THE GEOGRAPHICAL CONNECTEDNESS OF CHINESE SEAPORTS WITH FORELAND MARKETS: A NEW TREND?

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THE GEOGRAPHICAL CONNECTEDNESS OF CHINESE SEAPORTS WITH FORELAND MARKETS: A NEW TREND?JAMES JIXIAN WANG* & ADOLF KOI YU NG** *Department of Geography, The University of Hong Kong, Pokfulam Road, Hong Kong, China, E-mail: [email protected] **Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom, Hong Kong, China, E-mail: [email protected] Received: September 2008; revised November 2009 ABSTRACT This paper analyses the geographical connectedness of Chinese container ports with international foreland markets. Simulated results indicate that the hub-and-spoke network only forms part of the overall picture, where several different layers with diversified strategies can be statistically identified within the Chinese seaport hierarchical system. This paper addresses the question of whether there are alternatives for non-hub seaports within an established hub-and-spoke global shipping network other than just accepting their roles as feeder or spoke seaports. Also, it enhances our understanding on how China is divided by globalisation through trade relations with different regions around the world. Key words: Port, connectedness, foreland, containerised trade, China INTRODUCTION AND BACKGROUND The introduction of containerisation since the 1960s has prompted shipping lines to adopt economies of scale and scope as their core stra- tegic approach, notably increasing container ship size, as well as hub-and-spoke shipping networks. The 1990s have witnessed the prolif- eration of new transhipment hubs in major trading regions as a reflection of this develop- ment direction, which has been well docu- mented in existing literature (see, for instance, Heaver 1995; Robinson 2002; Notteboom 2004; Wang et al. 2004; Ng 2006; Baird 2007). This development has made a substantial impact on seaports (hereinafter known as ports), espe- cially after mega container ships with a carrying capacity of 12,000 twenty-foot equivalent units (TEUs) had been proven economically feasible in the 1990s (Cullinane et al. 1999). Given this, ports, particularly those with strong interna- tional connections, have become important nodes affecting trade and external channels by any country or region possessing coastlines with any significance. However, while analysis often focuses upon the node itself, that is, the contribution of the port and its development to the surrounding city (like the economic and trade potential of that particular city), the reality is that such contribution and development are often more macro and international in nature given the port’s role as the land-water interface. Such emphasis can be found in the works of Robin- son (1976) and Hilling (1996), where ports were regarded as a ‘complex’ that consists of five categories (Figure 1): (I) Intra-port system; (II) Port-hinterland system; (III) Port-foreland system; (IV) Regional port system; (V) Total port complex (combining categories I–IV). Tijdschrift voor Economische en Sociale Geografie – 2011, DOI:10.1111/j.1467-9663.2010.00600.x, Vol. 102, No. 2, pp. 188–204. © 2010 The Authors Tijdschrift voor Economische en Sociale Geografie © 2010 Royal Dutch Geographical Society KNAG Published by Blackwell Publishing Ltd., 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

Transcript of THE GEOGRAPHICAL CONNECTEDNESS OF CHINESE SEAPORTS WITH FORELAND MARKETS: A NEW TREND?

THE GEOGRAPHICAL CONNECTEDNESS OFCHINESE SEAPORTS WITH FORELANDMARKETS: A NEW TREND?tesg_600 188..204

JAMES JIXIAN WANG* & ADOLF KOI YU NG**

*Department of Geography, The University of Hong Kong, Pokfulam Road, Hong Kong, China, E-mail:[email protected]**Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom,Hong Kong, China, E-mail: [email protected]

Received: September 2008; revised November 2009

ABSTRACTThis paper analyses the geographical connectedness of Chinese container ports with internationalforeland markets. Simulated results indicate that the hub-and-spoke network only forms part ofthe overall picture, where several different layers with diversified strategies can be statisticallyidentified within the Chinese seaport hierarchical system. This paper addresses the question ofwhether there are alternatives for non-hub seaports within an established hub-and-spoke globalshipping network other than just accepting their roles as feeder or spoke seaports. Also, itenhances our understanding on how China is divided by globalisation through trade relations withdifferent regions around the world.

Key words: Port, connectedness, foreland, containerised trade, China

INTRODUCTION AND BACKGROUND

The introduction of containerisation since the1960s has prompted shipping lines to adopteconomies of scale and scope as their core stra-tegic approach, notably increasing containership size, as well as hub-and-spoke shippingnetworks. The 1990s have witnessed the prolif-eration of new transhipment hubs in majortrading regions as a reflection of this develop-ment direction, which has been well docu-mented in existing literature (see, for instance,Heaver 1995; Robinson 2002; Notteboom 2004;Wang et al. 2004; Ng 2006; Baird 2007). Thisdevelopment has made a substantial impact onseaports (hereinafter known as ports), espe-cially after mega container ships with a carryingcapacity of 12,000 twenty-foot equivalent units(TEUs) had been proven economically feasiblein the 1990s (Cullinane et al. 1999). Given this,

ports, particularly those with strong interna-tional connections, have become importantnodes affecting trade and external channels byany country or region possessing coastlines withany significance.

However, while analysis often focuses uponthe node itself, that is, the contribution of theport and its development to the surroundingcity (like the economic and trade potentialof that particular city), the reality is that suchcontribution and development are often moremacro and international in nature given theport’s role as the land-water interface. Suchemphasis can be found in the works of Robin-son (1976) and Hilling (1996), where portswere regarded as a ‘complex’ that consists offive categories (Figure 1): (I) Intra-port system;(II) Port-hinterland system; (III) Port-forelandsystem; (IV) Regional port system; (V) Totalport complex (combining categories I–IV).

