The opening of cabotage: China’s trials and challenges

Abstract

Cabotage law has long been adopted in many countries, including China. However, in November 2021, China announced a reform on trial basis allowing eligible foreign container liner companies to use foreign-flagged ships for coastal piggybacking business between specific Chinese ports and Shanghai Yangshan Port with foreign trade containers, which resulted in a partial relaxation of Chinese cabotage law. This new policy is based on the prior coastal piggybacking business applied for ships owned or controlled by Chinese entities but flying foreign flags. Although restricted in a quite narrow application, the new policy is supposed to help increase the port throughput and benefit foreign container liner companies, but might threaten the interests of domestic shipping industry. There will be challenges in enforcing the policy reciprocally since no agreement on the opening of the cabotage has been concluded by China in any existing bilateral or multilateral agreement before. The future of the policy depends on its effect on driving the reform of domestic shipping management and its impact on the domestic shipping market.