2.3 The World Bank’s first loans to Guangzhou, Shanghai, and Tianjin

BOX 2.3

The World Bank’s first loans to Guangzhou, Shanghai, and Tianjin

On November 2, 1982, the World Bank approved its first loan of US$124 million to China’s port sector. In line with the country’s five-year plan, the project targeted the ports of Shanghai, Tianjin, and Huangpu (in the city of Guangzhou). The objectives included the following:

• Creation of additional port capacity to avoid congestion • Development by the government of a long-term national port strategy • Initiation of a strategic dialogue based on three studies included in the project.

The main objective of the five-year national economic development plan for the period 1982–86 was to promote investments in the transport sector that would prevent the sector from becoming a serious bottleneck to the country’s economic development, with the understanding that ports had a special position not only in the transfer of resources between northern and southern China, but also as gateways to foreign markets and to foreign sources of plant, equipment, and technology. The government had indicated that coal-handling facilities in Huangpu and container handling facilities in Huangpu, Shanghai, and Tianjin would be accorded high priority for the period (World Bank 1982).

Following this initial project, the World Bank continued to invest in these three ports until 2000: Tianjin Port Project (fiscal 1986, US$130 million); Huangpu Port Project (fiscal 1988, US$88 million); Ningbo and Shanghai Ports Project (fiscal 1989, US$46.4 million for Shanghai Port); Shanghai Port Restructuring and Development Project (fiscal 1993, US$150 million); and China Container Transport Project (fiscal 1999, US$71 million).

Source: World Bank.

ports were given increased autonomy in managing their business affairs. Tax incentives were developed to attract both domestic and foreign investment in port construction. Foreign aid (for example, World Bank loans; box 2.3) was also pursued by the central government. Changes in port financing followed a trial-and-error approach, with several revisions made over the years—related, for example, to dealing with foreign investment and construction fees.

By 2003, central government investment had decreased to about 11 percent of the amount that ports required. Needing other sources of financing, port enterprises (including state-owned, foreign-funded, and private enterprises) pursued equity financing, bond financing, and bank loans. By 2013, the proportion of selfraised funds stood at 70 percent of total port construction investment. In 2016, the proportion of bank loans stood at 25 percent, compensating for the continuous decline of central government investment to about 5 percent in 2016.

As can be seen in figure 2.4, the rapid increase in investments went hand in hand with an equally rapid increase in cargo volumes, indicating that the newly developed capacity was soon utilized. Figure 2.5 shows the introduction of new financing sources over time.

In the 1990s, with the transformation of port enterprises into commercial operations, some of the most profitable entities, ranging from shipping companies to port operators, began to list on the capital markets to increase access to funding. The China Merchants Group (CMG), China Ocean Shipping Co. (COSCO), Tianjin Port Development, and the Port of Dalian were all listed on the Hong Kong SAR, China, stock market by 1992. Port enterprises also were listed on the stock exchanges of Shanghai and Shenzhen. The joint-stock system