China Plans to Modernise Shipping Industry: Shares Jump

Maritime Activity Reports, Inc.

September 3, 2014

China published a set of guidelines to support and develop its shipping industry on Wednesday, sending shares in shipping firms such as China COSCO and China Shipping higher.

The world's biggest trading nation is focusing on the shipping industry as it looks to secure its supply chains and grows more assertive over territorial disputes in the South China Sea, unnerving neighbours such as Vietnam and Japan.

China will introduce tax and other regulatory reforms while pushing shipping firms to upgrade and modernise their fleets to build an efficient, safe and environmentally friendly shipping system by 2020, the State Council, China's cabinet, said in a statement published on its website.

"Shipping is a key component in economic development and plays an important role in protecting a country's maritime rights and economy, in promoting exports and industrial development," it said.

The government would also encourage firms to retire vessels early, reducing supply, and develop shipping centres like Shanghai and Dalian to compete eventually with the likes of London in shipping services.

Shares in state-backed China Shipping were up 6.8 percent at 0440 GMT, while Hong Kong-listed shares in China COSCO were 1.2 percent higher. China International Marine Containers Group Ltd was trading 7.6 percent higher.

Barclays analyst Jon Windham said the sector - weighed down by over-capacity after too many ships were ordered before the global financial crisis - was sensitive to any good news even though the government's announcement lacked details. "There's some potential that there's going to be some policy support, likely in the form of some tax policy," he said.

While foreign firms such as Denmark's A.P. Moller Maersk have managed to remain profitable by cutting back on costs, China COSCO and China Shipping have suffered heavy losses attributed to the poor trading environment.

China's shipping industry, comprised of more than 240 firms, carried only a quarter of the country's trade and lagged behind other nations in terms of services and crew size, deputy transport minister He Jianzhong told reporters at a briefing in Beijing.

He said shipping firms should improve their corporate structure and costs, and aim to achieve scale to boost their competitiveness.

By Brenda Goh

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