OMGT2321 Assignment 1 PDF

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Summary

Table of Contents1. Executive summary............................................................................................................................. Executive summary...........................................................................................................................

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Table of Contents 1.

Executive summary.............................................................................................................................2

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Introduction.........................................................................................................................................3

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Findings about Guangzhou Port...........................................................................................................3 3.1. Historical evolution..........................................................................................................................3 3.2. Comparative advantages..................................................................................................................4 3.3. Competitive advantages....................................................................................................................6 3.4. Operational challenges and strategies..............................................................................................9 3.5. Future prospects.............................................................................................................................11

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Conclusion.........................................................................................................................................11

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Reference List....................................................................................................................................11

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Appendices........................................................................................................................................14

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A MARITIME HERITAGE Guangzhou, China

1. Executive summary The prosperity of Guangzhou port will be explained in detail in this article. First, this will highlight the port's historical context, as it has functioned as the Lingnan Region's sea-going channel and China's most significant international trading port since the Qin and Han Dynasties. Furthermore, relying on David Ricardo's view on a nation's comparative advantage, this will show certain advantages from its location - the Pearl River Delta's heart, a highly-skilled workforce, and infrastructure investment. These characteristics strengthen the port's ability to attract additional shipping businesses and boost China's GDP contribution. According to the national competitive advantage of industries in Porter’s diamond model, this paper also emphasizes factor endowments, demand conditions, firm strategies and rivalry and related and supporting industries. Guangzhou port provides a number of logistical value-added activities, like packaging, distribution, order processing, tallying, inventory management, and data analyzing. Nevertheless, the port is dealing with a number of difficulties, the most pressing is the shipping crisis caused by the Delta variant epidemic, which caused significant shipping delays at the port and drove up high shipping prices since berth waiting times rose.

2. Introduction The People's Republic of China's Port of GuangZhou is located on the Pearl River, about 125 kilometers northwest of Hong Kong. It is a large port and the most comprehensive port in Southern China. GuangZhou Port is a vital transportation and financial center for the Pearl River Delta area (Kuo & Gong-fu 2021). In this report, I have the chance to learn about and explore the role and management of Guangzhou port from the perspective of international commerce, and also to develop linkages between the theories learned in lectures and current industrial practices.

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3. Findings about Guangzhou Port 3.1. Historical evolution Guangzhou was_formed_as_a_city_in_221_B.C., and the world-famous maritime silk route was basically established. The precursor to China's foreign trade efforts was Guangzhou Port. This historic port has developed over time in harmonious ways for over 2000 years, and_has_experienced_thousands_of_years_of_success. Guangzhou has promoted its maritime transport industry to an exceptional level of frequency since 618 A.D., taking advantage of the favorable climate and geographical region. Guangzhou Port has grown to become the largest port in the East, interconnecting China with South Asia, Southeast_Asia_and_the_Arab_region. Guangzhou established its commercial connection with the world in 1757 as a meeting point for traders and ships. The thirteentrades monopoly's international trade sector climbed to unparalleled peaks of success. Since 1949, Guangzhou_Port_has_derived_its_cultural_or_historical_heritage and has continued to develop into a major driving force in the transformation of Guangzhou into a central city with economic impact, agglomeration activities, and the portal to the world for South China in the perspective of economic globalization (Guangzhou Port CoLtd n.d.) (Appendix 1).

