Steaming ahead as a maritime power
China last year was among the main purchasers of secondhand ships, in line with its policy of expanding its merchant fleet to cope with increased trade. China is now a significant maritime power, having dramatically increased the size of its fleet since the early 1970s when it was decided, as a matter of policy, to decrease reliance on foreign shipping lines.
According to a survey by Lloyd's of London, conducted at the end of last year , China, together with Greece, bought the most ships on the secondhand market in 1980. Lloyd's estimated that China spent $740 million on 68 vessels, mainly recently constructed bulk carriers.
China Trade Report, published by the Far Eastern Economic Review, quoting Japanese experts, said China was now the world's 15th maritime power. If the rate of fleet expansion continues, it will not be long before China is in the top 10.
The Chinese are striving for a position in which they will be carrying all the freight they are entitled to under joint shipping agreements they have negotiated with a number of countries, including the United States. It is estimated that at present Chinese bottoms are transporting about 70 percent of this entitlement.
At the same time it is building up its own fleet, China is also branching out into joint shipping ventures. Last year it signed an agreement with Sir Yue-Kong Pao, the Hong Kong shipping tycoon, head of the Worldwide Shipping group, to set up the International United Shipping & Investment Company.
The linkage with Sir yue-Kong is one of a number of such business ventures China has entered into with successful overseas Chinese.
Even without the assistance of experienced shippers, China appears to be doing quite well in the shipping business. With low labor costs and cheap bunkering facilities, it is well placed to complete against the conference lines.
It is estimated that rates charged by the China Ocean Shipping Company, the overseeing organization for the rapidly expanding Chinese fleet, are 10 to 20 percent below the conferences. China is picking up business in the commodities trade, which explains its heavy purchase of bulk carriers. Recently, for example, it signed an agreement with Malaysia to move bulk latex to European ports.
The size of China's fleet is something of a mystery. According to some estimates it is around 700 ships, but a New China News Agency dispatch reported in the middle of last year the fleet size was 400 with total cargo tonnage of 7 million.
In 1979, Chinese ships carried more than 40 million tons of cargo serving 400 ports in 100 countries, according to the China Trade Report.
If there has been a trend apparent in China's fleet development over the past year or so, it is that China is now buying newer ships. Japanese shipyards reported in October that China ordered two tankers each from hitachi Shipbuilding & Engineering Company and Sasebo Heavy Industries Company. China is also getting into the container ship business after a slow start.
It now runs container services via Hong Kong to Australia, Western Europe, the gulf, the Philippines, and now the United States. China started a container run to the US West Coast after signing a joint shipping agreement in September last year.
Despite concern among conference lines that Chinese shippers would behave as the Russians have done and heavily undercut them on freight rates, this has not happened. Chinese rates, while lower than those of the conferences, are on a par with other "outsiders."
As China steps up its maritime activity, it is also doing more shipbuilding itself. Over the past few years overseas shipowers have placed orders for more than 100 ships from China's 18 yards. Recently two German shipping companies signed contracts for small freighters.
China is also pushing forward with an ambitious port expansion program, and this means building up its container handling facilities, which are limited.