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Shanghai Municipal Government Press Conference Memo (December 7,2006)
8/12/2006 10:56

1.     Shanghai World Expo Website: I have a question. Mr. Chen mentioned just now that Shanghai will basically form the framework of a shipping center by 2010. How will it serve the Shanghai World Expo? Thank you.

Chen Xuyuan: According to the city government¡¯s requirements and the central government¡¯s strategy, Shanghai will basically form the framework of an international shipping center by 2010. The framework includes three aspects. First, Shanghai port will be more open and its function will further improve. Second, the infrastructure of the shipping industry will be more complete and the shipping efficiency will further increase. Third, Shanghai will increase efforts to function as an international shipping hub and will boost the shipping industry¡¯s contribution to the economy. The World Expo and the port belong to two different categories, but they are indispensable to each other. World Expo needs a large amount of cargo flow, people flow and capital flow. The port will provide logistics services, creating advantages for cargo flow. I believe the construction of the shipping center will be helpful to the preparations for the World Expo, as a big modernized port is necessary to the event.

2.     Youth Daily: Since the first phase of the Yangshan port was completed, many citizens have showed interests in a visit to the island. But tourism facilities on the island haven¡¯t developed well. Is there a plan to build any service facilities, such as coffee bars, in the port area?

Gui Mo: The problem you mentioned is understandable, because the whole of the Yangshan Deep-Water Port project has not finished. Now, some sightseeing routes affect our operation. Some officials once said if we could we would find a different route for sightseeing. We are trying. But we cannot stop visitors from Shanghai and Zhejiang Province coming or curb their enthusiasm. So the problem will linger for a while. When we improve the travel routes and service facilities, problems, including serving beverages and coffee, will be solved for certain.

3.     National Business Daily: Could you spell out the influence of disastrous weather on the Yangshan Deep-Water Port during its first-year of operation? How did it affect the port? Did it do what we had expected, and were there any differences? Thank you.

Chen Xuyuan: Since the first phase of the Yangshan port opened, Shanghai International Port (Group) Co has been the operator. Board chairman Gui just now said the first phase has been going well since December 10, last year. It was better than what we expected. Disastrous weather affected the port operation for only 51 hours in the year. The operation in Yangshan was better than that in the Waigaoqiao Wharf. It has proved that Yangshan is the correct location.

4.     Economic Observer: Part of the Yangshan port area belongs to Zhejiang Province. Shanghai has signed an agreement with Zhejiang to rent the area for 50 years. We are wandering if any change will take place in the plan to allot benefits to Zhejiang after the second phase is built, as Yangshan is a strong competitor to Zhejiang¡¯s Ningbo port.

Xu Peixing: The reporter raised a very practical question. At the beginning of the Yangshan port construction, we reached many agreements with Zhejiang on benefits. The agreement still works. We are cooperating closely, and there isn¡¯t any conflict right now.

5.     China Business News: I have several questions. The second phase has been put into use on a trial basis. Have you opened more international routes? Will Shanghai¡¯s container throughput rise to be the world¡¯s second this year from the third? In addition, when will you begin to seek strategic investors for the third phase? Is there a timetable? Or have you already introduced some overseas investors?

Chen Xuyuan: When Yangshan¡¯s first phase opened last year, all European shipping routes were moved to the wharves of the first phase. After one-year operation, ship owners and clients have both considered it a great success. In October, South American routes were also moved to the first phase. The launch of the second phase will bring some adjustments on the city¡¯s international shipping routes. The adjustments will be made to facilitate container transfer between ships and to provide clients with a better logistics service. We may make an adjustment on the routes to east America. As for the second question, we handled 18.08 million TEUs last year, and the figure will definitely exceed 20 million this year. No matter what place we will reach, we keep working. As for the third question about the third phase, board chairman Gui just now said the third phase is under construction. Its operation model is also being studied.

6.     Shanghai Morning Post: I have two questions going to Mr. Gui. The one-year operation of the first phase exceeded its designed capacity. I don¡¯t know how to understand this? Does it mean overload, and will it bring negative impact on the facilities? Secondly, Mr. Gui mentioned the second phase construction met some engineering difficulties. Could you give some details and how did you get over the problems?

Gui Mo: The designed annual capacity of the first phase is 2.2 million TEUs. The result was reached by the Ministry of Communications, based on the national average level. But Shanghai¡¯s efficiency of loading and unloading is higher than the country¡¯s average. The layout and some designs of the port were based on the maximum capacity instead of the designed capacity. We had such experience when we built facilities in the Huangpu River and the Waigaoqiao area. Therefore, we made 3 million TEUs in the first year, despite the designed annual capacity of 2.2 million TEUs. This has proved the building of the deep-water port is very correct decision and our operators are very skilled. In response to the second question, I¡¯m afraid it is too professional to talk about here. For example, under the second phase was soft clay. After consulting experts from all over the country, we replaced about 20 percent of the clay, making it a mixed groundwork. The current steady operation shows the method works.

The construction quality of the second phase is as good as the first phase.