Tijdschrift voor Economische en Sociale Geografie – 2011, DOI:10.1111/j.1467-9663.2010.00600.x, Vol. 102, No. 2, pp. 188–204.© 2010 The AuthorsTijdschrift voor Economische en Sociale Geografie © 2010 Royal Dutch Geographical Society KNAGPublished by Blackwell Publishing Ltd., 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

In existing literature on port and maritimeresearch, substantial efforts were devoted tocategory I, that is, the analysis of a port’s inter-nal system, both case-specific and comparativeanalysis, notably port performance and effi-ciency, mainly through surveys and question-naires (for instance, see Willingale 1981; Slack1985; Murphy et al. 1988; Ng 2006) or opera-tions research techniques, notably data envel-opment analysis and stochastic frontier analysis(see, for instance, Dowd & Leschine 1990;Estache et al. 2001; Cullinane & Song 2003;Song & Han 2004; and Yan et al. 2009), man-agement structure and governance (forinstance, see Heaver 1995; Wang et al. 2004;Brooks & Cullinane 2007; Ng & Pallis 2007), as

well as intra-port competition (for instance, seeDe Langen & Pallis 2006). On the other hand,there have been increasing studies whichfocused on category IV, especially on issuesrelating to port competition, evolution of cargodistribution, and the implications of contempo-rary shipping development on the system.For instance, Frémont (2006) studied ports’throughput distribution within differentEuropean port ranges and investigated howincreasing ship size and the establishment ofhub-and-spoke systems influence ports’ strategyand management. Meanwhile, similar studieson Korean and North American ports were alsoundertaken by Frémont and Ducruet (2005)and Notteboom and Rodrigue (2005), respec-

Source : Figure reconstructed based on the work of Robinson (1976)

Figure 1. The port complex.

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tively. Generally speaking, in all these studies,the researchers mainly considered six factors inthe analysis of ports’ regional system, namely:(i) cargo volume; (ii) routing configurationand ship deployment plan; (iii) port/terminalcharges; (iv) level of port services and physicalconditions (like water draught); (v) calls andservices of other competitive liners; and (vi)policies and restrictions of local and stateauthorities.

Similarly, considerable studies also existedfor category II. For example, Taaffe et al. (1963)and Hoyle (1983) emphasised the develop-ment and stage evolution of the establishmentof hinterland networks. During this process,various port development models were intro-duced, as characterised by the ‘Taaffe-Morrill-Gould’ model (Taaffe et al. 1963) and Hayuth’s‘Five Phase Model’ (Hayuth 1978). Both studiesexplained the relations between differentstages of economic and technical developmentand their impacts on ports and transportationnetworks. Indeed, the relations between portand hinterland were of interest not only totransportation researchers but also to historicalgeographers, as exemplified by studies on port-hinterland relations in the past century (see,for instance, Banga 1992; Wu 2006). Theirstudies clearly indicated the impacts of interna-tional trade on economic, cultural, and socialregional development, especially their diversi-ties resulting from geographical variations.More recent studies related to similar topicshave mainly focused on (i) the characteristicsof different transportation modes and theirpotential roles in newly established multimodallogistics supply chains; (ii) integration betweenports, inland/river navigations, and theireffects; and (iii) the effects of hub-and-spokesystems, establishment of transhipment hubs,and port competition on hinterlands (Notte-boom & Rodrigue 2007).

On the other hand, academic works relatingto the port-foreland system,1 that is, categoryIII, remain comparatively scarce as comparedto other categories within the port complex.Such scarcity is believed to be due to the factthat most analyses have been conducted fromthe perspective of liners’ (especially the majorones) economic benefits such as increased shipsizes and the implications for shipping net-works. Thus, the importance of research on this

issue has yet to attract significant attention,leading to the scant development of relevantanalytical methodologies. Indeed, the tradi-tional research culture often seems to regardthe nature of port competition as equivalent tothe acquisition and/or expansion for hinter-lands, as characterised by the frequent concernof Belgian researchers on how Antwerp shouldcompete with Rotterdam for the Germanheartland (see, for instance, Charlier 1996;Notteboom 1997; Huybrechts et al. 2002).Meanwhile, South Korean researchers oftenfocus on the competition between SouthKorean and Chinese ports (see, for instance,Cullinane & Song 2003).

Nevertheless, owing to the globalisation ofproduction and the gradual establishment ofglobal supply chains (GSCs), especiallycontainer-related ones, port competition anddevelopment are gradually becoming morebuyer-driven, following the GSCs (Gereffi 1994;Gereffi et al. 2005). In response to this trend,Robinson (2002) proposed a new researchparadigm by considering ports as elements ofvalue-driven chain systems. However, in manycases, multinational corporations (MNCs) andsupply chain managers, despite striving foroptimal locations for their investments andactivities (Chapman & Walker 1991), do nothave concrete ideas on where exactly such loca-tions should be. In this case, they often developtheir GSCs contrary to the traditional tradeprocess, that is, choosing relevant regions (orconstructing their own) for export before iden-tifying relevant factories in that particular loca-tion for production and/or value-addedservices. However, the development of suchbuyer-driven GSCs has raised an importantresearch question: which and where are therelevant locations? Assuming that the hub-and-spoke port system works, GSCs may prefer theirproduction bases to be located at hub portcities in developing economies with other con-ditions being equal, for instance, the existenceof free trade zones,2 favourable taxation poli-cies for foreign direct investments (FDIs), andrequired skilled labours. However, variousGSCs may be associated with different marketregions, and more importantly, a port becom-ing a hub or not is determined by a limitednumber of major shipping lines. Once a groupof shippers associated with a specific GSC uses

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the same hub port to export its products to theglobal market region(s), that hub thusbecomes part of the GSC. However, consider-ing the diversity of the global market, someGSCs and shipping lines may not need to set upor use hub ports for various reasons.

