Monday, March 23, 2009
Monday, 23 March 2009
As global shipping companies struggle amid slumping international trade, China Ocean Shipping Co. is flush with cash, and one of its top leaders says it stands poised to announce record revenue for 2008. Cosco Vice President Zhang Fusheng, in a recent interview, indicated that the state-owned company is under pressure from the government to bolster local industries, especially China’s hard-hit shipbuilding industry. Mr. Zhang said, for example, that Cosco had recently agreed to construct a shipbuilding wharf in a city suffering badly from the economic downturn, after provincial leaders pressured it to help the local economy.
Zhang Fusheng said, ‘We are in a good position thanks to our strong performance of the past few years. But this year will be more challenging.’
Cosco’s situation illustrates the important relationship between China’s government and its huge state-sector companies, which benefit from Beijing’s policies — and are expected to contribute to its efforts to keep the economy growing.
With more than 800 ships and 53 million tons of total carrying capacity, Cosco is by many reckonings second in size in its industry only to A.P. Moller-Maersk AS, the Danish container-and-oil shipping giant. A former national monopoly, Cosco now has several domestic competitors, and has listed more than half of its assets through various vehicles on overseas stock markets, Mr. Zhang said.
Zhang Fusheng said the group’s revenue grew to at least $26.9 billion last year from $22 billion in 2007. That was largely on the strength of the first nine months, before the recession began to slow trade and cripple many shipping companies. He declined to give an estimate for 2008 profit.
He said this year’s revenue will be lower, but that China’s stimulus package will help cushion Cosco’s business. The company has diversified into domestic logistics and shipbuilding, both of which stand to benefit from government spending.
Cosco also recently received an $11 billion line of credit from a state-owned bank. Such a loan would be unusual outside of China because most countries’ banks have sharply tightened credit. But because China’s banks are majority owned by the government, their lending can be directed to national champions like Cosco.
Vinmaso.net reported that Zhang Fusheng said Cosco’s advantages are complicated by state control. Besides being vice president, he is also in charge of the Communist Party committee inside Cosco — all major enterprises in China have such a party structure that exists in parallel with management. A member of China’s unelected legislature, the National People’s Congress, he said he was appointed as a delegate by the governor of Guangdong, the large southern Chinese province where Cosco is headquartered. Guangdong is also the center of China’s export-processing industry, which has been hit hard by the downturn.
Source: China Economic Review