing-Hangzhou Grand Canal ( ) Two networks ( ) The high-class waterways networks of the YRD ( ) and PRD ( ) Eighteen Lines ( ) 18 major tributaries of rivers ( ): Minjiang River ( ), Jialingjiang River ( ), Wujiang River ( ), Xiangjiang River ( ), Yuanshui River ( ), Hanjiang River ( ), Hanjiang Canal ( ), Ganjiang River ( ), Xinjiang River ( ), Heyu Route ( ), Huai River ( ), Shayinghe River ( ), Youjiang River ( ), Beipanjiang - Hongshuihe ( ), Liujiang - Qianjiang ( ), Heilongjiang River ( ), Songhuajiang River ( ) and Minjiang River ( ) Source: MOC Inland ports As specified in this layout, inland ports are classified into three categories: main ports, regional ports and general ports. This layout will focus on main ports only. A total of 28 main ports are covered; all of which are radiating from major cities in one region to other neighbouring cities and regions (see Exhibit 4). 6
Exhibit 4 The main ports covered in the National Plan for Inland Waterways and Ports Layout Source: MOC Municipality/Province Ports Chongqing Municipality Chongqing Port ( ) Sichuan Province Luzhou Port ( ) Hubei Province Yichang Port ( ) Jingzhou Port ( ) Wuhan Port ( ) Huangshi Port ( ) Hunan Province Changsha Port ( ) Yueyang Port ( ) Jiangxi Province Nanchang Port ( ) Jiujiang Port ( ) Anhui Province Wuhu Port ( ) Anqing Port ( ) Ma anshan Port ( ) Hefei Port ( ) Bengbu Port ( ) Zhejiang Province Huzhou Port ( ) Hangzhou Port ( ) Jiaxing Inland Port ( ) Jiangsu Province Xuzhou Port ( ) Wuxi Port ( ) Shangdong Province Ji ning Port ( ) Guangdong Province Zhaoqing Port ( ) Foshan Port ( ) Guangxi Province Nanning Port ( ) Guigang Port ( ) Wuzhou Port ( ) Heilongjiang Province Harbin Port ( ) Jiamusi Port ( ) iii. Outcome of the National Plan for Inland Waterways and Ports Layout The MOC is expecting the following major outcomes: The high-class inland waterways and main ports in some twenty provinces will connect 56 cities with population of over 500 000 people and 27 national Class I ports. On the other hand, industrial zones will be developed along the rivers so as to facilitate coordinated regional development. A national inland waterway and port system will be formed with the high-class waterways and main ports as the core, allowing vessels of 1 000 tonnages to navigate. With improved inland water transportation, a comprehensive integrated transportation system will thus be formed. 7
By 2010, the capacity of the inland water transportation will increase by 40% and will double by 2020. The navigation conditions will also be improved and the cost will be lowered. Construction of high-class waterways will raise the capacity of the integrated transportation system. Moreover, saving land resources will also help achieve the national goal of sustainable development. II. Air Transportation 1. Overview Air transportation has become one of the most effective tools to serve the world markets. In today s highly competitive business world, just-in-time delivery is crucial. The overall trend towards fast and reliable delivery and the transformation of China s economy along the value chain of production, among others, have boosted the demand for air transportation. According to the General Administration of Civil Aviation of China (CAAC), there were 142 civil airports with regular flights in Mainland China in 2006. As at January 2006, there were a total of 1 257 domestic and international lines; of which, 1 024 were domestic lines. The total passenger throughput rose 16.7% to 332.0 million in 2006; of which, passenger throughput for domestic routes rose by 17% to 299.3 million while passenger throughput for international routes grew 14.6% to 32.6 million. Among these 142 airports with regular flights, 44 of them handled more than one million passengers, representing 95% of the total passenger throughput in Mainland China in 2006; and 7 of them even handled more than 10 million passengers, representing 51.3% of the passenger throughput. The largest hubs, namely, Beijing, Shanghai and Guangzhou accounted for 36.5% of the total. As for freight traffic, 39 out of the 142 civil airports handled more than 10 000 ton of goods in 2006, accounting for 98.4% of the total freight throughput. Beijing, Shanghai and Guangzhou accounted for 58.2% of the total. Exhibit 5 shows the top twenty civil airports in Mainland China in 2005 in terms of passenger traffic and Map 2 shows some busy airports in China in 2005. 2. Development Plan China s 11 th Five-year Plan for Civil Aviation Development (1) Objectives To develop the air transportation, the General Administration of Civil Aviation of China (CAAC) formulated the China s 11 th Five-year Plan for Civil Aviation Development (the Plan) in 2006 with reference to the national 11 th FYP. The objectives of air transportation development during the 11 th FYP period are: i. To substantially speed up the growth of the air transportation and promote the quality of the transportation; ii. iii. iv. To increase the capacity of general aviation sector; To strengthen air transport infrastructure; and To strengthen legal framework for the industry. Exhibit 6 summarizes the development goals for air transportation during the 11 th FYP period set by the CAAC. 8
