China Bans Foreign Ships From Rivers as Local Operators Struggle

China will ban foreign vessels from sailing on domestic waterways including the Yangtze River, the world’s busiest for freight, as local operators struggle to make money amid a global shipping glut.

Overseas investors will also be barred from engaging in river shipping, including through the use of Chinese vessels, according to a statement posted on the government’s website yesterday. The ban, which comes into effect Jan. 1, doesn’t apply to vessels registered in Hong Kong, Macau and Taiwan.

The new rules are designed to help promote a “healthy” domestic shipping sector and to ensure safety standards, according to the statement. The government also this month announced tax and financial support for local shipping companies after China Cosco Holdings Co. (1919) and China Shipping Container Lines Co., the nation’s largest listed operators, both posted wider first-half losses.

Shippers will be able to seek exemptions from the transport ministry for using foreign ships if there is a capacity shortage, according to the statement. Otherwise, companies found to be using overseas vessels on rivers will face penalties including fines of as much as 1 million yuan ($160,000), it said.

About 1.5 billion tons of cargo were shipped along the Yangtze in 2010, China Daily said in May 2011, citing the Changjiang (Yangtze River) Administration of Navigational Affairs. That’s more than three times the amount carried on the Mississippi River, it said. The river runs 6,300 kilometers (3,915 miles) to Shanghai from Tibet.

China Cosco, the nation’s largest operator of container and dry-bulk ships, has forecast a nine-month loss as rising capacity in the global fleet and slowing trade saps cargo rates. For instance, The Baltic Dry Index (BDIY), a benchmark for commodity- shipping costs, has plunged 53 percent in the past year.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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