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Shipping Review
Zhen Hong: institutional issues impede port development - an example of Lianyungang
Date:2014-07-30 Readers:

According to Zhen Hong, Secretary General of SISI, institutional issues impede port development.


In terms of port transformation and development, there are three aspects to grasping the opportunity of the “one belt and one road”, namely the new trend of port transformation and upgrade, the new opportunities for Lianyungang’s development, and the innovation of Lianyungang.


 Port transformation and upgrade involves many respects. The first is the change of port network layout for the purpose of win-win cooperation, the second is the effect of integrated logistics, and the third is green eco-port.


The new trend of global port development shows that there will be less single ports while port network will be more popular, and the network operators represent the trend of port resources. Instead of limiting their resource allocation to any one region, they pursue global development on the network, and such resource combination meets the demand in the age of supply chain. The expansion of port operators results in the concentration of ports in a handful of operators, and global allocation of port resources is the general trend. China is a hot spot for investment from the top-ranking operators, many of which have reached into Chinese ports.


Meanwhile, China has done an excellent job with port hinterland, and Lianyungang has rich experience in that regard. Inland port means an inland location with port functions such as port service, shipping related institutions and some outlets, and that realizes its own profits. Such an extension of inland network is actually an important reflection of port in the supply chain. Therefore, the “one belt and one road” that we talk about now, namely the Silk Road Economic Belt and the 21st Century Maritime Silk Road, provide an excellent opportunity for Lianyungang to build its port network.


The second point is the supply chain of port management. Ports are not isolated but should be connected with the upstream and downstream to provide complete services. The production supply chain, namely manufacturing, for instance, has a complete supply chain from upstream to downstream, including the transfer of products. Logistics, on the other hand, refer to the delivery of products from the upstream to the downstream by multiple organizations or enterprises. When logistics and product supply chain are integrated from upstream to downstream, it’s called the supply of logistic services, which, when centered on port, is called the supply chain of port services. Its development direction is coordination and cooperation both in the upstream and the downstream, including delivery for cargo owners, contact with ships, and cooperation with railway companies, the basis for which is information sharing among all members along the supply chain. I’ll give a simple example. When cargoes arrive at a port, the containers need to be separated to be delivered to different destinations. We can carry out this work at a specific port according to the final clients, such as cargoes for the US. This is an important business in the Shanghai FTZ now, but it’s rarely done in China, yet this typical supply chain approach can save a lot of cost on the chain.


The third point is park-port interaction, so that the parks close to the port area can develop in an integrated way. The problem is that park-port interaction is quite difficult in China now because the port area has its own committee, and industrial park and logistic park are administered by different departments, so many works are not carried out in cooperation. Such cooperation would have boosted development, but now there is no such interaction, so the port efficiency isn’t fully tapped. Many ports are faced with this problem, including Lianyungang. Institutional issues have impeded port development. There is a port in Germany that is developed by the local government. It is planned in such a way that one department is set up to realize park-port interaction. When it came to Shanghai for business and capital attraction, it not only involved port investment but also logistic park and industrial park.


The fourth point is green and ecological development, which is an important new trend. It’s a concept about the harmonious coexistence between people and nature, whereby economic benefits can be improved without damaging the environment, and both environmental requirements and port development are taken into consideration. The basic idea is to maximize the utilization rate of port resources and accomplish greater tasks with limited land or other resources. Meanwhile, damage to the environment around the port shall be minimized, such as finding an intensive way of land use. There is room for improvement in this respect, but Lianyungang has done very well in environmental friendliness.


The last point is smart port, which involves technical aspects such as IT application, automation and network development, as well as intelligent application and human thinking. Smart port is more than just an emerging technology, but a new concept. It connects all links from the perspective of the overall port supply chain and conducts comprehensive innovation in this chain. In general, smart port applies advanced automation and other technologies to form a network, which has great potential in the future although we can hardly find a port totally meeting that concept yet.


 Next I’ll talk about the development under new circumstances. China will work with other countries to jointly push the development of the Silk Road Economic Belt. Premier Li Keqiang said at Shanghai Cooperation Organization (SCO) that China is willing to provide logistic services on the New Eurasian Continental Bridge. Such initiative put forth by a top state leader is a rare opportunity for Lianyungang’s development.


How to seize this opportunity? What opportunities will Lianyungang face? What I just mentioned provides great lessons learnt for Lianyungang’s development for generations to come. In addition, it is also supported by four strategic plans for Jiangsu, for the Yangtze River Delta and for the eastern, central and western regions. Meanwhile, Lianyungang is faced with new situations in port development. The first is the appearance of super shipping alliances, which is aimed to face the outcomes together and deal with more extensive shipping development with larger-scale operation. This is necessary for Lianyungang, which is building a port of 300,000 tons, so it must be able to meet the route demand. There is also the FTZ, which is misunderstood by many. There are a lot of people applying for free trade port area, which may be different from the Shanghai FTZ because the latter is a pilot experimental zone. If it turns out successful, what’s done there can be done in Lianyungang too. So we must know that we should work hard to apply for the free trade port area. Don’t mistake it as something that’s forced on you. This is promotable in 2014, and it’s very important for Lianyungang. Located in the Yangtze River Delta, are you well prepared when these opportunities come to you?

The second is some guidance on port transformation and upgrade. This brings a great opportunity and plays a positive role in Lianyungang’s positioning and development as it is being re-planned. Lianyungang is faced with both opportunities and challenges in the future. 


 Lianyungang has a sound foundation to seize those opportunities. SISI has developed a global port transportation development index that is calculated with throughput growth rate and other indicators. Lianyungang ranks 12th in the list, indicating solid growing momentum, and it has wide route coverage too although still a long way from big ports. Nevertheless, such a foundation is very important and constitutes the ingredient of the network we mentioned earlier. To seize the opportunities, namely the overlapping of several strategies, an advantageous transportation hub is required, and Lianyungang’s multiple transportation modes present a good way of integration.


 On the other hand, port transformation has come to a critical phase, which requires Lianyungang to strengthen the cooperation with Japan, South Korea and Central Asia and build related industrial zones. At last, I’ll talk about Lianyungang’s innovation and development. Having invested several hundreds of millions in recent years, Lianyungang has rapidly improved its infrastructure, significantly enhanced its capability, and continuously expanded its routes, providing and built msolid technical conditions for large ships. As to park-port interaction, Lianyungang has experience in that regard too. Apart from regular industrial parks, port-centered ones, especially the China-Kazakhstan logistic park, are also well conditioned for integration with Lianyungang port. Moreover, Lianyungang has actively fostered the network any dry ports and developed port-centered areas. Such an industrial layout has laid a solid foundation and created the necessary elements in many places.


In sum, Lianyungang cannot rely on the traditional mode to deal with changes in the age of globalization. It is in urgent need for transformation and upgrade, and shall seek a realistic development path in light of the global law of port development and the characteristics of port development today on the basis of its own actual conditions. Merging into the supply chain management is both an opportunity and the direction for Lianyungang’s development.

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