Asia Logistics Wrap

A Lesson in Managing Relational Architecture for Supply Chains in China

Relational Architecture

"the appropriate linkage between a supplier, the organization and its customers for maximum benefit; includes internal supply matter relationships throughout the organization."

If you haven't ever read the Silk Road International Blog, today is the day to start. The posts there consistently provide great insight into on-the-ground business in China. Earlier this week the blog's author, David Dayton, wrote extensively on the disconnect between Chinese suppliers and Western buyers. The post delves into their relationship and in my mind provides a lesson on managing relational architecture in supply chains that traverse China. Bob Ferrari of the Supply Chain Matters blog does a nice job of summarizing David's key points:

"You will note that this blog posting points to six deep ethical differences between Chinese suppliers and western buyers:

1. The Chinese supplier wants to know first and foremost who you are to determine first and foremost if they are going to be paid on a timely basis.
2. Westerners forget that the West has, in general, been pretty nasty to the Chinese for hundreds of years. The Chinese do not forget.
3. Business is about getting you, the buyer, to sign agreements and pay deposits. Promising the moon and figuring out how to get it to you comes later.
4. Chinese suppliers have their own interest in mind first and foremost, and no one knows what’s around the corner 3, 6, or 12 months from now.  The resultant attitude is "get it now while the getting is good."
5. The current world economic crisis implies a growing sense of desperation in China.
6. There is a completely different sense of what is right and what is wrong. While Western culture is guilt-based, driven by a spirit of laws and doing the right thing, China is shame-based, meaning that getting caught and the resultant public humiliation is the definition of what can be considered wrong."

Basically, I get the sense from these that the Chinese are currently "deal-focused" while willing to sacrifice quality in supply chain execution to maintain the deal. The pitfall for Western buyers is in thinking a solid deal will result in solid execution by the Chinese counterpart, and so the best approach is to treat them separately and follow several of the tips illustrated by David in his post. In the end, the goal is to make sure partners mutually understand where each other fits in supporting your supply chain architectures.  Based on this, possible performance gaps--say a Chinese emphasis on financial architecture (i.e. how they get paid) vs. a Western emphasis on innovational architecture (i.e. execution quality)--can be identified in advance and shored up early on.

Rough Waters for China's Shipbuilding Industry

China Law Blog has posted in parts one and two on the 2008 Maritime Conference in Wuhan, China, where Dan's colleague Steve Dickinson was attending. Since shipbuilding is a key industry in making the world's supply chains go 'round, there is some solid insight to take away from these posts. The first post provides the following highlights:

"The presenters all agreed on the following. The downturn in shipping is having a profoundly negative effect on all segments of China's maritime industry.

• Shipbuilders are finding that their shipbuilding contracts are being extensively breached. Since shipbuilders in China are mostly new companies, they are heavily in debt. These breaches threaten the life of the entire shipbuilding industry in China. 
• Vessel owners are finding that charter parties are refusing to pay charter payments. Some charter parties are demanding revisions to charter agreements. In more extreme cases, the charter parties are simply abandoning vessels in mid-voyage. [Editor's note: charter party agreements are essentially agreements to rent out a ship] 

Shippers are finding that their customers are refusing to honor long term shipping agreements and are demanding extreme reductions in shipping rates.

• Ports are finding their volumes rapidly decreasing. This is an especially serious problem with smaller and newer ports. It is also a problem with ports in the middle of ambitious expansion plans."

Read the rest for some additional evidence of how companies are dealing with the collection of debts as companies lose business or fall out of business completely during this financial crisis. This all strikes at the heart of a supply chain's financial architecture. Because the funds generated from this architecture is essentially what maintains every other architecture--physical, informational, relational, innovational, and human--companies must decide which aspects of their business will have to take the hit and which receive scarce funds. Of course, in extreme situations the whole supply chain can collapse.

In the second post, Dan highlights a Q&A session where Steve acted as moderator:

"In my role as moderator, I then posed the following questions/comments to the speakers and to the audience:

"Steve: The shut down in bank financing will have a severe impact on the Chinese shipbuidling/shiprepair industry, right? Answer: Correct.

"Steve: Historically, in the U.S. and Europe, when worldwide bank financing dried up, local banks usually stepped in to provide financing. Are Chinese banks stepping in to fill the financing gap? Answer: No, they are not. Chinese banks have no appetite for risky loans right now. Further, they do not understand international ship financing and they have no real desire to learn.

