Shortly after Beijing approved the expansion of the China (Shanghai) Pilot Free Trade Zone, Shanghai Capacity Exchange Co Ltd launched its new online container forward-booking platform, in January, believed to be the first of its kind in the world.
One of the first 25 companies to be registered in the zone, Shanghai Capacity had until then kept a low-profile as it worked on fine-tuning the trading rules for the new platform, by running a pilot program since March last year.
Comparing it to China's largest online marketplace Taobao.com, Shanghai Capacity General Manager Fu Weizhong said the online trading system will be run based on real-time freight rates.
Discounts will be offered on the forward booking of containers, much like those offered when booking advanced air tickets.
Consignors will book container space in advance by paying a deposit. If the client withdraws from the booking, the deposit will not be returned, but if the shipping company breaks the contract, it will be charged a penalty.
As deposits are required, consignors will be offered lower prices than the market's average freight cost, explained Fu.
Since the pilot started last year, more than 100 shipping companies, cargo agencies, non-vessel operating common carriers and consignors have taken part in the design of the platform, with the trading volume both online and offline reaching 1,000 containers every month.
Zhen Hong, secretary-general of the Shanghai International Shipping Institute, said that in recent years London has emerged as a major shipping center. It is particularly well known for its Baltic Dry Index, which provides an assessment of the prices being charged on 23 shipping routes used to move the majority of raw materials by sea.
Zhen pointed out that with international shipping rules still being decided elsewhere, Shanghai needs to have more decision-making abilities if it really aspires to become an international shipping hub.
With this in mind, the State Council announced recently the country's aim of building an international shipping system by 2020, which will be safe, convenient, highly efficient, economical, eco-friendly and globally competitive.
Fu said that although Shanghai looks up to London and aims to build itself into the next global shipping center, it still lacks pricing power, even after launching the Shanghai Shipping Index five years ago－but with this new online trading system, everything is very likely to change.
"The shipping industry in China has been lacking credit over the past few decades," said Fu.
"There is no credit between the consignor and the ship owner, and as a result, it happens from time to time that brokers are not paid. The consignor will now make price enquiries to more than five ship owners, which will largely affect the accuracy of the statistics used in future."
The financial reforms being undertaken at the FTZ have provided the perfect home for the upcoming online container forward booking platform, said Fu.
With most ship owners set to be involved based overseas, and the consignors based in China, there is expected to be a huge demand for two-way cross-border renminbi payment system.
"The entire shipping industry has remained stagnant ever since the global financial crisis of 2008," said Fu.
"London's position at the heart of the world's shipping industry has remained unshaken since then. There are worries that the sluggish international trade that China is facing will bring bad timings for the upcoming online container forward booking system. But the favorable policies introduced by the FTZ authorities have come just in time to purge the gloom."
