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FACE TO FACE
November 2001 Issue  Face to Face with Liu Guoyuan  Shipping and logistics services are going to
play an increasingly vital role in a post-WTO China. Bulletin Editor Malcolm
Ainsworth spoke with Liu Guoyuan, Executive Vice Chairman & President, China Ocean
Shipping Company (Hong Kong) Group Ltd, (COSCO) about the industries and the future of
Hong Kong as a shipping centre. Following are extracts from that interview.
The Bulletin: What
challenges do you see for COSCO in keeping pace with China's booming export machine and
how do you plan to overcome them?
Liu Guoyuan: I read a recent report by the Hong Kong Trade Development Council that said export volumes in the first five years after China joins the WTO will increase by an extra 2.4 per cent annually. The projected increases in imports will be even higher. So we will need to meet more challenges than ever before. What will the main challenges be?First, with rising demand for cargo transportation, shipping companies will probably have to expand their fleet capacity. Second, with increasing throughput at container terminals, demand for container leasing and container terminal services will expand very quickly. Therefore, competition for investment in container terminals will become keener, especially for the main ports in the Chinese Mainland. So COSCO is also looking to expand its fleet? Yes, we plan to focus on our core business and will provide
customers with even better services than ever before, and to achieve this we plan to
enhance our vessel fleet capacity and investments.
We are also looking at signing
proposals to cooperate with hub ports to develop container terminals and other special
purpose terminals, especially among the busier ports like Shenzhen, Shanghai and Qingdao.
We plan to further leverage existing COSCO shipping, container transportation and container terminal networks, and set up new offices in main Mainland cities, as well as overseas, to keep in close touch with our customers and to establish long and stable business relationships. The Internet and its effect on the business environment, information technology and customer service is also allowing us to lower costs, further increase efficiency and provide our customers with more value-added services. What are you doing to stay ahead of foreign competition in post-WTO China?The main challenge we expect is competition from powerful shipping companies and terminal investors and management groups, not only in competing for business itself, but also in the field of human resources. One way that we will compete will be to form alliances with other major companies and groups to establish strategic partnerships to facilitate our main businesses. What impact do you think Beijing's successful Olympic bid and the Central Government's 'Go West' programme will have on your business and sea-freight-related industries in China?First of all, I'd like to show you these figures. According to these statistics, the Central Government will invest up to US$30 billion in the 2008 Olympic Games, which includes related projects such as sports facilities, communication systems, environment and airport and highway construction. All this activity related to the Olympic Games is expected to account for about 0.3 per cent of China's annual economic growth in the run up to the games. So of course there are tremendous opportunities there. As for China's development strategy for the western region, I think it will not only add momentum to economic and social development in the region, and stimulate domestic consumption, it will also strengthen cooperation between the eastern and western regions, and narrow their levels of development. For example, in the forthcoming 'Tenth Five Year Plan' period, China will launch its 'west-to-east natural gas transmission' and 'west-to-east electricity transmission' projects, railway extension projects, and other infrastructure projects this year at an estimated investment cost of RMB33 billion.I think the development strategy for the western region provides opportunities for those enterprises and organisations which have been working closely with China and are familiar with the market. Businesses are increasingly using just-in-time delivery to minimise costs. What is COSCO doing to capitalise on this trend?Expanding into the modern logistics business is a natural step for COSCO to take, and a key element in developing a successful strategy for the new millennium. The basic idea of our logistics strategy is to expand our service spectrum from transportation to include warehousing, processing, distribution and to even encompass some elements of manufacturing. All this will be supported by our prominent presence in the shipping business and our extensive global logistics resources. In carrying out our logistics strategy, we are finalising COSCO's service design, and we will be forming a logistics company after some organisational restructuring. Our target customer groups are the transnational companies with global supply chains. We will offer full-process logistics solutions to them, supported by advanced information technology and our global logistics Internet platform. Hong Kong is concerned that ports in South China, and Shanghai will siphon cargo shipments away from the territory. What is your outlook for Hong Kong's port and those of the Mainland?As an international maritime centre, Hong Kong's hinterland is the whole Pearl River Delta, as well as other nearby provinces in the Mainland. But Shanghai's hinterland is the Yangtze River area and other neighbouring provinces. So I can't see Shanghai siphoning cargo shipments away from Hong Kong. In my view, Shenzhen Port, will attract some cargo shipments from Hong Kong, but I think Hong Kong still possesses many advantages which Shenzhen will find it impossible to match in the near-future. These include a free-port policy, superior financial services, a sound infrastructure and strong information as well as other services support, and a vessels management centre and ship-owners base. Having said that, it is important to remember that in recent years China's foreign trade has increased sharply, so foreign enterprises in the trade transportation sectors, including ports, are having to transport more and more cargo. It is just like dividing up a cake -- maybe Hong Kong's slice is the same size, or maybe even smaller, but as the size of the cake quickly grows, everyone's slice will be bigger than before. Even though both sides are striving to capture a bigger slice of the market, I believe that Hong Kong and Shenzhen will both find themselves in a 'win-win' situation as trade volumes increase. I understand COSCO is interested in setting up in Taiwan once direct links across the strait are established. How difficult will that be given Evergreen's strong shipping position?This is the common goal for those business entities on both sides of the Taiwan Strait, because, undoubtedly, direct links will minimise the costs of cargo trans-shipments and human resources. COSCO and major Taiwan shipping companies have long maintained business relations in one form or another, and it is our mutually belief that direct links across the strait will benefit the trading and shipping communities. |
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