Such new development in port selectioncharacterised as buyer-driven rather thanoperator-driven may create opportunities forsecondary ports. For instance, we notice arecent report by APL Logistics (Knapp 2008)revealing a major spatial change within theirGSC. Instead of using single hub ports inboth the market region (USA) and productionregion (India), the company decided to use anumber of secondary ports closer to both indi-vidual foreland markets within the USA andthe separate production bases in India in orderto lower the land transportation costs causedby the ever increasing fuel prices. However,which secondary ports were selected? Whichshipping lines are serving them, and why dothey choose to call at these ports? A recentstatistical analysis administered to shippinglines by Chang et al. (2008) provides someclues. Their study indicated that there are sig-nificant perspective differences between theshipping lines operating ‘trunk’ services (i.e.ocean-going major routes) and the regionalliners that operate intra-Asia routes whenchoosing which port to call. These differencescan be combined into six factors, includingwater draught, land connection, terminal han-dling charge, service reliability, IT ability, andmanagement/worker relationship. However,their analysis did not provide much explana-tion on what kind of port connection patternthe significant perspective differences may leadto. On the other hand, Ducruet (2008) andDucruet et al. (2010) measured the maritimelinkages between North Asian and foreignports which offered some interesting insighton the region’s port hierarchical structure,although still, their approach was highlyoperator- (rather than buyer-) driven.

Hence, this paper aims to provide an expla-nation to such deficiency. Chinese containerports will be used to investigate how such dif-ferent perspectives from the shipping lines, as areflection of the trade demand between Chinaand the rest of the world, may affect the geo-graphical connectedness between Chinese

ports and their foreland markets. By doing so,this paper can generate insights into the geog-raphy of port-foreland system in the globalisa-tion era, which would make a substantialimpact on port strategies, especially how theseports position themselves in tackling intensi-fied competition with traditional hub ports.Perhaps more importantly, it also addresses animportant question: within an established hub-and-spoke global shipping network, what is theway forward for secondary ports? Are therealternatives for them other than accepting theirroles as feeder ports?

Moreover, from the perspective of a largeproduction country for global markets such asChina and India, an individual region may havedifferent forelands or markets to be associatedwith, which may result in various economicimpacts of the specific foreland countries.During the world financial crisis of 2008, forexample, the Pearl River Delta (PRD) regionwas more vulnerable than other parts of Chinabecause of its high dependence on foreignmarkets, especially the American economy. Forexample, towards the end of 2008, Guang-dong’s exports in November and Decemberregistered an unprecedented drop of 12.2 percent and 6.8 per cent, respectively, from that ofthe previous year, while it was estimated thatmore than 7,000 firms had closed down withinthe PRD region (Huang & Chen 2009). Byundertaking this study, we can also understandhow China is divided by globalisation throughtrade relations with different regions aroundthe world, thus allowing policy-makers to have amuch clearer picture of how different prov-inces would be impacted in the face of (oftenunexpected) exogenous shocks like the finan-cial crisis of 2008.

After this introductory section, China’s econ-omic and port development will be briefly intro-duced, followed by the study area and researchmethodology. The results and analysis will thenbe presented, of which the use of port connect-edness in decoding shippers’ impacts on theestablishment of contemporary Chinese seaporthierarchical system will be illustrated. Finally,theconclusionsarguethat thispaperhasofferedvaluable insight in terms of explaining therecent changing strategies of shippers andliners, as well as providing an ideal platform forfurther research on this important topic.

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TRADE AND PORT DEVELOPMENTALONG THE CHINESE COASTLINE

Within the last three decades, the People’sRepublic of China (hereinafter called ‘China’)has transformed itself from a closed, plannedeconomy to an economic powerhouse withheavy reliance on international trade, withinwhich more than 80 per cent of such tradehas been completed with ports’ involve-ment (excluding road transportation passingthrough Hong Kong). China is one of the veryfew countries around the world which has along coastline (approximately 18,000 km) witha large number of ports. In 2007, includingHong Kong, there were 39 ports with scheduledcontainer liner services in China, handling over110 million TEUs.

The processes that made China the singlelargest production base for the world market issupported by two intertwining spatial concen-trations – foreign trade and port development.In terms of foreign trade, it has 99 per cent of itsexports originating from its coastal provinces.The high propensity of the trade-based Chineseeconomy towards the coastal regions shouldnot be a surprise because the cost ratio ofinland transport (container trucking alongtoll highways in particular) and water-bornetransport is high (Wang 2005). Within coastalChina, there are a more complicated, but alsointeresting, trade dynamics from the perspec-tive of the foreland relationship.

China export statistics by provinces to differ-ent foreland markets (Figure 2) shows thatbetween 1995 and 2005, most coastal provincesexperienced significant changes in their fore-lands. For example, in the total exports fromChina to North America, Jiangsu and Shanghaigained significant percentage from 6 per centto 18 per cent and 16 per cent to 31 per cent,respectively, while Guangdong dropped from51 per cent to 34 per cent for the same period.These three provinces together contributedmore than 81 per cent of the total exportsto North America. Chinese exports to Asianmarkets show a different picture because sevenprovinces share one-third of the intra-Asiamarket instead of being dominated by Guang-dong, Shanghai and Jiangsu.

The remaining part of this paper attempts toexplain to what extent such variation is due to

or related to the connectedness of containershipping services to the Chinese port system.

