Why the Beijing government is banning foreign freight operators from its waterways

COSCO doesn’t have to worry about being sunk by foreign competition.
COSCO doesn’t have to worry about being sunk by foreign competition.
Image: AP Photo/Elizabeth Dalziel
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Wei Jaifu, the boss of Beijing government-backed Chinese shipping firm COSCO, just told Bloomberg: “the Chinese economy has seen a turning point in the third quarter, and it is bullish news for the shipping industry.” Wei said he believed the economy will recover because “Premier Wen [Jiabao] said” it would.

That is a good thing to say for a shipping industry boss whose ultimate boss is Premier Wen. But behind the talk, China’s shipping industry is deeply troubled. As Reuters points out here, Chinese shippers and ship builders are suffering from “overcapacity and slowing global trade”.

Business has recovered a bit in recent weeks. The Beijing government launched a round of economic stimulus spending, in August, boosting factory production and helping the shipping business to pick up.  But in a signal that Beijing realizes economic stimulus measures cannot go on forever, it has been quietly and without fanfare taking strong steps to protect its shippers and ship builders from foreign competition.

The authorities cannot ban foreign firms from using China’s international ports. But they can lock overseas operators out of China’s busy inland rivers. And they just have. As Reuters reports, new rules come into effect in China from January 1 that prohibit “foreign companies, financial organisations and individuals from operating waterway transport services”. As Bloomberg explains further, what this means is that non-Chinese shippers are now banned from waterways such as the Yangtze River, which is the world’s busiest waterway for freight.

Meanwhile, the Chinese government is also limiting the ability of global companies to access its international ports where it can. As Caixin explains here the central government has made it difficult for Brazilian metals and mining firm Vale to bring iron ore to China in its new supertankers, named Valemax. (Vale designed the giant vessels so it could transport more iron ore to its major customer from Australia and save costs.) Protectionist measures such as these do not look like the actions of a government that is confident about the future of its shipping industry.