Tag Archives: China

BRAVE NEW WORLD | Dangers as the Vale-China row escalates

From Tradewinds, 2012.05.11

Harsh lessons need to be learned as China’s anger escalated this week over the fleet of 400,000-dwt “Valemax” vessels being built and now operated by the Brazilian miner.

In an intriguing twist to an already extended saga, which could be a parable for our times, Cosco has rounded on Vale for allegedly boycotting its dry-bulk fleet. The blacklisting is in apparent retaliation for what Brazil believes is Cosco’s – and China’s – discrimination against its new fleet of super-bulkers.

It pits one of the world’s biggest commodities producers against a leading shipowner and operator, which just happens to be a state-owned arm of the world’s largest importer and second-biggest economy. Put so bluntly, it is hard to overstate its potential significance.

Cosco president Ma Zehua has threatened to complain to China’s ministry of commerce over what he believes is Vale’s retaliation for government lobbying he says has not happened.

Vale has yet to confirm the boycott but has apparently shunned chartering Cosco ships for around two months, even at times taking higher-priced alternatives.

Vale has already seen some of the 10 Valemax vessels delivered refused entry to Chinese ports on thinly argued “safety” grounds, although some independent experts acknowledge the risks of such large ships in China’s shallow coastal waters.

Vale has set up a transhipment point in the Philippines in an expensive solution that clearly undermines the potential savings of building and operating such giants in the first place.

In response, Cosco’s Ma continues to peddle the fear of “a growing number of [future] safety problems” without any hint of the specific issues, let alone any solutions — which is rather ironic as 20 of the current proposed fleet of 35 Valemaxes are being built at Chinese yards.

Attitudes on both sides appear by turns authoritarian, naive and now increasingly embittered. It is not a pleasant picture with worrying implications for all.

The central message the outside world needs to understand is that commerce and state remain firmly intertwined in modern China, despite apparent modernisation. Until those links are fully broken, it is wise to presume that the two remain cyphers for the other.

Further, no one should underestimate China’s desire to take complete control of its supply chain. If that means breaking the power and influence of any supplier — either of commodities or ships — then that’s what it will do.

It is another chapter in the story of China remodelling the world to its own needs and expectations. China believes the choice is clear: you are either with it or against it.

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Shipping industry to face ‘relatively long’ decline

By Zhou Siyu (China Daily | 2011.11.04)

BO’AO, Hainan – A lack of political consensus to achieve balanced global economic growth is making 2011 “the most painful” year for the already troubled shipping industry, said Wei Jiafu, chairman of China Ocean Shipping (Group) Co, China’s largest State-owned shipping conglomerate.

This year has brought gloomy prospects for world economic recovery, as developed economies struggle with debt woes and high unemployment, while emerging markets are battling high inflation.

The global trade volume is still growing. But demand in the United States and Europe is expected to be low, which is likely to bring down the growth rate in the market.

The Baltic Dry Index, a benchmark for commodity shipping costs, has registered a 27 percent decline in the past year.

“There is still no political willingness to be seen (among world leaders) in addressing these problems,” Wei said.

“This is making the year even more difficult (for the shipping industry) than during the global financial recession. Governments around the world responded immediately to save the markets during the crisis, but now they are making different policies serving their own interests,” he added.

Wei was speaking at the World Shipping (China) Summit in Bo’ao, in South China’s Hainan province, on Thursday. His comments came just days after Greece announced it would hold a referendum on whether to accept a bailout plan put forth by European leaders.

Dong Tao, managing director and chief regional economist for Asia excluding Japan at Credit Suisse SA, said the debt crisis in Europe is likely to worsen, affecting the banking system in Europe.

“The bailout plan needs to focus on stabilizing the market and improving financial structures in the debt-stricken countries,” he said. “For the next few years, consumption will decline globally, leading to more risks for the financial sector.”

The shipping industry also faces other problems, such as overcapacity and surging oil costs, said industry leaders and officials.

