Romantic notions of travel by sea to the mysterious East have existed for centuries.

While the mysterious aspect of travel to China may have evaporated, the idea of a leisurely cruise on impressive luxury liners is catching on.

This new wave of tourism is drawing hundreds of thousands of tourists to Asia every year from around the world.

The center of attraction is undoubtedly China, and the choice port of call is undoubtedly Shanghai. This is why the city is conjuring up big plans to live up to expectations.

In a report to the annual Shanghai Foreign Trade and Investment Work Conference held on February 17, Pan Longqing, the director of the Shanghai Municipal Foreign Trade and Economic Relations Commission, formally announced the development of port facilities for cruise liners was one of the commission's five key tasks for 2004.

This marked the city's first official announcement of intentions on becoming a major international cruise destination and a home port for luxury liners in the coming three to five years.

To realize this ambition, the city, earlier this year, began building an enormous international passenger terminal on the Huangpu River capable of docking large international cruise liners.

The 160,000-square-meter Shanghai Port International Cruise Terminal, located at the 158-year-old Gaoyang pier near the downtown area, will include three 850-meter berths, each of which can accommodate an 80,000-ton passenger liner and function as the city's "water gateway," according to the Shanghai International Port (Group) Co Ltd, the main developer.

The project, costing an estimated 2 billion yuan (US$241.8 million), is scheduled for completion by the end of 2006, making Shanghai the first Chinese mainland city with port facilities dedicated to accommodating large passenger cruise liners.

Shanghai has geographic and economic advantages for developing the cruise industry.

Located on the east coast of China, Shanghai is the economic and transportation center of the developed Yangtze River Delta region, where there is no shortage of tourist attractions, including such well-known destinations as Suzhou, Hangzhou, Nanjing, Shaoxing and Ningbo.

Sailing from Shanghai, international cruises can reach Hong Kong, Japan and South Korea within 48 hours.

Government statistics indicate that Shanghai has a permanent population of more than 13 million. About 15 percent of them have traveled for leisure out of the city in the past three years. The percentage of outbound travel from this region is 17 times higher than the national average.

More than 50 international cruise liners docked at Shanghai in 2003, despite the SARS (severe acute respiratory syndrome) outbreak, bringing tens of thousands of overseas tourists to the city.

But Shanghai's old piers provide little service facilities for luxury cruise ships. They are too old and ill-equipped to meet the projected demand of the emerging industry.

A more ambitious plan

To promote the cruise industry, international investors and local authorities are planning to develop the city's North Bund area in Hongkou District, where the new terminal is located, into a home port complex for international luxury liners.

Hong Kong-listed Star Cruises, the world's third-largest cruise liner operator, and the Shanghai Hongkou District Government are the two main supporters of this project.

According to the draft proposal, Star Cruises will invest about 10 billion yuan (US$1.2 billion) to expand the Shanghai Port International Passenger Cruise Terminal into a 1,200-meter home port for luxury liners, with 200 square meters of supplementary space earmarked for hotels, shops, restaurants and entertainment facilities.

"In the next five years, ocean cruises will definitely become a hot tourism product in Shanghai," said Yu Jianmeng, Star Cruises' chief executive officer for its Chinese mainland business.

Star Cruises sees huge potential for the cruise market in Shanghai, Yu said, adding that the city and the neighboring Yangtze River Delta region are one of the most developed areas in China with an increasing number of people wanting to travel abroad.

Meanwhile, international cruises are expected to bring around 500,000 overseas to Shanghai annually for the next three years and the number of arrivals is expected to increase to 3 million by 2010, Yu estimated.

Annual cruise ship tourist revenues are expected to reach US$200 million for Shanghai, even if each passenger was to stay only one day in the city, Yu added.

Ren Qingdong, director of the foreign trade committee of the Hongkou District government, also expressed his optimism about the project.

He noted in his report to the city government that Shanghai needs to take advantage of the Star Cruises project to build a new landmark commercial area in the North Bund district similar to the one on the south bank of the Bund and the Lujiazui financial zone in the east.

"I believe the Shanghai government will choose Star Cruises as the main operator of the home port project," said Yu.

Once the green light is given, Star Cruises will need to register as a wholly owned cruise travel agency in Shanghai and arrange 4 to 6 international cruises at the new terminal, according to Yu.