Exhibit 5 The Top-20 Busiest Civil Airports in Mainland China in 2005 in terms of passenger traffic, and their freight traffic and number of flights handled Turnover of passenger Turnover of freight Number of flights Rank Airport traffic (million person) traffic (10 000 ton) handled (10 000) 1. Beijing 41.0 78.2 34.2 2. Shanghai Pudong 23.7 185.7 20.5 3. Guangzhou 23.6 60.1 21.1 4. Shanghai 17.8 36.0 17.0 5. Shenzhen 16.3 46.6 15.1 6. Chengdu 13.9 25.1 13.3 7. Kunming 11.8 19.7 10.9 8. Hangzhou 8.1 16.6 7.9 9. Xi an 7.9 8.3 9.1 10. Haikou 7.0 6.1 6.9 11. Chongqing 6.6 10.1 7.3 12. Xiamen 6.6 15.9 6.7 13. Qingdao 5.9 8.9 6.3 14. Dalian 5.4 9.9 5.0 15. Nanjing 5.4 13.9 5.6 16. Changsha 5.3 5.2 6.0 17. Wuhan 4.7 6.4 5.2 18. Shenyang 4.6 8.3 4.3 19. Urumqi 4.4 6.2 4.9 20. Fuzhou 3.5 5.0 3.7 Sources: General Administration of Civil Aviation of China (CAAC) and Yearbook of China Transportation & Communications Exhibit 6 The Development Goals for Air Transportation during the 11 th FYP Period Goals 2005 By 2010 Number of people travel by air (million) 138 270 Cargo volume (million ton) 3.1 5.7 Number of aeroplanes 1246 > 1 500 Number of civil airports with regular flights 142 190 Accident rate (per million flight hours) - < 0.3 Sources: CAAC, Yearbook of China Transportation & Communications and China Daily 9
Map 2 Selected airports in Mainland China and their passenger traffic, freight traffic and number of flights handled in 2005 Source: Yearbook of China Transportation & Communications (2) Highlights of the China s 11 th Five-year Plan for Civil Aviation Development i. Increasing infrastructure investments The investments in fixed assets in civil aviation were 82 billion yuan during the 10 th FYP period (2001-2005). According to the Plan, the CAAC will increase its investments in the aviation sector during the 11 th FYP period and the sum earmarked nearly doubled that of the previous five years. Exhibit 7 shows the details of the allocation of funds on different areas in these two periods. Exhibit 7 Investments in Aviation Sector during the 10 th and 11 th FYP Periods Area 10 th FYP period (billion yuan) 11 th FYP period (billion yuan) Airport construction 70.7 140.0 Airport management 7.0 11.0 Safety facilities 1.3 5.0 Information and education 3.0 7.0 Total 82.0 163.0 Source: CAAC 10
Among the sum earmarked for the aviation sector, more than 85% were allocated to airport construction. According to the Plan, these funds will be spent on upgrading and expanding the existing civil airports. New constructions in Beijing, Shanghai and Guangzhou airports are some of the major projects during this period. As for the building of new airports, most of them will be built in the western part of China as less than 40% of the airports are currently located in the western region. ii. Ensuring safety Due to a rapid increase in air transportation volume and a fast expanding fleet, the CAAC is facing more and more pressure and difficulty in ensuring flight safety. As shown in Exhibit 7, 5 billion yuan will be injected to safety facilities. The sector will strive for an accident rate lower than 0.3 per million flight hours during the 11 th FYP period, a standard comparable to that of developed nations. The CAAC will allocate special funds to develop civil aviation safety. For instance, in May 2006, the CAAC announced the establishment of an institute of civil aviation safety to train about 10 000 staff including flight safety inspectors. iii. Others Apart from more input in infrastructure and safety facilities, the CAAC will also seek to facilitate comprehensive development of civil aviation, construct a modernized air transportation management system and strengthen training and education for nurturing talents. 