Recently, China’s State Council approved a pilot project to open some ports for foreign vessels to operate coastal shipping. The project will last for three years, until December 31, 2024. The details of the new policy are still under development and therefore how many foreign shipping companies can benefit from the policy remains to be seen.
Currently, the Regulations of the People's Republic of China on International Marine Transportation and the Regulation on the Administration of Domestic Water Transport prohibit foreign ships from operating shipping transportation between Chinese ports or leasing Chinese ships to operate such businesses.
The announcement (original in Chinese) for the pilot project, issued on November 18, is a notice to temporarily adjust the applicable regulations on international marine transportation and domestic waterway transportation under the Overall Plan for the Lingang Special Area in Shanghai Pilot Free Trade Pilot Zone (“Overall Plan”). The new announcement exempts the Lingang area from the above-mentioned shipping restrictions. According to the State Council announcement, eligible foreign container liner companies are allowed to use wholly owned or controlled foreign vessels to carry out cargo shipping services between Yangshan port in the Shanghai Lingang area and Dalian Port in Liaoning Province, Tianjin Port in Tianjin City, and Qingdao Port in Shangdong Province.
Due to the shipping restrictions, there used to be a lot of containers in Qingdao and Dalian that went to Busan port in South Korea for transit shipment. This new policy would allow foreign shipping companies to use Shanghai Yangshan port as a transportation hub.
The implementing guidelines of the policy and the scope of application remain to be seen as the local government formulates the rules and implements the measure. According to the Overall Plan (link in Chinese), which serves as the foundation of the policy, the openness to foreign vessels could be based on reciprocity. Therefore, the number of companies that can benefit from the policy could be limited.
Joerg Wuttke, President of the European Union Chamber of Commerce in China, lauded the policy change. “At a time of significant stress in global supply chains, this is a very welcome step which may ease some of the bottlenecks exporters are experiencing,” he said. He also noted that “this seems to be a meaningful step towards opening up the maritime industry in China to foreign participation, and creating more reciprocal market access terms between Chinese carriers in the EU and EU carriers in China. Furthermore, it will reduce the CO2 footprint of ocean transport.”
Lu Hongjun from the shipping department of the Administrative Committee of the Lingang Special Area noted that “this [new policy] allows some shipping companies to optimize their route design and conduct cargo transit in Shanghai, which will boost Yangshan Port's capacity to allocate shipping resources.”
Colin Grabow, policy analyst at the Cato Institute, told China Trade Monitor that “it is both notable and encouraging that China has opted to liberalize its cabotage laws which, as the president of the European Chamber of Commerce in China points out, may help to ease some of the country's export bottlenecks.”