Chinese Officials Make Huge Investment to Upgrade Shipping Lines

China just awarded $1.8 Billion Yuan (US$293.2 million) to its four largest shipping interests. Officials intent for the four shipping lines to update their ships, and scrap older, obsolete vessels. With a huge surge in steel exports over the past few years, the decision to update the fleet seemed obvious.

Currently, China Cosco received the lion share of the money (1.4 Billion Yuan or $224.6 million), while the sister shipping company Cosco Shipping got 182.9 million Yuan ($29.8 million). Additionally, China Shipping Development Company received 215 million Yuan, and China Shipping Container Lines (CSCL) received 40 million Yuan.

The fact of the matter is that China is still looking to increase their overall capacity. This sizable investment will allow the country to accommodate 2.5 million Twenty-Foot Equivalent Units (TEU), which is an increase of 8.2 percent from 2013. This figure is also in line with the steel production in China, which is up 11 percent this year, and increased 8 percent in 2013. Steel is one of China’s major exports, and a serious reason for the growth in the country’s economy, over the last five years.

The one challenge in this increase in export trade is the average wages of Chinese workers. Chinese labor rates are increasing 15 percent per year. This means that goods that used to be cheaper to produce in China and then ship to the United States and Europe are being produced locally in those regions, once again.

Although in the past the Chinese government pledged to reduce subsidies, officials have decided to make an exception, given that it is in the best interest of the nation to keep the shipping industry up to date.

Two Contributions Shipping Industry Makes to Economic Growth

Since the era of trade began, shipping lines have been a significant influence on economic growth, prosperity, and important communication between regions.

Throughout the ages, the rich have boasted of fashions and delicacies from faraway lands, which has encouraged countries across the globe to exchanged ideas, luxuries and consumer goods. With the ongoing investment in global trade, today's shipping companies continue to travel the world's trade routes, transporting (slightly) more than 90 percent of the world's container cargo.

While so much has changed in the shipping industry over the past few decades, it is worth reflecting upon two very important contributions this sector makes, as well as the good investment opportunities it provides.

1. Bringing Products, Produce and Prosperity

Currently, the top five shipping companies in the world maintain a container fleet of more than 8.67 million Twenty Foot Equivalent (TEU) shipping containers. This fleet moves a majority of the world’s consumer goods and produce.

In fact, the merchandise delivered by container ships accounts for an estimated $15 trillion worth of goods, annually. The United States is responsible for $5.6 trillion alone.

2. Brings nations together

Shipping is one of the activities nations must consistently work on together in order for the world economy to work well. As goods come in and out of each other’s countries, logistics and resources from many nations, become tied together.

Furthermore, intent upon ensuring the security of their people and the delivery of products, officials from regions around the world get together to ensure that the worlds' nation-states can work together; productively. Take the International Maritime Organization (IMO) as an example. This United Nations based organization works with shipping companies to help them increase their commitment to the environment, as well as creating a joint set of rule for every maritime nation.

Final Thought.

Since the early days of transportation and trade, the shipping industry has maintained a powerful influence in the world's economy. It is not only the goods that it delivers to shipping ports around the world, but also the culture and the communication it shares.