“Overcapacity in the industry can be traced back to 2002, when the business was booming and shipping companies won lots of orders,” Transport Minister Li Shenglin said at the summit.

The shipping industry is being pressured by the excessive tonnage and depressed freight rates and the current market downturn might last for a “relatively long” period, he said.

“We exert moderate and orderly control in putting new container and dry-bulk ships into the market,” the minister added.

But the market will eventually recover after a decline of several years, and China’s robust growth in economy and demand may serve as a major engine, said analysts and companies.

“China is gradually tapping into its domestic consumption. The country’s deepening process of urbanization is good news for the global market, especially bulk commodities,” said Tao from Credit Suisse.

Under the 12th Five-Year Plan (2010-2015), China will focus on “upgrading its economic structure and securing quality growth”, and will encourage companies to move up the value chain.

“From a container business perspective, this means less business in the next few years compared with the situation if China were simply a world exporter,” said Soren Karas, vice-president of Maersk Line North Asia Region, a division of Copenhagen-based AP Moller-Maersk Group, the world’s largest shipping company by capacity.

“Although China’s trade growth may not be as radical as a few years ago, it will remain very robust,” he said. “We are very positive about China’s economic growth.”

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The Guardian: Brazil’s huge new port highlights China’s drive into South America

Investments guarantee Chinese access to soy, oil and other badly needed resources

Blades slicing through the morning heat, the helicopter rose from the tarmac and swept into a cobalt sky, high above Rio’s Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic rainforest and fishing boats that bobbed lazily in the ocean below. Then finally, 80 minutes on, the destination came into view: a gigantic concrete pier that juts nearly two miles out into the South Atlantic and boasts an unusual nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up by dozens of 38-tonne pillars, this vast concrete structure is part of the Superporto do Acu, a £1.6bn port and industrial complex that is being erected on the Rio coastline, on an area equivalent to 12,000 football pitches.

Reputedly the largest industrial port complex of its type in the world, Açu is also one of the most visible symbols of China’s rapidly accelerating drive into Brazil and South America as it looks to guarantee access to much-needed natural resources and bolster its support base in the developing world.

When Acu opens for business in 2012, its 10-berth pier will play host to a globetrotting armada of cargo ships, among them the 380-metre long Chinamax – the largest vessel of its type, capable of ferrying 400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of barrels of oil are expected to pass along the “Highway” each year on their way east, where they will alleviate China’s seemingly unquenchable thirst for natural resources.

“This project marks a new phase in relations between Brazil and China,” Rio’s economic development secretary, Julio Bueno, said during the recent visit of about 100 Chinese businessmen to the port complex, which is being built by the Brazilian logistics company LLX and should receive billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America, is part of China’s “going out strategy” – an economic and, some say, diplomatic push for Chinese companies, many of them state-run, to invest abroad, snapping up access to minerals, energy and food by pouring the country’s colossal foreign reserves into overseas companies and projects.

China is expected to overtake Japan as the world’s second largest economy this year and may already be the world’s greatest energy consumer. Now it is set to become Brazil’s top foreign investor, with its companies plowing $20bn into the country in the first six months of 2010, compared with $83m in 2009. A recent study by Deloitte predicted that Chinese investments in Brazil could hit an average of about $40bn a year between now and 2014, with companies throwing money at sectors ranging from telecommunications, infrastructure and farming, to oil, biofuels, natural gas, mining and steel manufacturing.

“Relations with Brazil in all areas have entered a new era,” Qiu Xiaoqi, China’s ambassador in Brazil, recently told the state news agency Xinhua.

The surge in China’s South American spending is not just a Brazilian phenomenon. Ecuador has already signed around $5bn of bilateral deals with China this year, including $1.7bn to help build a hydro-electric dam and $1bn investments for oil exploration and infrastructure projects. That compared with Chinese investment of just $56m in 2009.

Chinese companies have sunk $1.4bn into mining operations in Peru this year, while in April Hugo Chávez announced that the Chinese, already major sponsors of Venezuelan oil exploration, had agreed to open a $20bn credit-line for the “Bolivarian revolution”.