"Steve: It appears China's shipbuilding industry is taking a passive approach to both the contract default and financing issues. Answer: Yes.

"Steve: It therefore appears China's ship building/ship repair industry will be heavily impacted over the next 18 months, with few companies surviving. Answer: The audience did not answer. The presenters agreed that this seems to be a reasonable conclusion. These Singapore and Hong Kong lawyers are therefore turning their efforts towards cementing their relations with Korean and other national shipbuilders they think will survive the current situation. Even during private discussions after the formal presentation, the Chinese company representatives remained silent about their plans for dealing with the key issues facing their industry.

"It is not clear to me whether the Chinese industry will wake up to the situation in time to resolve the critical issues facing the industry. In the interim, however, it appears there will be some very good deals on new vessels from Chinese yards as customers begin to abandon existing contracts. I also think there will be very good deals on Chinese shipyards, many of which are state of the art. It is also possible, of course, that China will institute a stimulus package that will save at least some of its shipyards."

It seems the financial crisis will last beyond when many companies will need the economy to pick back up to survive; thus, as Steve mentions above, there is likely to be some consolidation of the existing capacity with perhaps some of the strongest players in the shipbuilding market looking for deals on any failing shipyards.

China's Bailout: Accelerating Logistics Infrastructure Investment

The Wall Street Journal today highlights a key part of China's announced bailout: accelerated investment in roads, bridges, and other related infrastructure:

"Much of the $586 billion stimulus package China unveiled this week will go toward building highways, railroads and airports. Already, according to official estimates, infrastructure spending had been increasing by an average of 20% annually for the past 30 years -- a tried and true engine that has helped power the Chinese economy's explosive growth."

China's supply chains stretching into the less developed western regions have often been hampered by less than ideal public infrastructure--such as roads, rail and airports. This physical architecture can greatly enhance performance in existing supply chains and allow entrepreneurs to develop new opportunities where the quality of public infrastructure either makes or breaks a business:

"Yang Zhenghua, a genial 34-year-old with a buzz cut, makes the run from Qijiang to Chongqing most days, bringing a truckload of farm produce to a wholesale market in the city. Traveling on the new highway, he can now get to the market earlier in the day, when demand is highest. The shorter journey has trimmed transport costs -- his biggest single expense -- by around 100 yuan ($15), to around 600 yuan ($90) a load.

"For 14 years, Mr. Yang has distributed produce from around Qijiang, supplying farmers with seeds and ordering crops in advance. Last year, he started raising crops himself on land leased from several farmers. "Without the highway, we wouldn't dare to develop this," he says, gesturing toward his fields of corn, eggplant and chili peppers. He has 20 farmers working for him on this site, and he is adding more at other locations. Other local farmers are expanding plantations of papaya and Sichuan peppercorns, both high-value crops that can now be sold in bulk because of access to big-city markets."

However, the resulting industrial growth of these expanding and more efficient transportation networks will strain the environment:

"The last decade's explosive growth in automobile use has also come under more public scrutiny in recent years, as air quality worsens. China is the world's biggest emitter of sulfur dioxide, a major component of the urban air pollution that causes 350,000 to 400,000 premature deaths a year in China, according to a joint report last year by the World Bank and the Chinese environmental agency."

This is why high performance supply chains require tuning of every supply chain architecture, and environmental problems are opportunities where businesses can develop the use of green technologies as part of their innovational architecture towards improving the environment for Chinese communities. Financial and physical architectures are usually the first to get attention in building supply chains, with the other architectures being developed as supply chains develop and become more sophisticated in order to maintain competetive advantages and increase efficiencies.

China Logistics Report 1

Even though I am in Japan, since I now work for a global company I am more frequently coming across news on China logistics via one form or another. Whether it is through a friend in the industry or via reading China-focused blogs, it is easy to find articles and posts to point out to readers.

Over at the logistics blog at China Economic Review, they mention a new air hub being established by UPS in Shanghai. That is right on the heals of news regarding DHL's new contract logistics hub in the area.

Over at All Roads, Rich has posted a nice write-up on infrastructure investments in warehousing on the Mainland, along with an update on the Three Gorges Dam. I don't currently have time to analyze the warehousing post, but I want to come back to it in a later report.

Lastly, be sure to follow all the links on China at 3plWire--there are a few on recent ports data. Tomorrow, the Logistics Report travels to Korea!

