How OBOR affects China's cruise industry

Cruise industry
Cruise industry

Six hundred years ago, Zheng He, a Chinese official, along with 27,000 men and 240 ships, visited more than 30 countries along the Pacific and the Indian Oceans. Even though the current OBOR (One Belt One Road) strategy is significantly different from Zheng He’s voyages to the western seas, shipbuilding is nevertheless the starting point for navigation.

On December 2, Caissa Touristic, a Sino-German tour company, cooperated with the British-American-owned but Italy-based cruise company Costa Cruise Lines, launching a 46 -day cruise around the Pacific Ocean. The cruise sets sail from Tianjin harbour and passes by another 14 harbours including Fukuoka (Japan), Jeju (Korea), Busan (Korea), and the island of Saipan. As the cruise anchors at the tourist attractions along the Maritime Silk Road, this route can be seen as part of the OBOR strategy in action.

However, China’s cruise industry extends beyond simple tourist services. It also includes cruise design, coachwork, operations, and harbour supporting service.

On October 2014, the China State Shipbuilding Corporation (CSSC) signed a memorandum of understanding (MoU) with Carnival Cruise Lines, a listed company on the American Stock Exchange, to build top level cruise business in China, including plans to build five cruise ships. On December 28, the CSSC signed another agreement with Agricultural Bank of China, Bank of China, China Construction Bank, China Everbright Bank, and Industrial Bank, to set up a 30 billion renminbi fund for investing into cruise manufacturing, operations, and related fields.

As of October 2016, China has already finished the construction of eight cruise ports including Wusong (Shanghai), Guoke (Shanghai), Tianjin, Sanya (Haikou), Xiamen, Zhoushan, Qingdao and Shenzhen. Dalian and Guangzhou port are currently under construction. These eight ports have already received 810 cruises with 3.7 million people in 2016.

But despite the progress, the cruise industry in China is at an early stage with potential profitable opportunities, there are still some concerns. First, more research is needed to understand the market’s real needs. Unlike how the European’s discovered America by ship, China lacks a nautical tradition of naval navigation. More market development work will therefore be needed to popularize cruise vacations.

Second, similar to other OBOR infrastructure projects, port construction and cruise coachwork are big investments with long payback periods. Attention needs to be paid to whether the cash from China can really support so many big projects at the same time and over such a long period. Historians know that Zeng He's voyages emptied the nation's treasury during the Ming dynasty which have been cited as a possible reason for the dynasty's decline.  

Despite these challenges, any progress that comes with building China’s cruise industry is expected to benefit the OBOR strategy in the long-term.

Date

5 Jan 2017

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