Picture 1. Map of Guangzhou Port (Source from: Guangzhou Port CoLtd n.d.) 4

3.2. Comparative advantages Comparative_advantage_is_the_ability_of_a_country_to_produce_a_specific commodity or_service_at_a_lower_opportunity_cost_than_other_competitors_(Ricardo 1817). He also asserted_that_in_global_trade, a_nation_should_allot_its_most_efficient_resources for producing_goods_and_acquire_other_commodities_from_its_trading partners, even if it has a benefit in producing this product. Heckscher and Ohlin model (1993) stated that advantage_is_created_as_a_result_of_disparities,_strength,_and_development in national variables, such as a country's land, labor, and capital resources. a. Land Guangzhou port which is situated at the entrance of the Pearl River Estuary and in the geographic center of the Greater Bay Area, has proven to be an important_commercial_and_trading_port_in_China, and is now playing a greater and_more_vital_role_in China's ongoing_opening_up_and the Belt and Road Initiative (Kuo & Gongfu 2021). Maritime_trade_from Guangzhou now covers over 300_ports in_over_80_nations_and_regions_across_the world (Appendix 3). Guangzhou is the most crucial economic and transportation hub of the_Pearl_River_Delta_region_and Guangdong. Guangxi, Yunnan, Guizhou, Sichuan, Hunan, Hubei, and_Jiangxi are all nearby, and_it_serves_as_a_vital_transportation_center_for their businesses (South China Morning Post n.d.). Guangzhou_has_133_buoys, 4600_berths, and 2359_anchorages, all of 1000 tonnes. Loading_and_unloading, storage, bonded warehousing, and container freight services_are_some_of_the_various services provided by Guangzhou Port. Coal, oil, chemical fertilizer, grain, ore, steel and vehicles are some agricultural, industrial, and manufacturing_goods that_are_transported most through the port. b. Labor Workers in a workforce that is intensely competitive and has a comprehensive understanding of consumer technology goods and cutting-edge product technology, are the_result_of_a_highly_competitive educational system based on a knowledge-based culture (Kang, Kim & Chang 2008). Guangzhou - capital city 5

of Guangdong province which is transitioning away from these labor-intensive, low-cost_service_and_manufacturing businesses and toward_contemporary_manufacturing or service industry. More high-skilled industrial_employees_are_needed_as_a_result_of this transformation, and technical_institutions_play a key role in satisfying this need (World Bank 2020). According to China's Ministry of Human Resources and Social Security, the_Chinese_mainland_has_over_200_million_talented employees, with over_50_million_of_them_being_highly_skilled (Xinping 2021). In 2020, the_agriculture_industry_employed_23.6%_of_the_labor_force, while the industrial_sector_employed_28.7%_and_the_service_industry was 47.7% (Appendix 2). c. Capital The Guangzhou Port, which is the world's seventh largest container port, would get a USD15.5 billion investment in the next three years from 2018 to expand the infrastructure in response to demand increase (Yicai 2018). Infrastructure improvements for the Hong Kong-Guangdong-Macao Greater Bay Area will help the port expand and create a complete intermodal system of waterways, trains, and highways (Yue 2018).

3.3. Competitive advantages It is critical to define seaport competitiveness in order to develop port strategies and increase performance in comparison to competitors (Haezendonck et al. 2001). Based on demand conditions, factor conditions, related industries, and firm structure, strategy, and competition, Michael Porter (1990) tried to address why a nation may prosper in a specific industry and outperform other countries in the competitive global market. a. Factor endowments Guangzhou Port has grown into the largest international trade port and extensive major hub port in South China, with shipping connectivity to more than 400 ports in over 100 nations and regions globally, and also over 100 ports in China, thanks to its competitive geographical benefits (Appendix 3). The Guangzhou Stateowned Assets Supervision and Administration Commission has been given 6

permission to execute investor obligations for the Guangzhou Port Group. Guangzhou Port CoLtd specializes in port cargo storage and handling, along with waterway cargo transportation, internal and overseas freight forwarding, and shipping agency services. It is providing a variety of logistics value-added services, including packaging, distribution, order processing, tallying, inventory control, and data processing. Guangzhou Port is located in the epicenter of China's export-oriented economy. Through the complex Pearl River system, and also road and railway connections, it may be linked to Guangdong Province, Pearl River Delta, as well as the hinterland of Pan-Pearl River Delta, South China. The port provides fully operational and diverse terminals, like those for containers, ore, coal, grain, ro-ro vehicles, the petrochemical industry, ordinary cargo and tourist gateways. Within the Pearl River, Guangzhou is the only port operator to be certified for lightering operation in anchors for bulk liquids like petrochemicals. It operates South China's largest port tugboat operator, with 25 high-powered tugboats that provide services such as port and sea towing, supplemental ship mooring and disembarkation, safety monitoring, urgent rescue, and disaster aid. Guangzhou port is committed to providing efficient, high-quality and economical water transportation services through the built Pearl River water system. It has developed “shuttle bus” barge services, which are handled by its subordinate shipping company, and run 44 international trade branch routes and 23 internal trade branch routes by the end of 2019. Additionally, the BeijingKowloon, Beijing-Guangzhou, Guangzhou-Meizhou-Shantou, and GuangzhouShenzhen railways link Guangzhou Port to the nationwide rail system, allowing freight to be gathered and dispersed throughout China. Moreover, Through National Roads 105, 106, and 107, highways, a radial road system centred on Guangzhou is built, integrating the economically vibrant Guangdong Province, Pearl River Delta, and other inland commercial hinterland. (Guangzhou Port CoLtd n.d.). b. Demand condition Good demand circumstances in the domestic economy have both produced a strongly competitive market and been a good drive for the industry to develop 7

