Compromise deal

The Communist burghers of Shanghai municipality feel a heavy responsibility to the city's mercantile past, especially when it comes to two of the proudest claims their revolutionary predecessors discarded – the mantle of China's biggest port and most important financial centre.

Faced with the prospect that new developments in the world of container shipping could lead to their city being bypassed by the world's biggest ships, the city government has drawn up a plan to build a new port on reclaimed land some 40km out to sea.

The proposal, which is believed to be under favourable consideration by the State Council, already represents a victory of commercial reality over political considerations, since the islands involved are located just outside Shanghai waters in Zhejiang province.

Cramped location
In the nine years since Shanghai was given rein to pursue rapid economic growth, it has followed a twin strategy of strengthening its financial and shipping infrastructure in order to regain its former status.

Geographically, these policies have coincided in Pudong, which has not only been transformed by the erection of more than 200 skyscraping towers but also by the construction of a container port at Waigaoqiao. The old Shanghai Container Terminal properties at the mouth of the Huangpu have long reached the limits of capacity expansion in their cramped location. Last year the terminals, which are operated by the world's leading port operator Hutchison Port Holdings, handled just under 2.5m twenty-foot equivalent units. (teu).

The first three berths at Waigaoqiao have already gone into operation and another three are due to start accepting ships around National Day in October. Altogether the wharves at Waigaoqiao will add 1.6m teu to Shanghai's container handling capacity. Throughput volumes last year grew by 21 per cent to 3.05m teu: To cope with additional growth above 3.5m teu, the city then planned to develop 20 new container handling berths at Waihaogou which would have gradually boosted capacity by 5m teu a year by 2010.

The strategy of promoting Waigaoqiao and then the nearby Waihaogou as the epicentre of eastern China's container shipping has long drawn sotto voce doubts from the shipping community. To assuage sceptics, the Shanghai government repeatedly said a Yn3.3bn dredging programme launched early last year would allow 24-hour navigation by vessels capable of carrying 3,500 teu. The plan involves lowering the depth of the Yangtze River at Wusongkou, where the Huangpu spills out a silt bar, from about 7 metres to 12.5 metres. It held out the prospect of further dredging in later phases to extend the channel beyond 15 metres.

The expensive, time-consuming dredging programme was not due to complete excavation down to 12.5 metres until 2007. However, container ships have already moved one and two generations beyond the depth that Shanghai will then be equipped to handle. Shipyards are now able to build mega-container carriers with capacity of more than 8,000 teu.

Even with container ships half that size, doubts among the shipping community were sustained by the competing claims of Ningbo's excellent natural deepwater harbour. There was also a more ambitious attempt by the government of Jiangsu and the Chinese national shipping line, China Ocean Ship-ping Company, to develop a port upstream of Shanghai, at Taicang. Although Taicang was always a long shot because it faces the same silt bar problem, its mile-wide turning area allows much more freedom of movement than in the cramped channel at the mouth of the Yangtze.

While all three governments pressed their claims for central government backing to become the regional deepwater port, Shanghai's advantage lay in the fact that it was unlikely to face exclusion from the final settlement. What forced the city to compromise in the latest proposal was that container shipping companies are looking beyond regional stops to global stops, a move which would leave room for just one or two first division ports in China, to which the rest would act as feeder ports.

The next generation of 6,000 teu vessels and above will operate on global lines with just four and five stops. Without a deepwater port Shanghai would be sidelined, says one Shanghai-based executive.

Among China's existing ports Hong Kong, Yantian or even Ningbo are the most likely candidates to attract these vessels, the executive says. The unpalatable prospect of giving up its aspiration for global status as first among Chinese ports has forced a rethink among the city leadership.

According to industry officials, the Zhejiang government moved first by dropping absolutist support for Ningbo and luring their Shanghai counterparts with a proposal to build a new deepwater port around Dayangshan and Xiaoyangshan, two islands in the archipelago between Shanghai and Ningbo. Shanghai countered with a plan to build the port at Shengsi Island, a short distance away and further negotiations bridged the gap between the two sides.

Both provinces are now pressing for approval for a port that would be linked to the mainland by a six-lane, 36km highway. The facility, which would have a 15-metre draft, would boast 56 berths capable of handling 14m teu. According to officials, construction would be completed in phases, with the first ships scheduled to dock by 2003.

Multi-modal handling
The pragmatic result means that both sides have given up cherished bargaining ground for a smoother path towards developing a port that will serve as the head of the vast trading dragon emerging along the Yangtze River.

No one is yet sure how much the new facility will cost. Not only will land have to be reclaimed from the sea for the new port but state-of-the-art road and rail links will have to be built to facilitate multi-modal container handling.

As the container shipping company official says: "The industry is developing across services. Leaving out a rail container-handling depot would be unthinkable. That means bridges and extra reclamation."