3. Case Studies Case 1: Aviation landscape in the GPRD region The Greater Pearl River Delta (GPRD) consists of the 9 cities in the PRD as well as Hong Kong and Macao. The region is one of the most interesting economic entities in the world. Its economy and infrastructure is integrated at a very high level. The GPRD also features many extremes: its strong economic power, its rapid growth, its population density and last but not least, its aviation landscape. Within a radial distance of about 100 km, five international airports are at service, creating the highest airport density in the world. The clear leader among them is the Hong Kong International Airport (HKIA), which has established itself as a leading aviation and logistic hub in Asia and has been the airport with the highest international air cargo throughput of the world for many years. Its dominant counterpart for domestic traffic is the Guangzhou Baiyun International Airport (GBIA). JV between Zhuhai government and AA Liberalized air traffic policy in recent years has rapidly expanded China s own international air cargo traffic. In light of this, it is crucial for HKIA to connect its extensive international connection with PRD airports strong domestic air networks. The joint venture (JV) between Zhuhai Municipal People s Government and the Airport Authority Hong Kong (AA) to manage Zhuhai Airport for 20 years is the first major cooperation achieved between HKIA and PRD airports. It is also a milestone in forging an integrated PRD regional airport system. 11
Multi-modal transportation network To further extend its reach to the home market which comprises Hong Kong and the 50 million people in the PRD, HKIA is committed to creating a multi-modal transportation network between the PRD and HKIA. For example, SkyPier - the cross-boundary ferry service - enables the PRD passengers to travel via HKIA without going through the immigration and customs formalities to their destinations worldwide in a seamless and comfortable manner. Currently, there are five PRD ports - Shekou and Fuyong of Shenzhen, Dongguan, Zhongshan and Macao - offering these speedy cross-boundary arrangements, while passengers can even pre-check their luggage at Shekou of Shenzhen. Under construction and scheduled to open in 2009, a permanent SkyPier will provide ferry service users with an enhanced facility. In addition to the cross-boundary ferry service, 240 coach trips are made every day to link HKIA with 160 drop-off locations in 70 cities and towns in the PRD. Passengers expecting even more comfort can use the crossboundary limousine service - SkyLimo - which takes them to their PRD destinations fast and direct. JV between Hangzhou Xiaoshan International Airport and AA To further enhance its integration beyond the PRD, HKIA also pioneered in the formation of air-bridges with mainland airports. To this end, the joint venture between Hangzhou Xiaoshan International Airport Co. Ltd and AA is the first airbridge formed to connect the two thriving economies of the PRD and YRD. Case 2: Beijing-Shanghai Express Flight ( ) Growing demand for quality air service According to the CAAC, the Beijing-Shanghai route is the busiest domestic business line. In 2006, the passenger throughput between these two cities witnessed 4.18 million persons, accounting for nearly 3% of the total national passenger throughput. Since most businessmen are very time-sensitive, they wish timely, flexible yet fast flights. Currently, quite a number of airline companies are providing service linking these two cities; however, there are restrictions refraining these businessmen from enjoying fast and high quality air services. First, each airline company provides only a limited number of flights every day. Second, once the businessmen confirm the flight with one company, it will be costly for them to shift to another company providing a more suitable flight for them. New pilot project In light of this, the CAAC has recently launched an innovative mode of express flight. Starting from 6 August 2007, flights between Beijing and Shanghai will arrive and depart every 30 minutes. Passengers can choose among five major domestic airlines, namely Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines and Shanghai Airlines. They can also enjoy quicker check-in times and security checks. The time required from point to point will be reduced from 5 hours to 3 hours. The CAAC sees this as a big leap forward in integrating and making full utilization of existing resources to alleviate the growing demand for quality air transportation. The CAAC will promote this new mode of service provision to other major cities such as Guangzhou and Shenzhen after developing a more mature system with the experience of this pilot project. Copyright 2007. All rights reserved. Though endeavours to ensure the information discussed in this material is accurate and updated, no legal liability can be attached as to the contents hereof. Reproduction or redistribution of this material without s prior written consent is prohibited. 12