METHODOLOGY AND DATA

This study included all the coastal containerports in China with international connections,a total of 25, ranging from Yingkou on theNortheast to Fangcheng in the Southwest(Figure 3),3 as well as 62 major liners providingcontainer liner services between China andoverseas regions. Understanding the recentregional integration between the economiesof Hong Kong and China, especially the PRDregional port system, Hong Kong was alsoincluded in the dataset as well.

To measure ports’ international connec-tions, the behaviours of shipping lines are,among other factors, important concerns.Instead of measuring individual shipping net-works or routing structure as some studies have(see, for instance, Willingale 1981; Ha 2003;Frémont 2006; Ng 2006; Chang et al. 2008), thisstudy considers the resulting pattern of portconnectedness as the focus of study. To do this,some terms need to be defined first.

International container shipping services withChina – Such a service is: (i) a scheduled linerservice with its own pattern of port rotation;(ii) it may be operated by one single shippingline or more than one line; (iii) it is identi-fied by the shared couple of vessels used andthe same port rotation sequence; (iv) it canoperate weekly, bi-weekly, monthly, or anyscheduled interval; and (v) is connected with aspecific market.

To a shipping service provider, all the abovefive aspects, namely, port rotation pattern,operation sharing, vessel sharing, service fre-quency, and market matter, are related to oneanother when choosing to connect to China.To a port in China, on the other hand, the mostimportant considerations are: (i) whether theport is called by each of these services; themore, the better; (ii) which market is con-nected; and (iii) how frequent are the services.The vessel sharing scheme among service pro-viders and the number of port calls of eachservice are secondary to individual ports.

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40.0%

35.0%

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10.0%

5.0%

0.0%1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

SH 31.9%GD 20.3%

ZJ 14.7%

JS 7.8%SD 4.9%

TJ 2.4%

GX 0.6%

LN 0.4%

FJNo data

35.0%

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

19951985 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

SH 25.4%GD 20.5%

ZJ 6.3%

JS 11.4%

SD 7.1%

TJ 3.5%GX 0.6%

LN 8.2%

HN 0.2%

FJ 4.4%

SH 31.9%GD 27.8%ZJ 11.8%JS 11.6%SD 3.4%

TJ 2.4%GX 0.4%

LNO 0.5%

FJNo data

SH 33.7%GD 32.7%

ZJ 10.6%JS 12.4%

SD 4.1%TJ 2.8%

GX 0.5%LN 2.3%

HN 0.2%

FJ 4.8%

SH 23.7%GD 44.5%

ZJO 7.0%JS 10.6%

SD 4.0%TJ 3.7%

GX 0.4%LN 2.8%

HN 0.2%

FJ 5.6%

SH 25.8%GD 29.7%

ZJO 10.7%JS 12.3%

SD 3.9%

TJ 3.0%GX 0.7%

LNO 3.0%

HN 0.2%

FJ 4.8%

Figure 2. China export statistics by provinces to foreland markets.

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Market coverage – Understanding that signifi-cant variations exist between different Chineseports in terms of foreland coverage, marketsshould be divided into regions (rather thancities or countries) to ensure consistencythroughout the analysis. Thus, we divided inter-national connections with Chinese ports intoeight market regions, as follows:

1. China-North America (CA-NA).2. China-Europe (including Mediterranean

countries) (CA-EU).3. China-Australasia (CA-AU).4. China-Middle East and South Asia (CA-ME).5. China-Africa (CA-AF).6. China-Latin America (CA-LA).7. China-Korea/Japan/Taiwan/Southeast

Asia (Intra-Asia).

8. China-Other connections (CA-OT), includ-ing: (i) round-the-world routes; (ii) to morethan one continent; and (iii) China-Russia.

The market coverage between ports and theseidentified regions depends on (i) whetherthere are any international connectionsbetween the ports and stated market regionsand, if any, (ii) the number of such connec-tions. To reflect the degree of concentration interms of market coverage between differentports and market regions, the Herfindahl-Hirschman index (HHI) is used for analysis.HHI measures the size of particular firms inrelation to the industry and would also reflect amarket’s degree of concentration. HHI is rep-resented by the sum of squares of market sharesassociated with a specific market, say, j. In thiscase, the HHI of a particular port, say, n (HHIn),can be expressed as follows:

HHIxX

Snn

n

N

nn

N

= ( ) == =

∑ ∑1

2

2

1

(1)

s.t.

N S X, , ≥ 0 (2)

where n is the total number of ports studied inthe specified market (n = 1, . . . ,N), and x is thetotal number of international container linerservices calling port n, (x = 1, . . . , X). Withsuch understanding, the percentage of marketpossession of port n in this region (Sn) can beexpressed as x Xn . By applying Equation (1),the market size of each port in each region, say,j, can be obtained. After then, the HHI valueswill be divided by the total number of geo-graphical regions in order to obtain the marketcoverage index of port, say, n (MCn). It can beexpressed as follows:

MCJ

w HHIn j njj

J

= ( )=

∑1

1

(3)

s.t.

J w, ≥ 0 (4)

where j is the number of regions (j = 1, . . . ,J),and wj is the weight for market j. In accordance

Figure 3. Chinese ports included in this study.

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with the standard application of HHI, MCshould range from 1 to 0, that is, from 100 percent to 0 per cent, affected by the number ofparticipants or the ports within the market. Adecrease in the HHI value indicates that themarket is less concentrated and vice versa.

Frequency of services – From the perspective ofusers, the frequency of services is another keyattribute in deciding a port’s international con-nectivity,especiallygiven itspivotal role inaffect-ing the supply chain’s efficiency. In this study,the frequency of service can be understood as areflection of how frequent container liner ser-vices are connected between the inscribedChinese ports and overseas regions (expressedin the total number of services destined to theseregions, say, j, per port per month).