quicker and produce more advanced products (Kim & Morrison 2011). More than ten Chinese port authorities and logistics companies including Guangzhou port have joined TradeLens' shipping and trading data management, giving it direct access to data from ports and cargo depots in the biggest exporting country globally (Johnson 2021). According to Chen (2021), by collaborating with TradeLens, they will be able to increase operational efficiency and encourage others to help supply chain players both locally and internationally in order to better logistical dynamic monitoring (Sea News 2021). c. Firm strategy and rivalry The value of Guangzhou port in the Greater Bay Area is rising. Despite accounting for only 4.5% of China's population, the GBA generates 9.5% of the country's GDP, over 16% of international investment, and around a quarter of China's foreign commerce. The key factor assisting the port's consistent growth in all directions is the infrastructure development connecting the port to the inland regions, and also creating infrastructural linkages within the region so that it can truly develop as a metropolitan area, similar to Tokyo, San Francisco or New York. The size of ships in both the east-west and north-south trade has increased significantly during the last ten years. Volume at the Guangzhou ports are beginning to grow as a result of this and the change of exports, particularly to the west of the Pearl River Delta and the interior regions (Appendix 4,5) (Nanninga 2020). d. Related industries Guangzhou's consumer and service industries are also undergoing transformations. Imports of commodities, particularly frozen and fresh groceries, drinks, and branded consumer products, have regularly increased in double digits in the Pearl River Delta over the previous years, owing to the increasing demand. The port will contain the world's biggest temperature-controlled warehousing, supporting the developing fresh and frozen commodities industry. This type of warehousing in free trade areas is needed in China's booming e-commerce industry. In Q1/2021, another 170,000 square meters of general warehouse space was expected to be delivered (Nanninga 2020). 8

3.4. Operational challenges and strategies This part will clarify the developmental path of Guangzhou along with the stakeholders’ goals and role. It is critical to define key stakeholders (Appendix 6) and the goals that they want for the long-term growth of port cities. Stakeholders theory states that stakeholders are impacted by externalities created by entities and stakeholders exercise influence on these entities to minimize negative impact (Hörisch, Freeman & Schaltegger 2014). Stakeholders come from various backgrounds, spanning from port owners to logistics firms, implying that decision-making is complicated, with numerous interests to be addressed and ideally addressed. Conflicts arise when profit-driven port owners, managers, and market participants aggressively pursue economic development compromising the environment and social wellbeing (Lee & Yap 2019). Guangzhou grew significantly in line with the Pearl River Delta's economic boom from 2001 to 2010. In terms of stakeholders, most of Guangzhou's progress may be attributed to the efforts of public policymakers. Guangzhou port has been aggressively expanded by the Chinese authorities, which includes the Guangzhou Municipal People's Government and the Guangzhou Port Administration Bureau. To transition Guangzhou from a river port to a coastal port and create a port-based economy, comprehensive plans were developed to develop and enhance port services and promote port-oriented businesses (Guangzhou Port CoLtd n.d.). Internal factors, particularly Guangzhou Port CoLtd play a vital role in port administration and management. There was a huge investment of over 10 billion RMB to develop new berths, deepen and broaden the sea channel, improve container and petroleum/oil terminals, as well as coal and grain handling systems, and other facilities to strengthen the standard and critical functions of Guangzhou port fundamentally (Zhang 2008). Guangzhou is now a significant economic and transportation hub for Guangdong and the Pearl River Delta area, and also other sectors in adjacent regions. While Guangzhou's economy keeps growing, sustainability concerns have become more prominent in this era. The local area is most worried about the impact of ship emissions and contaminated waterways in Guangzhou port on their wellness and water usage (Lee & Yap 2019). Environmentalists are worried about how the port city's massive development and nearby businesses would affect the environment, particularly in terms 9

