Shipping

Harbouring doubts

Fatal blasts shed light on Tianjin’s “independent port kingdom”

Firefighter walks among damaged vehicles as smoke rises amidst shipping containers at the site of Wednesday night's explosions, at Binhai new district in Tianjin, China

Some of the damage caused by the explosions in Tianjin Port

In 2013 the Belgian chocolate maker “Italo Suisse” wanted to change its brand name because it was no longer associated with either Italy or Switzerland. It rebranded as “ISIS Chocolates”. Of course, the timing was unfortunate and sales slumped following the rise of the extremist group of the same name. The chocolate maker changed its name again to ‘Libeert’ last year.

In China many companies have tied their names to a particular locality, enthusiastically so if the locale promises hot economic prospects. Beijing Enterprise, Shanghai Industrial, Shenzhen Holdings – the list goes on.

But the group of companies that have proudly associated with Tianjin may be having a rethink in the wake of the deadly explosions in the port city on August 12, which has claimed 139 lives.

The share prices of Tianjin Development and Binhai Investment, which are listed in Hong Kong both fell more than 2% on the trading day following the blasts.

Yet it seems that Tianjin Port Group, a powerful state firm owning the port area that was ripped apart by the blasts, has felt the greatest fallout.

The company’s two key listed units – Tianjin Port Holdings (TPH) in Shanghai and Tianjin Port Development (TPD) in Hong Kong – have both plunged more than 35% since the accident – that’s despite clarifications from both TPH and TPD that their “port operations are normal” and that “the accident won’t cause any material loss to the group”.

Tianjin is the world’s 10th biggest port and the most important in northern China, providing an entrepot for the import of strategic resources for much of the north of the country. Tianjin Port Group was created in 2004 as part of the reform of the former Tianjin Port Authority. Since then total assets have grown nearly eightfold to Rmb135 billion ($21 billion), China Business Journal has noted.

In other major ports like Shanghai and Shenzhen, state firms typically compete with each other or foreign operators. But underscoring its virtual monopoly status in the port area, Tianjin Port Group operates 151 of the 160 or so berths that are available. Leveraging from this position of strength, the port operator has entered into various joint ventures with leading state firms such as Sinochem, CNOOC and Shenhua, says China Business Journal. Its commercial interests now span the import, processing and transport of raw materials.

“It has formed a massive kingdom in the port of Tianjin, a complex web of interests, both with state firms under the central and local government,” the newspaper notes.

China Economic Weekly, a financial magazine under Xinhua, agrees with that view, also reporting that Tianjin Port Group has been operating as an “independent kingdom” since it was founded.

“Even the [Tianjin] local government has no say in which companies are allowed to do business in the district. Tianjin Port Group decides everything,” the magazine said, quoting a local official.

How is this possible? Southern Metropolis Daily says that Tianjin’s military importance (see WiC292) means that governance of its port district has been divorced from the rest of the city since 1949. Before 2004 the Tianjin Port Authority had almost complete control over the zone’s economic planning, even running its own police and firefighting forces. When the Tianjin Port Group was formed, it took over the port authority’s commercial units, but also most of its administrative power.

“Everyone knows that all the policemen and firemen in Tianjin port are not part of the civil service. They are all in fact the employees of a commercial firm [Tianjin Port Group],” an insider told Southern Metropolis Daily.

Many of these employees were the first to arrive at the scene of the fire that engulfed the chemical warehouse that exploded this month. Hong Kong’s Apple Daily has reported that a number of them are believed to have perished, but that their names are yet to be added to the official casualty list. (Families of missing firefighters stormed a news conference last week, demanding more information on their relatives.)

Likewise the media is asking for more answers from company bosses about the disaster. “Why has no one come forward and claimed responsibility after the explosion? Is it true that no one can actually control Tianjin’s port, as observers have been suggesting all along?” Southern Metropolis Daily asked.

The newspaper also suggests that Tianjin Port Group should at least be held accountable for allowing Ruihai, the owner of the logistics firm at the centre of the scandal, to stockpile such huge amounts of dangerous chemicals (the media reports that 700 tonnes of cyanide – or 70 times the permitted amount –was being stored at the warehouse where the blasts took place).

The question now is whether Tianjin Port can survive the disaster with its autonomy intact. After a deadly train disaster in 2011, the country’s most powerful independent fiefdom – the Ministry of Railways – was broken up. The question now is whether Tianjin Port can survive the disaster with its autonomy intact. After a deadly train disaster in 2011, the country’s most powerful independent fiefdom – the Ministry of Railways – was broken up. A fuller review looks likely after news on Thursday that the president of Tianjin Port Group and two of his colleagues have been detained. Meanwhile, TPD was also suspended from trading on Thursday.


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