China’s Port Consolidation to Boost Operators’ Revenue Stability, Government Linkage

China’s port consolidation under the “One Province One Port” initiative will enhance the operators’ standalone credit quality and increase the potential support from their provincial governments, Fitch Ratings says.

We think port operators will benefit from greater revenue stability, driven by better volume resilience and stronger pricing power after the consolidation, which could enable them to gain market share, reduce competition, improve efficiency and enhance the ability to raise tariffs.

Port consolidation was proposed by the central government after China’s coastal cargo throughput growth slowed substantially in 2015 as port capacity increased, and fierce competition among ports on both tariff and volume hurt their earnings. Zhejiang province kicked off the process in 2015.

Port operators that are consolidated are typically owned and administered by provincial governments. This moves the operators closer to higher-level governments, which have stronger financial and administrative capabilities than their local counterparts.

The provinces are at varying stages of progress. Our study of five selected coastal provinces within three major economic regions showed that Zhejiang and Shandong led the way after having completed their consolidation in 2020 and 2019, respectively. Hebei is at an advanced stage while Jiangsu and Guangdong are still behind schedule.

Fitch rates Zhejiang Provincial Seaport Investment & Operation Group Co., Ltd. (A+/Stable) in Zhejiang province and Lianyungang Port Group Co., Ltd. (BBB/Stable) in Jiangsu province.
Source: Fitch Ratings