of carbon emissions, which will contribute to climate change and global warming. Guangzhou has progressed to the stage of sustainable development from 2011 to 2018. This endeavor to solve economic, social, and environmental concerns is being led by public policymakers. The port's_most_recent_13th 5-Year Plan (2016–2020) supports the concept of grouping and identifies Guangzhou's growth path as benchmarking with the world's most_sophisticated_international_maritime_hubs. The goal is to develop a contemporary shipping service system and enhance shipping logistics on the foundation of reinforced port and terminal facilities and a multimodal transportation system, with the goal of improving connection with other ports. The overall strategy for developing Guangzhou as an international maritime hub includes creating a green and secure port, an intelligent shipping system, and open port partnerships with foreign ports (Guangzhou Port Authority 2016). There should be an emission control area, for instance, to handle social and environmental issues. The sulfur content of gas generated by boats when berthed in Guangzhou port is limited to less than 0.5%_m/m. Guangzhou_aimed_to_have_50% of its ports equipped with onshore power source facilities by 2020, in_addition_to_the_usage_of_low-sulfur_bunkers by vessels (Guangzhou Port Authority 2016). Meanwhile, according to CNBC (2021), COVID-19 epidemic in southern China has disrupted transport systems and delayed cargo causing to drive up shipping prices once again. Moreover, Brick (2021) said that the interruption in Guangzhou is tremendous and it would have a massive influence on the supply chain (CNBC 2021). Local authorities of Guangzhou should focus on following anti-epidemic instructions first. Additionally, Guangzhou port must take the new program UNCTAD has launched to assist ports throughout the world in keeping ships operating and commerce circulating while also securing employees in the epidemic (UNCTAD 2021).

3.5. Future prospects In early 2018, the proposal of the most recent Guangzhou City Master Plan (2017–2035) was finished. The draft strategy calls for the development and creation of a world-class airport, port, and railroad center. Guangzhou's port is expected to handle 10

36_million_TEU_containers_and_750_million_tons_of_maritime_freight_yearly by 2035. Guangzhou will also conduct research on building free trade terminals to international standards in the Huangpu, Nansha, and Airport Economic Zone (Lee & Yap 2019). Regarding Nansha port of Guangzhou, it will continue to evolve into the freight center of the Greater Bay Area in the Pearl River Delta as infrastructure investment_projects_are_completed_and_implemented. Some logistics companies have reevaluated_their_distribution_networks_and_examined_dependence and alternatives in the context of the current Covid-19 issue. In this scenario, businesses have recognized Nansha as a viable option to Shanghai, Ningbo, and Shenzhen, particularly for interior regions (Nanninga 2021).

4. Conclusion Guangzhou_Port_evolves_multimodal_transportation_via_sea-rail_networks, river-sea channels, land_centralized_and_dispersed_transport_networks, and_a_diverse_system of worldwide_liner_routes_with_shuttle_bus_branch_lines/sea-rail_transit_trains and inland port workplaces, taking_advantage_of_the_Pearl_River's_developed_water system_and_interconnected_transport_hub. Guangzhou Port has grown into the largest international trade_port_and_comprehensive_primary_seaport_in_South_China, with shipping linkages including over 400 ports in over 100 nations and regions across globally, as well as over 100 ports in China, thanks to its competitive geographical location.

5. Reference List Guangzhou Port Authority 2016, Guangzhou Port’s 13th Five-Year” Development Ideas.

. (In Chinese)

Haezendonck, E et al. 2001, ‘The Competitive Advantage of Seaports.’, International Journal of Maritime Economics, vol.2, no.2, pp.69-82.

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Hörisch, J., Freeman, R.E. & Schaltegger, S. 2014, Applying stakeholder theory in sustainability management: Li...