Star Cruises plans to recover its investment in the project in 18 to 20 years, according to Yu.

Government push

The Shanghai government has showed great enthusiasm for the cruise industry since the idea was raised publicly in early 2003.

The city is hoping that cruise liners will begin arriving in Shanghai on a regular basis during May's week-long Labor Day Holiday. This would be seen as the first substantial step towards the city becoming a major destination for international cruises, according to a source with the Shanghai Municipal Tourism Administrative Commission.

"We have been designated by the municipal government to work out feasible policies relating to the development of the cruise business in the city," said Zhu Jianguo, an official with the policy and regulation division of the commission.

To become a regular port of call for luxury liners is the commission's immediate task, according to Zhu.

The city's top leaders, including Mayor Han Zheng, have given the go-ahead for the development of the cruise industry along with Shanghai's Formula One automobile race, which is scheduled for the second half of this year, according to Zhu.

Zhu said the city government is preparing to release a series of new preferential policies for the cruise industry.

They include encouraging overseas business to register Shanghai-based cruise companies, tax incentives for cruise operators, low-interest loans for the purchasing and leasing of cruise ships, government subsidies to locally based large international cruises and allowing overseas luxury liner operators to establish wholly owned travel agency subsidiaries.

In addition to the city's tourism authority, the Shanghai Development and Reform Commission was appointed earlier this year to take responsibility for the overall planning of the project while the Shanghai Municipal Foreign Trade and Economic Relations Commission was given the task of promoting overseas investment in the city's cruise ship business.

"Shanghai seems determined to catch up to Hong Kong and Singapore in this area," said Hua Min, a professor of world economy studies at the Shanghai-based Fudan University.

The cruise industry has appeared in the urban planning reports of several coastal Chinese cities, such as Qingdao, Ningbo and Tianjin, but the conditions in Shanghai are "so far the most advantageous and mature," said Hua.

The cruise business, if successfully managed, will become "a breakthrough for the city's staggering services industry," said Chen Wei, a chief expert of Shanghai Regional Economy Studies at the Shanghai Academy of Social Sciences.

Shanghai's service industry has lagged far behind the city's manufacturing sector, which contributed to at least 70 percent of GDP growth in 2003, according to Chen.

After rapid development in the 1990s, the Shanghai services industry entered a bottleneck ever since growth of the city's backbone finance industry stalled in 2001.

"New ideas are needed (to re-ignite the growth of the service sector), and the cruise industry may be one of them," said Chen.

He suggested the city should combine the cruise business with its strong shipbuilding industry, which ranks the first place in China, and its emerging private yacht business to create a new maritime sector.

Obstacles ahead

Despite the support of the municipal and district governments, Star Cruises' home port project is still facing some hurdles.

"It is still not the time to formally announce the news," said Wang Meihua, sales manager of Star Cruises' office in Shanghai.

"We are still negotiating with relevant government bodies to settle some differences before the contract can be signed," Wang told China Daily.

The main obstacle is the availability of land for the Star Cruises project in the North Bund area.

The core part of the North Bund area is under the administration of the Shanghai Port Authority, which is responsible for the new terminal project and has already invited some large companies like Sinochem (China National Chemicals Import & Export Corporation) and Shanghai Real Estate Group Co Ltd to join the construction of new facilities around the terminal.

Ding Gengsheng, a senior official with the Urban Port Areas Integral Development Office under the Shanghai Port Authority, told China Daily Star Cruises's proposed project is "somewhat too ambitious."

"We (the government and Star Cruises) are still discussing the scope of the plan because land at the proposed site is of limited supply," said Ding.

Industry insiders noted that the port authority intended to build more commercial and office buildings around the terminal instead of service facilities for cruise ships only.

Star Cruises demands an area of 40,000 square meters around the terminal for the building of facilities utilized in maintenance services, storage of water and oil and waste disposal.

But the port authority has only agreed to release 5,000 square meters for Star Cruises, which, according to the company, is "far from enough for a home port project."

Though both the port authority and Star Cruises said they are committed to the project, negotiations have dragged on with no chance of a breakthrough in sight.

Ding, however, expressed his optimism on the negotiation results but pointed out that a final scheme will likely involve several business which will jointly develop the area around the terminal, with the key sections built and operated by Star Cruises.

(China Daily March 11, 2004)