The "commercialisation" of COSCO, the China Ocean Shipping Company, while good news for all those wishing to see China enter the capitalist world, is in reality only the latest stage in the progressive liberalisation and modernisation of the shipping industry in the People's Republic. Last year, China signed an agreement with the EC allowing the latter's shipping operators greater freedom to put their own main line vessels into Chinese ports and, should they so desire, operate their own coastal feeder services. Other Asian carriers, notably Hanjin, have also been increasing their presence following the signing of new bilateral shipping agreements. Overseas investors, notably Hong Kong's Hutchinson Whampoa have been raising their investments in mainland Chinese ports such as Shanghai, while the Chinese Have reciprocated with similar investments in the colony.
The Chinese deep sea shipping market is now probably no more restrictive than that of any other major Asian trading nations, or for that matter the USA's. Exports are a priority for the Chinese government, and while it would naturally like to see COSCO and other Chinese-owned lines take their share of their trade, its main concern is that goods are carried to overseas markets as economically and reliably as possible. COSCO also has to cope with the mushrooming number of other Chinese carriers. Although none of these can yet even begin to match COSCO's vast size, they could become a significant force over the next few years. Even the Chinese state forwarding organisation, Sinotrans, has expressed an interest in operating its own deep sea shipping service in direct competition with OSCO by chartering space on other operators' vessels.
The main task facing COSCO's new commercially aggressive management will be trying to match the best services now on offer and ensure that COSCO retains its share of what promises to be a rapidly growing market. Although significant in absolute terms, China's overseas trade is small in proportion to its huge population and there is still plenty of scope to increase exports. Imports per head of population are also low by the standards of many other countries.
The company's strength is its depth of coverage of the Chinese market, as befits the main national line. There is scarcely a commercial port in the People s Republic which does not receive either a direct or feeder service. Many of the foreign-owned operators claiming to offer a comprehensive service do so only by using COSCO-operated feeder services in many instances, though non-Chinese lines do have more freedom to operate their own feeder services if they so wish. COSCO also operates an extensive trucking network, operates its own terminals and has access to regular container trains serving most inland points.
But it badly needs to modernise its shipping fleet to keep up with the best international carriers. One of the first acts of the newly "liberated" COSCO management will be to take delivery of an as yet unspecified number of large new container ships. These will have a carrying capacity of about 3700 TEU (twenty foot equivalent units) and while by no means the largest container vessels in operation today, will make COSCO a serious contender in the international shipping stakes. They will go into service on the line's trans-pacific service to the USA, currently being operated by 2700 TEU vessels, and on the European routes, where present ships are in the 1900-2000 TEU bracket.
In keeping with the new commercialisation philosophy, nationalism will have no part to play in deciding where the new tonnage will be built. COSCO has already gone to Germany and the UK for its previous new buildings (in the past, extensive use was made of yards in the Communist world) and Chinese yards will have to demonstrate that they can supply the right quality at the right price if they want to play any part in the company's next order. Chinese policy in this respect is in fact more liberal than that of many other Asian shipping nations, some of whose lines have been accused of enjoying direct or indirect government subsidies as a way of keeping domestic yards busy.
The new vessels are only the icing on the cake, however. Since its comparatively recent birth in 1961, COSCO has built up a fleet of well over 600 vessels of all types totalling over 14.5 million dwt (dead weight tonnes) ranging from small coasters, through bulk carriers, roll-on, roll-off (ro-ro) vessels and oil tankers to the newer modern container ships. There are even a handful of passenger cruise liners. Estimates of its status in world terms vary, but COSCO Shanghai is already reckoned to be well in the world top 20 container operators. Taken as a whole, the group's total container fleet capacity is almost 85,000 TEU ? a considerable achievement for a country with almost no modern container shipping at the beginning of the 1960s. True, a large proportion of the fleet is over 14 years old and the main purpose of the new tonnage is not to add yet more capacity but to modernise the fleet, allowing some of the older non-containerised general cargo ships to be withdrawn.
The new commercial freedom will also allow COSCO to adjust its labour force without interference from central government. With the progressive withdrawal of labour-intensive cargo ships in favour of large modern container and bulk carriers, some of which can be operated by crews of less than a dozen, this is likely to become a significant factor in the future. However, the line's management hopes that a general increase in traffic will lead to a more or less constant labour requirement.
COSCO claims that it treats its labour force well, offering housing, health and a whole range of other social benefits on a scale virtually unimaginable in the west. This is partly a reflection of COSCO's policy of diversification. "We don't in fact regard ourselves as being simply a shipping company," says a spokesman for COSCO (UK) Ltd. As well as maritime related interests such as agencies and port operations both in China and in many other parts of the world, the company owns or operates hotels, shops, schools and hospitals.
Although wide-ranging in terms of both the scope and the geographical range of activities, COSCO has to some extent avoided the monolithic management structure often associated with enterprises in planned economies. Although ultimately answerable to corporate headquarters in Beijing, COSCO's direct subordinates ? for example, Guangzhou Ocean Shipping Company or Shanghai Ocean Shipping Company ? are set up on a regional basis and now have considerable freedom in terms of conventional vessel service .planning, and marketing. There are also a number of joint-venture companies in various parts of the country. Outside China, COSCO is represented either by wholly-owned companies, such as Cosco Europe GmbH, COSCO (UK) Ltd and COSCO America Inc., by joint venture organisations such as Cross-Ocean BV in Rotterdam or by independent agents ? depending on the volume of business in the country or region concerned.
The group can command a fair amount of maritime and commercial expertise, particularly in its main overseas markets ? an advantage not always shared by former Soviet and developing country fleets which have previously attempted to break into world shipping markets. Much depends now on whether the momentum built up with the order for the first batch of large container ships can be maintained. While COSCO can always play to its strengths in the mainland Chinese market, to be considered an effective player in the ultra-competitive Far East/Europe and transpacific trades, the line needs to be able to introduce enough new tonnage to be able to offer fixed-day sailings using 3000-plus TEU ships every time on its main routes.
In total, COSCO operates 47 regular international liner services with over 2500 sailings per year. Direct sailings operate and from all major Chinese orts, backed up by an extensive coastal Feeder network. Frequent container routes operate between ma or Chinese ports including Shanghai; Xingang, Dalian and Huangpu and the main European centres such as Rotterdam, Hamburg, Antwerp and Felixstowe using ships of between 1200 and 1900 TEU at present. A similar schedule, though using ships of about 1200, runs to southern Europe and the Mediterranean, and the same region also receives a non-container multi-purpose liner service while northern Europe is the destination of regular general purpose refrigerated vessels. All Europe services also call at the main Asian ports of Hong Kong and Singapore.]
Frequent schedules are in force between China and all major Japanese ports, including several on a fixed-day weekly basis. Owing to the short-sea nature of this trade, vessels are in the 382-724 TEU range. The North American service includes both east and west coasts and Gulf ports, as well as Canada, again using ships in the 1200-2000 TEU bracket. Other destinations served on a regular basis by full container vessels from China are Australia, New Zealand, Thailand, the Philippines, Indonesia and the Arabian Gulf. Another significant operation is a new schedule operated exclusively by COSCO's larger 2500-2700 TEU ships between Hong Kong, Kobe, Yokohama and the west coast of North America on a fixed-day weekly basis, with no direct calls in mainland China itself.
In addition to the scheduled operations, all parts of the world are served by conventional tramp vessels of up to 18000 dwt, according to demand. *