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China's International Freight Industry - Innovation in the Face of Slowdown

The global economic downturn is leading to decreases in the amount of international freight. In China, this is acting as a spur to development and innovation within the container ports industry, as the various ports respond to declining volumes. The government in China has taken a robust and proactive response to the economic crisis and has put in place a wide-reaching strategy to safeguard its international trade and maintain the attractiveness of the China import sector.
 
2008 marked the end of China's run of double digit growth in international freight. Amongst  the 'Top Five' ports in China, three ports saw only single digit increases in throughput in the last year. Shenzhen experienced the lowest percentage increase with  only 1.5% growth in freight transport throughput in 2008. Although Shenzhen is still the second most important port in China in terms of overall level of traffic, this is a situation that has caused port operators to launch some new strategies aimed at maintaining their share of the freight forwarding market and helping each and every freight company.

For example, Shenzhen port operators are now targeting domestic container boxes that until now have been mainly handled at nearby Nansha, which is also under the jurisdiction of Shenzhen Port.This is a marked shift in the port's freight transport marketing strategy.

Meanwhile, another innovative development can be seen from another major player in the freight forwarding world in China - Yantian International Container Terminals. They are based in eastern Shenzhen and alone accounted for a staggering 45% of the city's freight transport throughput last year. They have now started feeder services, in association with Sinotrans Guangdong, to and from smaller ports in the Pearl River Delta where many manufacturers needing freight services are based. In so doing, they are trying to replicate the succesful strategy employed by rival port Guangzhou, which has recently established a shuttle barge service in the Pearl River Delta, helping shipping companies to transport boxes from second and third tier ports at very low cost. Freight transport of domestic box traffic made up 70% of Guangzhou's volumes last year. The strategy appears to have been a success as Guangzhou showed an overall increase of 19% in 2008 compared with 2007, so it is little wonder that other ports are now seeking to learn lessons from its innovation and adopt a similar strategy to stimulate the freight services market in China.
The most important port for international freight in China remains Shanghai. Shanghai accounts for over 27 million TEU of traffic in 2008. Although volume growth slowed in 2008 in line with the decline in international trade and the China import sector, growth of throughput was still comfortable at 7%. Nevertheless, the slowdown in growth rate has prompted another innovative scheme from this giant in the freight services stratosphere. Together with Qingdao, Shanghai Port has launched a scheme offering free storage to freight forwarders for their empty boxes, as well as special discounts for shipping companies on handling empty boxes.

The reason that this is a useful scheme for the ports is that empty boxes are counted within the throughput figures for the port. Discounts are offered to the shipping company for their empty box storage according to their monthly container volumes. Free storage is offered to freight companies with more than 30,000 TEU of imported empty boxes each month, whereas discounts are offered to those with smaller or erratic throughputs. The scheme has been well received by shipping companies.

These developments demonstrate the innovative and nimble approach of the freight forwarding industry in China. Despite slowing growth in 2008, it is worth noting that all the top 10 Chinese container ports still showed growth in throughput. Indeed, Lianyungang showed astounding growth of over 48% year on year. Those ports that experienced a slowdown, such as Shanghai and Shenzhen, have responded to the challenge by creating fresh strategies and demonstrated that innovation is still alive and kicking in the freight services industry in China. 

About the Author

Stephen Willis is Managing Director of a UK based freight company RW Freight Servicesestablished in 1971 and operating worldwide freight forwarding services including specialist services for UK Importers from China