Service sequence can be divided into mul-tiple services per week, once per fortnight,once per month, or other possibilities. Giventhat different liner shipping companies can, inreality, use the same container ship within thesame scheduled service (usually also belongingto the same strategic alliance) but reportedseparately, efforts have been devoted to identi-fying the shared couple of container shipsdeployed and the same port rotation sequence.It has been ensured that the frequency of ser-vices connecting specified markets must beequivalent to the total number of servicescalling at the studied ports.

Port connectedness – We believe that the twoindicators as defined above, that is, market cov-erage and frequency of services, can reflect thedifference in port connectedness with a specificforeland market. Based on these differencesamong Chinese ports, we may then classify theports according to their role with the forelandmarket rather than according to their physicalor infrastructural scale. Indeed, the abovemethodological approach possesses significantadvantages as it implies that analytical resultsare not based on liner strategies, like hub-and-spoke networks, but from the perspective ofshippers, based on the degree of internationalconnections between Chinese ports and theiroverseas markets. This method allows us toidentify variations between different Chineseports which are otherwise non-identifiable byother existing indicators. Although the dataset

does not contain detailed information aboutindividual ports, for example, terminalcharges, water draught, etc., it can providemeaningful findings about the overall situationof China’s shipping geography and port hier-archical system. Since the dataset is relatedto scheduled services and the frequency ofChinese ports rather than cargo throughputs,any concerns related to indirect connected-ness via hub ports outside China can be safelydislodged.

Sources and quality of dataset – Data collectionhas been complicated by the fact that theinscribed ports are located within a developingcountry, of which reliable quantitative data areoften not easy to obtain. To ensure the data’squality, necessary data have been obtainedfrom the scheduling information available inChina and Hong Kong shipping gazettes. Allscheduled services in July 2007 was used as thestudy’s database. These data were publishedby the China Shipping Gazette (2006–7) andthe Hong Kong Shipping Gazette (2006–7).To avoid double counting of code-sharedvessels and other possible errors, we confirmedthe collected information by checking themagainst web sites or other available publishedsources.4

Dedicated to China’s liner service users, thesegazettes have enjoyed decent reputation in pro-viding reliable information on the provision ofscheduled liners from all liners, both for callingand leaving Chinese ports. In terms of dates,given the substantial efforts required in collect-ing and processing scheduled liners’ datathroughout the year, as well as the possibility ofoverlooking certain scheduled lines within indi-vidual weeks, month has been chosen as thedate’sbasicunit incalculatingservice frequency.Also, routine peaks (like September andOctober for Europe and North America owingto the approaching Christmas season) andunstable ‘drought’ months (like January andFebruary, of which the date of the Chinese NewYear can vary significantly based on the tradi-tional Chinese lunar calendar) have beenavoided, and thus July has been chosen. To mini-mise the possibility of missing out the loopholesof specific years, data have been obtained fromtwo continuous years (2006 and 2007).

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Furthermore, during the finalisation ofthe dataset, two technical issues have beenresolved. First, recognising that data are pro-vided by individual liners, of which the possi-bility of code-sharing with other liners alwaysexists (but not necessarily or clearly indicatedin the sources), considerable time has beenspent in carefully analysing the timetablesand identifying duplicated schedules due tocode-sharing, as well as verifying the collecteddata with other sources, notably the officialwebsites of the liners concerned. Second, tominimise the possibility of including initi-ally scheduled but later cancelled or delayedservices into the dataset, substantial effortshave been put to obtaining real-time infor-mation by accessing the official websites of theports concerned. After all these efforts, theauthors are confident that significant resi-duals have been minimised, if not altogetherremoved.

RESULTS AND ANALYSIS

Market coverage and frequency of services –Several scenarios can be identified concerningthe frequency of scheduled container liner ser-vices between the studied ports and overseasmarkets. First, 12 of these 25 ports only possessIntra-Asian connections. Second, the frequencyof Intra-Asian services has highlighted the out-standing status of Yangtze River Delta (YRD)and PRD. Shanghai and Ningbo are combinedto form YRD’s port complex, while PRD’s portcomplex consists of Hong Kong and Shenzhen.Third, the major ports located in northernChina (hereafter called Huabei), notablyDalian, Qingdao, and Tianjin, possess higherfrequency of services than those in Ningbo andShenzhen, although they are considerablylower than those in Hong Kong and Shanghai.In this respect, two particular cases can befurther discussed, and one of them is Xiamen.Ranked sixth within China in terms of servicefrequency, Xiamen covers all geographicalregions except the Middle East. Also, whencompared to the major Huabei ports, Xiamenalso enjoys a higher number of destinations toEurope, while the number of services to NorthAmerica is only similar to Qingdao (whichhas recently been established by Maersk as itsregional hub). Another outstanding case is

Guangzhou, while possessing relatively fewnumbers of services (68), its market coverage isexceptionally high and covers all regions butLatin America.

Taking an alternative approach, the port’scapacity has been excluded, and analysis isundertaken based on the share by containershipping services to different foreland regionports in China. Further significant scenarios canbe identified here, where Shanghai and HongKong share the most similarities in terms of widemarket coverage. In terms of their co-opetitors5

within the same region (YRD and PRD, respec-tively), Ningbo and Shenzhen are also highlysimilar. Also, it is found that some ports possesscertain specialities in terms of market coverage.For example, while possessing direct Intra-Asianconnections (73%), Fuzhou also possessesdirect connections linking Africa (13%) and theMiddleEast (14%),albeitonarather small scale.Similar examples include Lianyungang, Yantaiand Dalian.