Dealing with Workforces in China

I try to subscribe to some good online magazine mailing lists to reduce my search for good news and articles to post on here at the site. One of those online magazines is Workforce Management, and recently I was happy to learn that they have set up an entire section on China's labor market. Included so far are:

• Articles: HR on the Hot Seat in China and Vendors' Fast Boat to China
• Blog: China Matters--Ed Frauenheim writes on issues in HR in China.
• Podcasts: A nice slew of podcasts I am meaning to get through.

It is really too bad there is nothing like this for Japan, as there are a number of changes taking place here as well and as I have written on in the past. But in the meantime, we can enjoy this kind of reporting coming out of China.

For some additional takes on foreigners in China--the non-executive types--see All Roads Lead to China and their recent "halfpat" series.

Railways a Mode Towards Shrinking China's Gap

Some articles just jump right out at me as easy posts, and this was so when I saw a link summary in the WSJ titled "Narrowing the Gap" and discussing railways in China. The link takes you to an article titled "China Expands Rail System in Effort to Narrow Prosperity Gap," which is written by Bruce Stanley with contribution from Juying Qin. Directly or indirectly, China railways been covered before here, as well as at other blogs, notably in the posts listed below:

• Asia Logistics Wrap: "Going West" Along China's PRD
• China Economic Review: Railways Post Archive
• All Roads Lead to China: China Transportation Network

But what I like about this article is how it takes a topic I have been interested in since reading Tom Barnett's work--that is his work on "shrinking the GAP"--and melds it with the role of supply chain logistics in making that shrinkage happen. This melding was my entire inspiration behind the FAR matrix I created almost one year ago (image below).

Basically, before even reading the article, we can begin to brainstorm via the matrix above just how a physical architecture such as the railway network in China will have an impact on the above listed flows. From the article's title, we can assume it leans towards focusing on economic and people flows, and the first few lines confirm this slant:

China, worried about the wide income gap between its highly developed coastal areas and its lagging interior, is looking to railways to help spread the wealth.

In recent years, China's breakneck economic growth has lifted millions of people out of poverty. But the economic divide that growth has left behind poses a challenge for the ruling Communist Party, which has staked its legitimacy on its ability to make people richer and is worried about the potential for social unrest.

That last comment illustrates just how interconnected flows can be (economic and political, in this example), and the article goes further to illustrate the current Chinese Premier's concern:

Chinese Premier Wen Jiabao addresses the wealth gap in speeches and policy initiatives. The government's latest campaign: upgrade China's vast -- but overburdened -- rail system to link more parts of the country to one another and to overseas markets. Or, as China's policy makers put it: "to build up a harmonious socialist society, the development of railways has to be sped up."

The data here is pretty hefty, and one can just imagine the connectivity that will be driven by each section of railway being laid to the earth:

The plan calls for the government to nearly quadruple its investment in the nation's railroads to almost $200 billion by 2010. The aim is to create 10,500 miles of new track, much of it in underserved central and western China. By the end of the decade, if China meets its goal, the rail system will have grown to more than 56,000 miles.

For readers of this blog and other logistics blogs commenting on Asia, it is no surprise that the current status of China's inland infrastructure is lacking and behind the pace of its own economic growth, and most significant advances in logistics, along its eastern seaboard. WSJ provides a nice summary without digging into my archives, where you can find more details:

The investment would provide a missing link in China's logistical infrastructure. The nation's seaports are among the world's most modern and efficient, but its railroads, which could be supplying these ports with a lot of the goods they send abroad, aren't up to the task.

In many other countries, railroads carry as much as 20% of all containerized freight; China's historically underfunded tracks transport less than 2% of its shipping containers. Almost all of China's exports arrive dockside via truck. Yet trucks in China are cost-effective only over distances of roughly 300 miles, or a single day's road journey, according to transportation experts.

Of course, that state of this physical architecture impacts the decision-making of businesses around the world when considering China for investment:

Investors who want to produce goods for export have balked at building factories in provinces where reliable transportation links to seaports are scarce. As a result, investment in Chinese export-oriented industries has been concentrated overwhelmingly along the coasts and major rivers near China's ports. James Wang, a transportation geographer at the University of Hong Kong, calculates that no less than 94% of China's international trade value is generated within 150 miles of the coast. This investment pattern deepens the country's internal economic fault line.

