China’s Third Coast (the Yangtze)

General Overview

The Yangtze River, longest in Asia and third longest in the world, has been an essential artery for the Middle Kingdom for centuries. The headwaters, from the glaciers of the Tibetan plateau, flow over 6,000 km to the mouth of the river and Shanghai. However, in contrast to Chairman Mao Zedong’s devotion for great waterway projects, the last few decades of last century witnessed an almost ambivalent approach to Inland Waterway (IWW) management in China.

Under-funding caused infrastructure and floating equipment to deteriorate badly and the navigable network fell from 172,000 km in 1960 to 123,300 km by 2004. Hydropower dams, an inadequate multi-purpose infrastructure development approach, and a lack of coordination all contributed to the decline.

However, China’s central government has decided to turn this around. Starting with a series of policy commitments and preferential policies, and prompted by straining highway and rail networks, China is hoping to restore its ‘Golden Waterway’ to its former glory.

At present, the trunk line of the Yangtze stretches 2,838 km from Shuifu in Yunnan province to the Yangtze mouth in Shanghai. A major artery, linking western, central and eastern China, the Yangtze is of crucial importance to the Chinese transport network. Indeed, with 25 percent of the country’s enormous population living along the 1,500 mile river basin, the Yangtze is already one of the most heavily utilised waterways in the world.

China’s drive to open up the river is not in small part motivated by a desire to attract foreign investment further inland, thereby stimulating growth in China’s vast hinterland. In recent years western development has lagged woefully behind the more developed eastern seaboard cities and in many ways the government sees the drive to open up the river as pivotal to its ‘Go West’ strategy. Currently, 80 percent of China’s IWW traffic is on the Yangtze, and by 2020 the Yangtze is expected to be a fully integrated part of China’s port network. In addition China hopes to be the world’s perennial top ship building nation by 2015, a goal largely unachievable without the Yangtze River shipyards.

Logistical Overview

China’s policy to generate an economic corridor stretching westward has already led to huge investment in supporting infrastructure winding its way out of the river basin, bringing millions of low cost workers online, opening markets and lower rent property to both foreign and domestic investors. To date, the government has invested more than CNY 850bn (USD 105 bn) on 60 key projects from airports, rail lines, terminals, and pipelines to power stations, and broadband installation in the western region.

As an integral part of this strategy the government has moved quickly to improve conditions on the river. At present the Ministry of Communications is focusing its efforts on dredging, port construction, vessel standardisation, improving the ship lock capacity of the Three Gorges Dam and improving safety and connections between the trunk line and the tributaries. In the meantime efforts are being made to digitise the waterway, modernise traffic control, improve logistics infrastructure at the ports and computerise shipping data collection and management.

Development of the waterway as a logistics artery is currently focusing on development of three strategic hubs to open the river. Namely, Chongqing, Wuhan and Nanjing, with the new Shanghai Yangshan mega-port functioning as the region’s deep-water transhipment point.

This long term central government commitment to the Yangtze is likely to promise a potentially bright future for all three IWW ports. In many ways though the new approach looks like a strategy of picking winners, as each of the IWW ports chosen have records of performance outstripping many other ports on the river. All three of the ports are currently investing and expanding strongly to cement their positions spearheading the project.

With over 100 medium to large scale river ports open to foreign trade straddling the banks of the mighty waterway, and with traditional hurdles to investment lowering, the time may well be ripe for foreign investment to take full advantage of the river.

According to the Ministry of Transport, by the end of 2010 the local expressway network around Chongqing will be 3 times its current size, and Chongqing port is expected to have a throughput capacity of 1.2m TEU. Chongqing is adjacent to 30 waterways of navigable size and there are 100 IWW ports planned, among them fifteen with an annual throughput of 500,000 tonnes and twelve on the main Yangtze trunk. Via the ship lock on the Three Gorges Dam, vessels of up to 10,000 tonnes will be able to reach Chongqing from the coast.

Longtan Port of Nanjing, already the largest inland river port in Asia, is currently working on construction of Stage 2 of Longtan Port Construction Project which is expected to raise container throughput to 1.4m TEU. In addition CNY 60m has been invested to improve and regulate channels linking Nanjing to Wuhu, Wuhu to Anqing, Anqing to Wuhan, Wuhan to Chenglingji and Chenglingji to Yichang. The Regulatory Plan for the Yangtze River System divides the River into 5 sections – Yichang Dabujie-Chenglingji, Chenglingji-Wuhan, Wuhan-Anqing, Anqing-Nanjing and Nanjing-Liuhekou – focusing on 42 identified bottleneck stretches in need of increased regulation. Whilst import volumes grew rapidly at Qingdao, Tianjin, and Ningbo Ports, Shanghai, Shenzhen, and Nanjing Ports slumped badly as a result of the crisis. By the end of 2010 throughput capacity is expected to reach 3m TEU making it the largest comprehensive foreign trade port area on the Yangtze River mainline.

Wuhan port is located on the middle stretches of the Yangtze. North of Guangzhou, east of Chongqing and west of Shanghai, Wuhan is roughly 1000 km equidistant from all three. The present port area is 122.45 square km and last year throughput at the port reached 25m tonnes with container throughput exceeding 250,000 TEU.

Under the current five year plan, Wuhan is in the process of developing all of its main five port areas: Dunkou comprehensive port area, Hanyang container port area, Hankou, which is primarily reserved for passengers, Yangluo container and bulk port area and Zuoling dangerous goods area. Wuhan Port Group is also investing CNY 1.4bn (USD 182m) in 8 major projects. The current level of investment is five times as much as it was during the last five year plan, an amount roughly equal to building another Wuhan Port.

Key Dynamics

  • As development of the Shanghai Shipping Centre accelerates there will mostly likely be a substantial increase in the freight utilisation of the waterway—with volumes increasing in both directions.
  • As China’s energy and raw materials demand rises, there is likely to be increased demand for barge traffic to transport materials to industries adjacent to the river.
  • As developments to the Three Gorges Dam are completed, transit times will reduce and freight rates should lower.
  • Increased logistical access to the region along the banks of the river should lead to an increase in FDI across the regional traversed by the waterway.
  • As increased navigational aids come online, the river will become increasingly accessible to larger vessels and more attractive to international operators.