Michael Klare, author of Rising Powers, Shrinking Planet, a book about the growing tussle for global resources, described today’s China as “the shopaholic of planet Earth”.

“The Chinese authorities understand that to sustain the country’s continued growth, they will have to ensure that its industries are provided with adequate supplies of energy, minerals, and other basic raw materials,” he said. But the “going out” strategy went far beyond business transactions, he added.

“They seek to fashion a multipolar world in which no single power – read the United States – plays an overwhelmingly dominant role. To this end, they seek to bolster ties with rising regional powers like Brazil and South Africa.”

In Sao Joao da Barra, the city nearest to Acu and one of Rio state’s poorest regions, the Chinese presence is being felt even before Brazil’s Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water and Mandarin interpreters for visiting Chinese dignitaries. Sao Joao da Barra’s town hall, meanwhile, has started offering free Mandarin lessons to locals interested in working with the wave of Chinese guests that is anticipated.

“You should see a 10-year-old boy saying, ‘I understand … the Chinese are coming and when the Chinese industries come I want to work for them and if I speak Mandarin I’ll have a competitive advantage on the others’,” beamed Eike Batista, the billionaire entrepreneur behind the superport and one of the most vocal cheerleaders for Chinese advances into Brazil. “[It is] wonderful.”

Leonardo Gadelha, LLX’s CFO, said during a recent tour of the port: “This is part of a Chinese strategy of going to the market more and more. They are already a very considerable presence in Africa and we are now going through this moment in Brazil.”

The Highway to China lay “in the middle” of this blossoming relationship with China, he said, adding: “We are betting that … this will continue growing.”

Not all Brazilians, or indeed western governments, share such enthusiasm.

“There are many in Washington who worry about China’s growing presence in Africa and Latin America and claim that this poses a threat to America’s long-term strategic interests,” said Klare, noting, however, that the US’ “fixation” with Afghanistan and the war on terror meant there had been virtually no reaction.

In Brazil meanwhile China’s arrival has prompted cries of neo-colonialism. “The Chinese have bought Africa and now they are trying to buy Brazil,” the prominent economist Antônio Delfim Netto complained in a recent interview with the Estado de Sao Paulo newspaper, warning that it was a “grave mistake” to allow a foreign state to buy “land, minerals [and] natural resources” from another sovereign power.

Batista, Brazil’s richest man, rejected such criticism, saying: “The association between Brazil and China is a two-way highway.” Chinese companies such as Wuhan Iron and Steel had committed to helping build a $5bn steel mill at the port complex, rather than always shipping out primary resources to process at home, he pointed out. “You want to get three tonnes of raw iron ore, [so] produce one tonne of steel in Brazil,” he said. “That philosophy is sinking in and is great for both sides.”

Neither would Chinese companies be allowed to flood the complex with hordes of foreign workers as had happened in Africa, said Gadelha, the CFO.

“If it was up to them they would bring lots of Chinese workers as they are used to doing,” he admitted. “[But] Brazil’s legislation is very strict in this sense.”

Batista suggested that rather than complaining about China’s courtship of Brazil, western powers should urge their own companies to pay more attention to the region themselves.

“In the last 15 years or so the [American and European] CEOs have stopped coming here and that is why they are a little bit behind,” he said. “We are pushing European companies and saying: ‘You’re not really understanding what is happening in Brazil’.”

“Don’t put Brazil in the same bag as our neighbours,” he added. “We are not Central America. We are not Venezuela. We are not Argentina.”

Source: The Guardian

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EU: Chinese goods most dangerous to consumers

AN EC STUDY has revealed that Chinese products topped the list of dangerous consumer exports, IHS Global Insight reported today.

Products manufactured in China, most of which reach Europe via ship, accounted for more than half of the dangerous products last year, a rise of 7% from the year before. Toys, clothing, textiles, and motor vehicles were the chief culprits, accounting for 60% of alerts issued last year, Global Insight said.