To minimise any unexpectancy broughtabout by singular months, the similarities anddifferences of the daily number of services, thatis, the frequency of services, between 2006 and2007 are also compared. Analytical results indi-cate that the general port’s service pattern is, tosay the least, consistent, reflecting the generalstability of Chinese ports in terms of interna-tional connectivity. Indeed, it is reasonable toeven argue that in general, the container ship-ping market linking China with its overseasmarket has reached a mature stage, particularlyin PRD and YRD.6 On the other hand, Guang-zhou has experienced the highest growth rate,mainly due to the latest establishment of theNew Nangsha International Deep-Sea Termi-nal. Nevertheless, its effect on the overallpicture is not too significant thanks to its com-paratively low container throughputs. On thecontrary, Rizhao has experienced the most sig-nificant throughput decline, mainly because ofthe cancellation of Intra-Asian liner services in2006. Finally, Shanghai and Ningbo have expe-rienced similar growth rates in terms of thenumber of services, while Dalian and Tianjinare in the same predicament. Such scenariosimply the close interrelation between port’sconnectivity and shipping network adjustmentswithin particular regions. These situations alsotake place within PRD, of which Hong Kong

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and Shenzhen have experienced similargrowth rates. Such patterns confirm Wang’sargument where, in port’s term, Shenzhen isactually an extension of a ‘Greater Hong Kong’falling beyond Hong Kong’s jurisdiction (Wang1998). A similar argument also applies whendescribing the relation between Shanghai andNingbo.

When analysing the relation between con-tainer throughputs and the frequency of ser-vices,7 it is found that the bigger the port, thehigher the interrelation between the twofactors, while such interrelation is not that sig-nificant for medium and small-sized ports.However, when comparing the growth of con-tainer throughput and the frequency of ser-vices, such dynamic interrelation becomes lessvisible, and the increase in container through-puts of many ports is actually more related toliner operations, such as increasing the con-tainer ship’s size and/or higher carrying effi-ciency, among others. Ports with lowinternational connectivity are believed to behighly sensitive to whether liners are callingthere. Such a situation is also similar for liners,which are also overtly cautious when decidingwhether to include medium- and small-sized

Chinese ports in their services. Nevertheless,from the perspective of major ports withinparticular regions, factors like networkrestructuring, changing ship size, strategic alli-ances, and slot sharing had been morepopular strategies for liners than adjusting theconnectivity of ports. By comparing the shareof services by liners between 2006 and 2007, itis found that in virtually every region, majorliners have undertaken certain annual adjust-ments in terms of the sharing of services.However, such adjustments have minimaleffects on the overall connections betweenChina and its foreland markets, and the size ofsuch adjustments is significantly larger thanthe average number of calls to differentChinese ports. Finally, regional and othersmaller liners tend to use different strategiesand focus on specific markets. For Intra-Asianservice providers, they tend to have moreports of call per service, as they do not have torely on hub ports.

China’s port hierarchical system and discus-sions – By applying Equation (3), a figure onChina’s port hierarchical system can be con-structed (Figure 4). Apart from frequency of

Figure 4. China’s seaport hierarchical system based on international port connectedness.

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services, such measures can enhance under-standing of how each port is served by all liners,thus visualising the classification of ports byscale and revealing China’s seaport hierarchi-cal system.

From Figure 4, it is possible to classifyChinese ports into three hypothetical hierar-chies depending on their international connec-tivity. The top hierarchy, hereafter called ‘H1’,consists of four ports, located in PRD and YRD,possessing the strongest connectivity betweenChina and the overseas market, includingHong Kong, Shenzhen, Shanghai, and Ningbo,respectively, with each pair forming a dualisticmega hub port group connecting its respectivehinterlands with overseas markets. Towards theother end, the hierarchy with the lowest inter-national connectivity, hereafter called ‘H3’,consists of 15 ports which have direct connec-tions with (non-Chinese) Asian ports, suggest-ing their feeder status and/or regional trade’scharacteristics (Figure 3). In general, the geo-graphical coverage of H3 ports is highly concen-trated within a single or a few region(s) (mainlyIntra-Asian), while their major difference lies inthe frequency of services.

What is most interesting, however, is theidentification of Dalian, Guangzhou, Qingdao,Tianjin and Xiamen into a distinguished groupwith visible characteristics overtly differentfrom those belonging to H1 and H3, hereaftercalled ‘H2’. Based on their international con-nectivity, H2 ports can neither be classified asmajor hubs or feeder ports as generally under-stood within the existing literature as they haverather high HHI values (thus, the wide geo-graphical coverage) but low service frequen-cies, which are especially true for Guangzhouand Xiamen. This ‘in-between’ phenomenoncan trigger at least three hypotheses for furtherresearch. The first hypothesis is that H2 portsare currently in the process of becoming majorhubs. In other words, their development islikely to pose immediate, direct competitivechallenges to H1 ports. Statistically speaking,such possibility seems to be quite sensible giventhe rather linear pattern when the three hier-archies are graphically presented together(Figure 4). This hypothesis implies that whileWang’s (1998) query on whether one regioncan sustain two load centres has largely beenanswered, the next research question seems to

be about whether triple, or even multiple, loadcentres or port ‘clusters’ can be sustainedwithin a particular region. A second hypothesisis that a multiple layer of hub-and-spoke struc-tures has been established within the hierarchi-cal system, of which different layers can becompeting (or complementary to) with oneanother. The third hypothesis reflects a morecomplicated situation where the ports in hub-and-spoke and other direct-call major non-hubports co-exist. Such developments can be facili-tated by the existence of niche markets forthese ports to exploit (like the major Huabeiports owing to their proximities with theKorean and Japanese markets) which has beenwell-documented by Rodrigue and Lee (2006).The second and third hypotheses supportHayuth’s five phase model (Hayuth 1978)where the challenges from peripheral portshave clearly existed (stage V) within theChinese port hierarchical system. This paper’sanalysis has taken it further, however, indicat-ing that such challenges can be multi-facetedby creating alternative systems rather thansticking to the established order or the hub-and-feeder relationship between ports. Thisis especially true, as most of the H2 portsidentified do not have close neighbour(s)with very high connectivity (like Ningbo andShenzhen).

