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CIRCULAR OF THE STATE COUNCIL REGARDING FURTHER REFORM OF THE ADMINISTRATION OF INTERNATIONAL OCEAN SHIPPING INDUSTRY

    In order to meet the needs of developing foreign economic
relations and trade, a set of reform measures have been drawn up
which concern the administration of the international ocean shipping
industry in China, and which have played an active role in
enlivening foreign trade shipping and promoting the development
of the international ocean shipping industry. However, non-
separation between enterprises and administrative departments,
too much administrative interference and the inactivity of some
reform measures have restricted the management of goods shipping
agencies (hereinafter referred to as cargo agencies), shipping
agencies and the international ocean shipping enterprises
(hereinafter referred to as shipping companies), have caused a lack
of vigor in enterprises and affected the international ocean
shipping industry in China. Thus, further reform in the
administration of the international ocean shipping industry in
China must be undertaken. The following are to be especially
noted:

    1. Free up cargo agencies and shipping agencies, allow more
managers, and encourage competition in order to improve service
quality. Those enterprises, including branches which have
obtained business licenses, which meet business operational
conditions and legally conduct business activities, may engage in
cargo agency and shipping agency activities after approval; cargo
owners and shipping companies shall have the right to freely
select cargo agencies or shipping agencies, and carriers and
cargo owners may establish direct carriage and consignment
relationships; no department may undertake to interfere with
them.

    2. Every positive factor should be brought into play to
develop international ocean shipping. Those enterprises,
including large scale enterprise groups and specialized import
and export companies, which meet business operational conditions
and legally conduct business activities may establish shipping
companies after being approved for engaging in international
ocean shipping.

    3. Freedom in management of the shipping companies shall be
enlarged in accordance with the provisions of the Regulations on
the Transformation of the Mechanisms of the Industrial
Enterprises Owned by the Whole People. Shipping companies may, in
light of state macro requirements, freely determine route
management, ship allocation, increases or decreases in shipping
and ship renewal.

    4. Those routes which domestic shipping companies are not
able to open or those routes for which shipping densities are
insufficient may, on the principle of reciprocity, absorb
foreign-funded regular shipping vessels or overseas Chinese-
funded regular shipping vessels staying at ports in China, but
shipping may not be carried out along the coast. Foreign shipping
companies are allowed to run foreign-funded or Chinese-foreign
joint shipping ventures in a proper manner, and may canvass cargo
business, sign bills, convert foreign exchange and conclude
contracts for their own ships after approval.

    5. The management functions of government departments shall
be conscientiously transferred. The Ministry of Communications
and the Ministry of Foreign Economic Relations and Trade shall,
on the principle of simpler administration and loosened control,
decrease the approval and administrative interference of the
specific routines of enterprises. The Ministry of Foreign Economic
Relations and Trade shall be in charge of the policy, guidelines,
regulations and statistical surveys concerning the administration
of cargo agencies; the Ministry of Communications shall be in charge
of the policies, guidelines, regulations and statistical surveys
concerning the administration of shipping companies and shipping
agencies. Henceforth the two ministries shall, through macroscopic
regulation and economic and legal measures, carry out macro
management of shipping companies, cargo agencies and shipping
agencies engaged in international shipping. Moreover, they shall,
in line with international invention and on the basis of China's
national conditions, formulate just and reasonable operational
qualification standards and administrative approval measures for
the shipping companies, shipping and cargo agencies, and provide a
fair competitive market environment for enterprises. The two
ministries shall strengthen industrial administration of those
enterprises which participate in competition, without any
discrimination, and shall not treat them differently because they
are subject to different ministries. Each local government shall
also simplify administration, loosen control, and prevent local
protectionism.

    6. The Ministry of Communications shall study the measures
taken by foreign countries in developing the shipping industry
and, through consultation with the relevant departments, formulate
specific policies for promoting the development of the ocean freight
industry in China, which shall be effective after being submitted to
and approved by the State Council.

    The Ministry of Communications, the Ministry of Foreign Economic
Relations and Trade and other departments shall conduct research on
and formulate specific policies for the following items: fair
competition in taxation and management between state-owned shipping
agency enterprises, cargo agency enterprises, shipping companies
and foreign-funded or joint shipping agency enterprises, cargo
agency enterprises or shipping companies; improved supervisory and
restraint mechanisms; getting rid of barriers between different
levels or departments; preventing monopolies; and implementing
measures for the banning of illegal businesses and other activities
concerning the ocean shipping market. These measures shall be
effective after being submitted to and approved by the State Council.

    7. The enterprises subject to the Ministry of Communications
and the Ministry of Foreign Economic Relations and Trade shall
bring into play their respective superiorities and develop a
horizontal integration by adopting joint operation and stock
purchasing measures.

    8. The Ministry of Foreign Economic Relations and Trade and
the Ministry of Communications shall strengthen unity, cooperate
closely and consult with each other in administering
international ocean shipping. In case of problems involving other
departments concerned, agreement must be reached from such
departments or a joint document must be issued; no document with
which the relevant departments do not agree shall be promulgated.
Major issues which do not have the agreement of the relevant
departments through consultation may be submitted to and decided
by the State Council.

    9. The China Ocean Shipping Company and the China National
Foreign Trade Transportation Corporation are the two largest
foreign trade shipping enterprises in China, and shall share the
same policy treatment by the state. The relevant departments shall
support them, improve their competitive power with foreign
companies, and promote the development of the international ocean
shipping industry in China.

    10. Every relevant department shall, in the spirit of this
Circular, check up on the documents promulgated earlier by this
department; in case of any discrepancy with this Circular, former
documents shall be amended in accordance with the provisions of
this Circular and submitted for implementation.

    This Circular shall be implemented as of the date of
promulgation.