The EU’s consumer panel stressed that progress had been made on these concerns, but it added that EU administrators would stress during a visit to China in June that dangerous products must be blocked at source.

The study, published yesterday, based its findings on the EU’s rapid alert system, which was set up to ensure that information about such products is quickly relayed to national authorities. Such notifications have more than quadrupled since 2004.

The increased number of cases reported indicates improved transparency, Global Insight commented, but many Chinese imports to the EU still do not meet international health and safety standards.


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GROUNDING ON THE REEF | Reef safety in perspective

From Lloyd’s List
THE grounding of the Shen Neng 1 has become a metaphor for many things, including: the developing world and its hunger for commodities; the new dominance of China in world trade; our global disregard for natural resources in the face of economic development; and the new global capitalism versus the need to preserve our world.

The common thread running through all of this is China and the implicit demands it is placing on nations that benefit from trading with it. But while these broad-brush ideas are satisfying, sometimes we neglect the details, where the Devil resides.

Take the name Cosco, which has appeared in almost all the dispatches about the Shen Neng 1 since it was grounded 10 days ago. The ship is owned by Shenzhen Energy Transport. Cosco’s only affiliation is part ownership in the company that manages the vessel — that is, not an owner at all.

But the symbolic neatness of having Cosco be the erring party was too sweet. Cosco, a state-owned giant, is a corollary for Chinese shipping power. Journalists had time to sort out the details, but why bother with inconvenient fact when hamfisted metaphor will do?

A little perspective is needed, too, on the charges of recklessness in navigation, which are still under investigation. Whatever the outcome, it was one vessel in one particular circumstance, not a symbol of universal disregard or imperilment by China — which has since apologised — of a natural wonder.

Australia, laudably, understands the value and beauty of the Great Barrier Reef, and its citizens treasure this resource. But the reef itself has long been vulnerable to problems hampering pilotage. The piloting system was described by Australasian Marine Pilots Institute president Peter Liley as a flawed model.

The model was introduced in 1993 during a time, according to Capt Liley, “when economic rationalism was in its heyday and competition was thought to be a panacea to all our ills”. But the competitive structure that evolved does not lend itself to transparency, supervision or control, nor does it promote a culture of safety.

Truly protecting the reef will involve a considered look at all the problems, and less reliance on easy finger pointing.


I could not agree more. It was time someone came forward and said, “do not feed the hype, please.”

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China growth defies recession

From FAIRPLAY, Jan 21 2010

CHINA today posted a stunning 10.7% GDP growth figure for the fourth quarter of 2009, as well as a more than healthy 8.7% overall increase for the recession-racked year.

“China’s economy gained momentum in December,” said the National Bureau of Statistics, which pointed out that GDP growth hit the target for 2009 despite the global recession.

GDP of the world’s third-largest economy tumbled to 6.1% in the first quarter, improved to 7.9% in the second and rose to 8.9% in the third quarter.

Industrial output rose 11% year on year in 2009, though inflation rose 1.9% in December, prompting Beijing to curb lending and rein in a loose monetary policy, the official People’s Daily Online reported.

China’s growth is good news for shipping. Only yesterday Joseph Tan, chief economist for Asia at Credit Suisse, said in Singapore that the Baltic Dry Index will average 3,500 for H1 2010 on the back of firm iron ore trade and contract renegotiations involving China and Australia.

Tan, who was addressing the Singapore Shipping Association, was also close to the mark when he estimated that China’s GDP growth for 2009 would be 8.5%. Credit Suisse has forecast China GDP to grow by 9.5% during 2010.

There was a slight discrepancy in the centrally controlled Chinese media: the China Daily quoted the statistics bureau as attributing the 10.7% growth for the entire fourth quarter, while the People’s Daily just said double-digit growth was achieved in December 2009.

China’s economic rally was made possible through part-utilisation of a 4 trillion yuan fiscal stimulus package (11% of GDP) to prop up infrastructure spending and urban and rural incomes.

Source: http://www.fairplay.co.uk/secure/display.aspx?articlename=dn0020100121000001

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