While further research is necessary toprovide clear answers to these hypotheses, whatcan be confirmed here is that H2 ports areundergoing a transitional stage, where theircurrent development is characterised by dyna-micity, diversity, and comparatively greater vul-nerability to changing trade patterns andoverseas activities of shippers. Thus, the resultssupport the view of Lemarchand and Joly(2009) who note that changes in port hierar-chy, especially medium-size ports, can bea permanent phenomenon. The changingrequirements of shippers in their overseasactivities, including FDIs into new marketniches in order to keep production costsdown,8 have triggered new initiatives for majorliners to establish alternative strategies tocomplement the established order. In this way,liners have ensured that they do not miss outon any potential opportunities, especially inaccommodating the changing roles of ports inthe development of multimodal supply chains

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(Robinson 2002). At the same time, however,the pressure on liners to comprehensivelyrevise the established order within existingglobal shipping networks can also be relievedsignificantly. This line of argument is consistentwith earlier discussions that liner annual adjust-ments have minimal effects on the overall trunkline connections between China and overseasmarkets. The existence of H2 ports also seemsto support earlier discussions that while linersare largely cautious when deciding whether toinclude medium- and small-sized Chinese portsin their services. This is due to increasing diffi-culties in comprehensively adjusting estab-lished trunk services arising from increasingcontainer ship sizes and obliged commitmentsfor strategic shipping alliances, as pointed outby Ng (2009). Indeed, from the analyticalresults, while shippers in China do not have any

visibly explicit effects on the top hierarchy (H1),their new investment strategies have graduallycreated an additional layer of port hierarchy(H2) lying in-between the conventional ‘hub’(H1) and regional ports (H3).

Geographically, the three-level hierarchicalport system of China is illustrated in Figure 5,which reveals a pattern with the following char-acteristics of shipping service connectedness:

• Hong Kong–Shenzhen and Shanghai–Ningbo forms two super dual-port regionalhubs serving the two major productionbases, Pearl River Delta and Yangtze RiverDelta, respectively. In terms of the numberof services to each foreland market region,Hong Kong and Shanghai are similar toeach other; so is the case between Shenzhenand Ningbo.

Figure 5. Distribution of container shipping liners’ services to Chinese coast ports by foreland market, July 2007.

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• Dalian, Tianjin, Qingdao, Xiamen andGuangzhou present their regional hub role,having less comprehensive coverage to theworld market, each with some strengthsand weakness to different forelandregions.

• Other ports seldom connect to ports outsideAsia, and their intra-Asia services vary signifi-cantly from one another.

• Although the largest proportion of through-puts at the hub ports is the trade betweenChina and two major markets, NorthAmerica and Europe, Asian countries arethe best connected in terms of number ofservices.

• Although a larger number of Chinese portshave regular shipping services with theirAsian neighbours, intra-Asia servicesresemble similar geographical patterns as theservices to other markets, which peaked atthe hub ports with as high as much as 200services per month to Shanghai, Hong Kong,Qingdao, Tianjin and Dalian.

We can then conceptualise the above empiricaldetails into a conceptual model, as shown inFigure 6. Instead of depicting the network orrouting structure of individual shipping lines,this model intends to reflect how Chineseports are connected in a hierarchical manner.Chinese ports are classified into four tiers fromlarge to small:

1. Super hub: Hong Kong–Shenzhen andShanghai–Ningbo are the two super hubsserving PRD and YRD, respectively.

2. Hub port: Qingdao, Dalian, Xiamen, andGuangzhou fall into this tier.

3. Regional port: which has all or most connec-tions through minor shipping lines to itsneighbouring ports in Asia.

4. Local port: without any international ser-vices (not discussed in this paper)

CONCLUSIONS

Since containerisation and the establishmentof hub-and-spoke networks along major ship-ping trunk routes, ports have been widelyregarded as important nodes affecting globaleconomic development. However, academicattention has mostly focused on ports’ internalsystem, port-hinterland system and regionalport system while works addressing the port-foreland system, despite becoming moreimportant owing to the more buyer-drivennature of port choice, have remained scarce.Hence, by analysing the port-foreland systemand investigating the international connectionsbetween its container ports and forelandmarkets, this paper investigates China’s portinternational connectedness, as well as theimpact of shippers on the establishment of itsport hierarchical system. Empirical results have

Figure 6. Conceptualisation of Chinese port connectedness with regional and global foreland markets.

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verified a group of ports neither belong to hubnor feeder ports within China’s seaport hierar-chical system, where a multiple layer of hub-and-spoke systems and/or other direct-callmajor non-hub ports co-exist, as characterisedby a wide geographical coverage but low fre-quency of services. Based on the literaturereview, this newly identified category of ports,despite their dynamicity and relatively diversi-fied strategies, has largely been overlooked byprevious researchers. While the underlyingcauses behind this phenomenon are subject tofurther research, this paper’s analysis suggeststhat it is related to the changing need of ship-pers in their business expansions and FDIs.