7.     Singapore Lianhe Zaobao: What aspects will you consider while studying the operation model of the third phase? For instance, will you let more overseas companies participate, as only one or two joined in the second phase operation? How many overseas companies have expressed their interests? I know Singapore is interested. How big chances will overseas companies, including Singaporean ones, have? In addition, will any central government officials attend the launch ceremony of the second phase? Last year was Vice Premier Huang Ju. Will he still come this year?

Chen Xuyuan: I am responding the first question. The construction of Yangshan¡¯s third phase is in full swing. It is expected to be built by the end of next year. While studying the plan, we will take several principles into account. The first is that Shanghai will be more open to welcome overseas investors to participate in the third phase operation, especially those globally leading shipping companies and port operators, helping us increase the competitive edge of Shanghai as an international shipping center. The second is that we will prefer those investors who are relevant to port and shipping industries. Many shipping and port companies, as well as other investors, have expressed great interests in the third phase. The companies include Singapore¡¯s PSA. We, of course, welcome overseas investors, and we will choose first-rate partners to cooperate.

Jiao Yang: Media are welcome to attend the launch ceremony of Yangshan¡¯s second phase. As for the second question, then you will get the answer.

8.     China Securities Journal: I¡¯d like to ask Mr. Chen two questions. Since Shanghai International Port (Group) Co floated shares last month, its performance has been very bullish. Other Chinese port stocks also followed SIPG, seeing a rise. How do you like the stock price? Is it reasonable, considering the real value? The second question is about the company¡¯s internationalization strategy. SIPG has launched a plan to purchase some overseas wharves. Could you spell out the plan? Thank you.

Chen Xuyuan: Great thanks to investors for their attention to SIPG. We posted a statement to remind a risk in today¡¯s newspaper, as the stock price rose to a daily limit for three consecutive days. The price continues rising today. That¡¯s why I said the 3.67 yuan issuance price didn¡¯t match Shanghai¡¯s status as one of the biggest ports in the world. But I never predict when the stock price will rise, or comment if the price is high or low. Let investors make judgment when the price is reasonable. This is my answer to the first question.

In September this year, we signed a framework agreement with A.P. Moller-Maersk in Belgium to form a joint venture in the first half of next year. Shanghai port came up with three strategies, and the internationalization is one of the three. Our group plans to form an internationalization framework in 10 years. Certainly, Shanghai will seize any cooperation opportunities in future. Thank you.

9.     Shanghai 21st Century Business Herald: Could you talk about Yangshan¡¯s contribution to Shanghai¡¯s international transfer business? And I have some materials, saying many shipping companies want to open new routes and invest in Shanghai. Could you give more details?

Chen Xuyuan: The opening of the first phase of the Yangshan port is a great support to the international operation of Shanghai port. Because of water depth, the Waigaoqiao port area couldn¡¯t carry out international transfer effectively in the past. It is a key point to increase international transfer in Yangshan. We expect to transfer 600,000 international TEUs this year, an increase of about 200,000 TEUs from last year. As it is the first-year operation of the Yangshan port, it will take time to incubate the market of international transfer. Yangshan¡¯s international transfer throughput has surpassed the Waigaoqiao¡¯s. Yangshan¡¯s contribution will become more prominent in the next several years. I think international transfer volume will reach about 40 percent of the total in Yangshan next year. As for the second question, many shipping and port companies want to participate in the operation of the third phase. They include PSA, a Dubai wharf investment company and top 10 shipping companies. Thank you.

10. Hong Kong Oriental Daily News: The spokesperson team yesterday confirmed Zhou Zhengyi was detained. I¡¯d like to ask why he was put into custody, and if he will be extradited to Hong Kong?

Jiao Yang: Our spokesperson team yesterday responded to a call from Hong Kong. On this issue, I have no more to add.

11. Hong Kong South China Morning Post: Shanghai plans to boost its throughput to 15 million TEUs by 2012. What level will this figure stand for at that time? When will Shanghai become the world¡¯s largest port? And could you talk about Yangshan¡¯s advantages and disadvantages, compared with Hong Kong, Singapore and some South Korean ports, and also the competition with some new domestic ports, such as Tianjin? Thank you.

Chen Xuyuan: You might mistake the figure. 15 million TEUs has been Shanghai¡¯s history. I said Shanghai¡¯s throughput will surpass 20 million TEUs this year. We predict Shanghai will handle more than 30 million TEUs in 2010. But I cannot predict where the figure will rank, as other ports in the world are also developing. I think the Yangshan Deep-Water Port will develop along with nearby ports. I can tell you two figures. Shanghai¡¯s port throughput will grow about 20 percent this year from last year. Shanghai¡¯s growth has also brought along nearby ports. Ningbo¡¯s port throughput is expected to rise 40 percent this year. It wasn¡¯t disadvantaged by the development in Shanghai port. Nearby ports can benefit from Shanghai¡¯s growing function as a shipping center. Ningbo itself also has such a function. And no matter Lianyungang, Singapore or Busan, competition between ports is quite normal. The port industry is still in its fast-growth period, so seeking development in competition and seeking cooperation in competition will be a mainstream in the port industry over the next several years.