Where economic flows don't reach the people, the people go to where they can tap into it themselves:

Large numbers of Chinese have moved from inland regions to find better-paying jobs in coastal enclaves. Economist Sir W. Arthur Lewis, who studied Britain's colonies, noted the propensity of people to migrate to the capitalistic sector if wages there were attractive.

"The pattern of development that you are seeing in China is very similar to an African, colonial model. It centers on the seaport -- that's where globalization came in," says Becky P.Y. Loo, who, like Mr. Wang, is a transportation geographer at the University of Hong Kong.

Because China's inland ground transportation and mobility has been so poor, I believe that the growth of China's inland cities has a great deal to do with the concentration of large populations as well as the airport infrastructure being the first priority of investment by the government up until now. When necessary, businesses in these areas deal with the ground logistics difficulties while anticipating future improvements. In terms of models, Tom Barnett has before mentioned the westward movement of people in America's own history when discussing China's "Go West" policies, and the WSJ also notes the parallel:

Railways offer the prospect of bringing China's two economies closer together. If the colonial model is in some respects where China's rail system finds itself today, the transformation of the U.S. economy in the late 19th century is closer to where Beijing wants to go. In the U.S., the completion of the first transcontinental railroad in 1869 connected the industrializing eastern states with the Pacific coast. That rail link and others built in later years were crucial in opening the sparsely settled Western territories to settlement and making possible the development of ranching, mining and other businesses.

And back to the flows:

China already has a rail link to distant Tibet, completed just last year. The railway buildout, however, could have an important impact on the flow of people and goods and on the spread of prosperity in the nation.

And circling back again, step 1 is ensuring that physical architecture is solid:

A centerpiece of the plan is the creation of 18 logistics centers to expedite the distribution of containers throughout China. The plan also seeks to boost railway container traffic by promoting the use of double-stack container cars.

Those crunching the numbers on a daily basis for supply chains around the world know the benefits of reducing total logistics cost via intermodal benefits, and it is satisfying the Chinese are being aggressive towards providing more logistics efficiencies via higher quality in intermodal options. In the end, the actual results of this initiative will be evaluated on the ground rather in the total outlay of investment cash.

Rolling on the (Yangtze) River

I have been meaning to get to this article for some time, and it has been touched on already at 3PLWire. I just can't pass up going through it here because of my own recent, and albeit short, experience along the Yangtze River--particularly Jiangyin.

The article is "River of Opportunity" by Kris Knutsen and Clarence Kwan from Logistics Management Online, and was published on October 1 this year. The article is quite long and so I will just pull some pieces that add some context to my own trip along the Yangtze.

"...for companies that are willing to look westward, China's competitive advantages remain undimmed. Manufacturing wages in interior provinces are much lower, and prime industrial real estate is both more readily available and a fraction of the cost of land in the crowded coastal zones. Some of China's fastest-growing and most underserved consumer markets also beckon."

From conversations with Jiangyin officials, visits to sites with both utilized and available commercial real estate, and time spent downtown and in the parks taking in the local flavor, I can personally vouch that the above statements describe Jiangyin.

"The Chinese government has already spent billions of dollars to facilitate use of the river and to develop the roads and rail lines that parallel it. Much of that investment has been focused on “containerizing” China's inland economy; in other words, encouraging the use of containers to transport goods, by road, rail, or barge. For foreign investors looking for new opportunities to source, manufacture, and sell in China, the emergence of the Yangtze as a modern, multimodal transport corridor will be of tremendous significance."

This is an important marketing point for Jiangyin.

"The Yangtze, the world's third-longest river, is one of the most heavily utilized waterways in the world. Before 2000, traffic on inland stretches was almost exclusively bulk cargo, but as inland economies have grown, containerized traffic has markedly increased. Even today, the Chinese government estimates, 80 percent of the iron ore, 72 percent of the crude oil, and 83 percent of the coal delivered to manufacturing enterprises along the Yangtze is carried by barge."

As a result, in my Jiangyin post, you can see the new port equipment just prior to opening the second container berth. As the article states:

"In the short term, at least, expanding container capacity on the Yangtze will plug critical gaps in the existing road and rail network and will link huge areas of central and southwestern China to the coast at relatively low cost. The government has therefore moved quickly to improve conditions on the river through dredging, reef demolition, and, most particularly, navigational improvements associated with the Three Gorges Dam project. It has also coaxed more than two-dozen inland container ports into existence as far as 1,500 miles upriver. As a result, the river itself has emerged as a crucial enabler of expanded intermodal trade in China's interior."