This paper bears several important contribu-tions. First, although shippers are yet to exer-cise any real impacts in breaking up theestablished order within the liner shippingnetwork, nor are they likely (or want) to do soin the foreseeable future, the pressure on linersto make certain (at least minor or secondary)adjustments to the established order so as toaddress shippers’ changing requirements hasalready been felt. While adjusting shipping net-works and co-operation strategies with theircounterparts, major liners generally take themaintenance of market coverage and fre-quency of services as the core factors of consid-eration. However, they also allow certainflexibilities within niche areas, depending onchanging trade patterns and new opportuni-ties. Such outcomes have confirmed the mainhypothesis where shippers play certain, if notnecessarily dominating, roles in the inter-national connectivity of ports. By identifyingH2 ports and proposing a number of hypo-theses to explain their formation and dynamics,this paper provides a solid platform in kick-starting this research direction. Given theever-changing trade environments between dif-ferent markets, it can be regarded as the pre-decessor of time-series or pan-geographicalanalyses of similar topics.

Second, by identifying the connectedness ofcoastal ports against forelands, we can alsounderstand how China is divided by globalisa-tion through trade relations with differentregions around the world. By doing so, it notonly visualises the geographical distribution ofeconomic activities within the country but,perhaps more importantly, also allows policy-

makers to have a much clearer picture of howdifferent regions/provinces would be impactedin the face of (often unexpected) exogenousshocks such as the financial crisis in 2008. Inthe long term, this paper provides a usefulapproach to policy-makers as they assess andforesee the economic well-being of geographi-cal regions/provinces, thus improving regionalplanning and the implementation of moreeffective regional policies.

Third, the conceptualisation of the hierar-chical Chinese port-foreland relationship canbe regarded as a geographical classificationthat provides a platform for further studies onhinterland-port-foreland relations. Such rela-tions are the macro form and geographicalimplication of global supply chains. Admit-tedly, with only 1–2 years of observation, we maynot be able to tell whether such a hereticalsystem is stable. However, the dynamics of sucha system are critical for us to identify andconfirm the possibility that coastal China maybe so divided into several segments, each ofwhich has its own major trade partners and, inparticular, being served by specific types ofshipping lines that focus on that marketsegment. Such confirmation can lead to morestudies in a much-needed research direction: anew regional division of labour in a world pro-duction powerhouse is formed and shaped byglobal trade, supply chains, and related trans-port services.

Last but not least, analytical results open upseveral interesting queries for further research.As discussed earlier, the identification of asecond layer within the Chinese port hierarchi-cal system has supported Hayuth’s Five PhaseModel (Hayuth 1978) where challenges fromperipheral ports have taken place. In thisrespect, is the Chinese case unique and, if so,what are the lessons for other regions (espe-cially developing and/or rising economies)?Alternatively, is it an illustrative case indicatingthat a new general trend is developing also forother highly developed regions, for example,the Hamburg-Le Havre range in NorthernEurope? This does not only require furtherstudies on other regions (using similar method-ology) but also opens up the issue on the evolv-ing strategies of port authorities when strivingfor survival when facing dominating ‘super-hubs’. The evolving strategies of port authori-

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ties contribute to another query: how will thesestrategies affect the relations between (andamong) different port layers? Will they be com-petitive or complementary with each other?Inevitably, this also implies the need to investi-gate whether multiple load centres can be sus-tained within a region. In conclusion, thispaper offers a decent research platform con-tributing to the progress in port geography andregional development.

Acknowledgements

As a collaboration of researchers from two universi-ties, this study is funded partly by the Hong KongResearch Grant Council (RGC) (project accountcode: A-SA32) to Adolf Koi Yu Ng, and partly by theHui Oi Chow Trust Fund to James Jixian Wang (No.200801172008). We would like to thank the editorsand anonymous referees for their useful commentsand advices. Usual disclaimers apply.

Notes

1. ‘Foreland’ in this paper is different from that inthe work of Rodrigue and Notteboom (2009)where it is regarded as a maritime-based conceptfocusing on the capture of maritime hinterland byintermediate hubs (ports). In this paper, forelandis a land-based concept implying different over-seas regions around the world where the goodsproduced in China are destined.

2. The term ‘free trade zone’ can vary between dif-ferent countries and regions, for example, econ-omic development zone, foreign trade zone, freeport, transit zone, special customs privilege zone,special economic zone, and so on. See Firoz et al.(2003) and Feng and Hsieh (2008).

3. Here, liners with fewer than five internationalservices have been excluded. Services betweenHong Kong and Mainland Chinese ports (i.e.excluding Taiwanese ports) are counted asdomestic, while those between Taiwanese andMainland Chinese ports are counted as interna-tional connections.

4. Some data are also verified through the ChinaShipping Gazette’s official Web site: <http://www.snet.com.cn>.

5. For detailed explanation on the concept and prac-tice of co-opetition in ports, see Song (2003).

6. By ‘maturity’, it means that: (i) there are multipleplayers to cover the market; (ii) various servicestrategies are employed to fit the needs of major

market sections (hubs) and certain minor/nichemarkets; and (iii) liners keep adjusting themselvesaccording to market changes, including thechoice of port-of-call, routing strategy, and thechoice of the container ship’s size.

7. 2006 data have been used in this figure owing tothe incompleteness of 2007 data, which furtherconfirms authors’ earlier discussions that the col-lection of reliable quantitative data in a develop-ing country like China is often difficult.

8. For instance, according to anecdotal informationfrom the industry, in 2008, the annual salaries oftypical workers in textile factories in Shenzhenand Guangzhou were about RMB 30,000 (USD4,380) and RMB 21,600 (USD 3,154), respectively.

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