A United States company has signed a contract with the port of Lianyungang in east China's Jiangsu Province for a 51 percent share of its Xugou project.

The move comes in the wake of a change in the law allowing foreign companies to hold controlling stakes in Chinese ports.

The latest investment guideline for foreign capital issued by the Chinese government ended a regulation limiting foreign ownership of ports to less than 50 percent, the Ministry of Communications said in Lianyungang on Tuesday.

The move is expected to unleash a new tide of investment in China's ports, said Wang Jinwen, director of port administration of the ministry's shipping department.

The investment by the US firm United Yield International in Lianyungang comes after a joint investment deal was agreed earlier this year between Denmark's A.P. Moller Maersk Group and Britain's P&O with the port of Qingdao in east China's Shandong Province.

The United Yield International is a 51 percent shareholder in the Xugou project. The Lianyungang Port group and two other Chinese companies hold the remaining 49 percent but Xinhua did not name the other two companies.

Wang said ports were the first part of China's infrastructure to open up to foreign capital, with the first such foreign-funded project launched in 1979.

He said the new investment guideline not only allows foreign capital to hold shares in Chinese ports but also allows wholly foreign-funded projects.

There are some cases of foreign capital holding more than 51 percent in Chinese port projects but no reports of wholly foreign-funded port projects in China, said Wang.

He said that, with China's entry into the World Trade Organization and its further opening-up policy, the Chinese government has realized that overseas investment can not only help speed up port construction but also improve the capacity.

Currently, over 90 percent of China's foreign trade and half of the country's domestic transport goes through ports.

(China Daily August 7, 2003)