One of Jiangyin's hopes is to increase direct-to-export shipments coming out of its ports by utilizing its own custom clearance authority. This will reduce costs by eliminating the need for many exports to transfer shipment at Shanghai. The article confirms what I heard from Jiangyin officials:

"Some operators are even experimenting with seagoing barges; the first one began serving the port of Yangshan directly from Nanjing in December. These deeper-draft, more powerful vessels will significantly cut transit times on the river and open the possibility of direct container-on-barge service from deep in China's interior to seaports as far away as South Korea and Japan."

In the meantime, until cities like Jiangyin become more strategic as a logistics hub, the growth at Shanghai ports pulls business through the smaller Yangtze ports:

"A major stimulus for the long-term development of Yangtze shipping is the massive expansion of container berths now underway at Shanghai. In December, the first phase of Shanghai's new deep-water container complex opened, adding 2.2 million TEUs of additional capacity to what is already the world's third-largest container port.

"Yangshan, located 21 miles off the coast, will eventually add between 15 million and 20 million TEUs to Shanghai's total handling capacity--more than the 2005 throughput of the top three U.S. container ports combined.

"With a six-lane causeway that provides the only direct link to the port short of capacity, and the timeline for introducing rail service uncertain, expanded barge service clearly will be required to move traffic between Yangshan and the mainland. Port planners now expect container barges will move more than 30 percent of that traffic by 2020, and barge companies all along the Yangtze already are moving to upgrade their fleets."

The article goes on to highlight Wuhan and Chongqing as worthy target locations for new waves of investment. But only looking at these cities means locations closer to the Shanghai-Nanjing corridor will be missed. Although I am biased, Jiangyin is one of those cities that deserves some investigation--not just for its available and growing logistics infrastructure but also for the city environs that I believe are quite hospitable to foreign crowds but without the congestion typical of the coastal cities. And of course, it is only a 1-2 hour drive from Shanghai making weekend getaways to the city entirely reasonable.

Supply Chain Design Considerations for China

Dustin Mattison, writing at the China Supply Chain and Logistics Strategy blog, posted regarding "Sales and Distribution in China" on November 1. This post is particularly interesting because it essentially discusses the struggle of supply chain integration when trying to serve both the domestic and foreign markets from the same sources within China. For example, a company that has perhaps established its China supply chain primarily for export to non-China destinations may experience problems down the line when trying to reach the domestic market on the same infrastructure.

Dustin first touches on a possible cause of this short-sightedness:

There is no shortage of supply chain and logistics seminars in China, with practically at least 1 such event per day in Shanghai alone, not to mention Beijing, Guangzhou, Chengdu, etc. At such events one can gain insight into the mentality of government planners as well as logistics and supply chain professionals in China.

The recent CSCMP event in Shanghai is a good example. Discussions mainly centered on assets, infrastructure, capacity utilization, etc. Little focus was placed on the demand side of the equation. Currently, the majority companies in China believe they need to operate in a single "lean" fashion.

Dustin then follows up with a mention of John Gattorna (who I have posted about previously in regards to DHL and people power) and summarizes a recommendation:

However, as John Gattorna mentioned to me, a mistaken view of many companies is that they assume all customers act as one in a 'lean' buying behaviour...Companies selling in the China market need to conduct a detailed analysis of the buying behavior of their target customers, followed by an assessment of how the behaviors can be segmented according to different supply chain service strategies.

Because issues with the physical architecture of the supply chain can tie up so many resources within a firm, naturally companies follow up much more slowly with improving the other architectures necessary for a high-performance supply chain--financial, informational, relational and innovational. Thinking simply of the term "supply chain," it itself implies a "push" dynamic where the term "demand chain" might be recommended in instilling a "pull" dynamic that feeds off of the end customer or consumer. The most famous pull system is that employed in the Toyota Production System.

For reference on supply chain types, my former supply chain professor at Thunderbird, Joe Cavinato, long ago wrote an article for Supply Chain Management Review titled "What's Your Supply Chain Type?" John Gattorna also has a fairly new book out that I am looking forward to buying soon titled "Living Supply Chains."

Lenovo CEO on China

This past Thursday I had dinner with an expat friend from UPS and a halfpat friend from DHL. One of the topics that came up was the benefit of having a Westerner in the top leadership positions of branch offices in Asia. My DHL friend summarized that because Westerners are comfortable taking on significant amounts of responsibility, Asians feel more comfortable deferring to that leadership, answering commands, and avoiding the risk associated with assuming more leadership themselves. On the other hand, my friend argued that once an expat position is handed over to Japanese leadership, major decisions end up more in "committee" to better disburse responsibility. As a result, he said, decisions are likely to be less decisive and successful.

Personally, I feel this is in line with the characteristics commonly associated with Asian societies: greater collectivism (decision-by-committee) and high risk avoidance (disbursing responsibility to the point no one person can be held accountable). My friend at DHL said his own experience verified this dynamic. Obviously, working as I have for a Japanese company the past 1 year and 4 months has provided an environment for me to see the "decision-by-committee" approach as well as risk avoidance in action. As the only Westerner in the company, I have many times felt like a droplet of oil in a pan of water.

This past Friday, November 17, the Wall Street Journal posted an interview with a Westerner leading an Asian company: Bill Amelio, CEO of China's Lenovo. By Jane Spencer, I read the interview looking for Mr. Amelio's perspective on the dynamic my friends and I had just discussed the previous evening. Below are the selected highlights:

WSJ: What kind of cultural issues come up between the American and Chinese sides of the company?

Mr. Amelio: Every day there's something. On both sides, you need to have great trust in your colleagues to know that their intentions are good, even though the words might not come out right.

In the U.S. and Europe, we have highly opinionated executives who like to make their voices heard. The China team tends to listen more and express themselves more thoughtfully. The Americans and Europeans need to know that if a Chinese colleague is nodding silently, it doesn't mean they're agreeing. We also have a program in place to teach our China team better confrontational management skills.

The Chinese team also tends to be very, very thorough -- and sometimes when you want to get something implemented, it's important to have conciseness.

Sometimes it's great to rally the whole team around something that everybody is interested in. Last week, we had an event where we brought in the 1992 Chinese Olympic ping pong champion, and had him play our executives. Our chairman is the reigning champion [at the company].

WSJ: You've said that American companies typically use a "colonial approach" when they enter the global market. What's different about Lenovo's strategy?

Mr. Amelio: [With a colonial approach] you send an effective executive on an expat assignment to Asia. They hire talent in-country. The downside is that you tend to hire people through the filter of the language that you speak, and you don't get the best talent. It's hard to identify talent if you're conducting the job interview in English.

In all the previous jobs I had before Lenovo, the struggle was finding midlevel managers in China. What I came to learn at Lenovo is that there's a lot of talent, but a lot of the best people aren't at a high level of English proficiency. If you look inside Lenovo, we've been hiring without a screen for English for years, and that means we really have depth when it comes to talent in China. Now we're working with our Chinese midlevel managers on English skills.

With more and more Westerner "halfpats" acquiring jobs overseas, certainly in Asia, there will be less and less of a language barrier in placing Westerners as top managers. The above answer by Mr. Amelio assumes that expats aren't proficient in the language of their assignment location in the traditional approach. But I think this assumption is generally correct, especially for Asia where the languages are quite different from Western languages and thus much more difficult to learn. 

China's Port Investments Boosting Overall Capacity

Below is the full text of some news from Logistics Management:

China has spent over 10 billion US dollars to enhance the handling capacity of Chinese ports by 18 per cent to 5.5 billion tonnes by the end of this year, the state media reported (November 9).

These ports are expected to handle 94 million TEUs (twenty-foot equivalent unit) this year, up 24 per cent over 2005, Minister of Communications, Xu Zuyuan said at a national navigation industry meeting held in Tianjin, the largest port in north China.

By the end of 2006, the minister said, China will have invested USD 7.59 billion in building 166 new port projects. With completion of these projects, the country's seaports handling capacity will be increased by 548 million tons to reach 3.44 billion tonnes.

Investment in inland river ports will reach USD 2.78 billion, which were used to build 165 new berths with an additional handling capacity of 19.5 million tonnes, Xu said.

At the end of the year, China's investment in coastal harbour construction will reach USD 7.5 billion, accounting for 45 per cent of the total investment in the country's 10th five-year plan period (2000-2005).

Over the next five years, China will increase investment in infrastructure construction of waterway transportation, Xu said. The construction will focus on building specialised ports for handling coal, oil, ore and container in inland waterway transportation. By 2010, the minister said, China will further upgrade the handling capacity of coastal harbours by 2.1 billion tonnes.