What does China’s advance on the international stage mean for Europe? Read more
China is becoming more prominent on the world stage. Soon, it will surpass the United States as the largest economy. China is busy getting its hands on knowledge and high technology in all sorts of ways, aiming to be an independent technological superpower by 2025. What does this mean for Europe, which is already closely linked to China?
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The Cosco Shipping Solar at the Euromax Terminal Rotterdam © Casper Rouffaer
China is already deeply embedded in the Dutch logistics sector
Since Chinese state-owned company Cosco Shipping acquired a stake in the port of Hamburg, their presence in Rotterdam has also become subject to scrutiny. There is less attention paid to other Chinese companies, such as the Hong Kong-based Hutchison. But that business is put in a new perspective now that China is steadily increasing its grip on Hong Kong.
- China’s ambition is to be a technologically independent superpower by 2025. It is making every effort to acquire all necessary knowledge, techniques and materials – including through investments in, or acquisitions of, foreign companies.
- In The China Files, Follow the Money examines China’s presence in the Netherlands. Which companies are Chinese-owned? In which sectors? We previously demonstrated that China’s influence is strong in many more sectors than was initially known, including in sectors regarded as our ‘critical’ infrastructure. Today’s article takes stock of China’s business interests in (port) logistics.
- Four of the five largest container terminals are wholly or partly owned by companies from China or Hong Kong. In addition, Chinese (state-owned) companies supply cranes for loading and unloading, scanners to check the contents of containers, and logistics and support services for transshipment and transit.
- In recent years, Chinese companies have acquired several Dutch logistics companies or set up new branches here. Companies from China and Hong Kong now have significant interests in the ports of Venlo, Moerdijk, Vlissingen, Amsterdam, Rotterdam and Harlingen.
- Hutchison Ports has played an important role in Dutch logistics for decades. Because the company is from Hong Kong, this was never a problem. But in recent years, the Chinese government’s grip on the former British colony has increased significantly. How long can Hong Kong companies maintain an independent course?
From the Europoort – known as Rotterdam’s old port – it is another 19 kilometres on a two-lane road to the far end of the Maasvlakte, which protrudes into the sea like an extension of the mainland. Here, at the estuary of the river Meuse, some 30 thousand seagoing ships pass through every year.
On the way to this terminus, you can see the APM and Rotterdam World Gateway terminals on the right and then a harbour where the Pioneering Spirit is moored. The world’s largest operating vessel, owned by offshore company Allseas, was completed here; it can lift large platforms of 48,000 tonnes off the pedestal and transport them in one go.
The five major container terminals that have established themselves here are all owned by foreign companies
Everything about the Maasvlakte exudes Dutch glory. A modern port now lies where the North Sea used to be seventeen metres deep. It accommodates container terminals, distribution centres, storage tanks, offshore companies and an almost endless row of wind turbines. Nowhere else in Europe can the very largest containerships dock 24 hours per day for loading or unloading.
Conquering new territory from the sea: it’s as Dutch as it gets. But the five major container terminals that have established themselves here are all owned by foreign companies.
A shifting image
Together with ECT Delta, Rotterdam’s largest terminal, Chinese state-owned company Cosco acquired a 35 per cent stake in ECT Euromax in 2016 for more than 125 million euros. At the time, news coverage of this was limited to small, business-like snippets. Very different from the fuss that arose when Cosco recently wanted to acquire a 35 per cent stake in one of the four terminals at the port of Hamburg.
It’s all due to the shifting image in the West. For a long time, China watchers, entrepreneurs and policymakers thought that China would gradually become more democratic due to its ever-increasing prosperity and its growing middle class. That hope has diminished.
Reports of the detention and persecution of Uyghurs, dissidents and human rights activists, harsh censorship and mass surveillance, and increasing repression in the ‘special administrative region’ of Hong Kong have done the country’s image no favours.
There are also concerns in the West and Asia about the modernisation of China’s military, the threat to Taiwan in the East China Sea, and the militarisation of artificial islands and atolls in the South China Sea.
Over the past few years, the massive scale on which China is trying to obtain Western (business) secrets via hackers and spies has gradually become apparent. This is why the European Union labelled the country a ‘systemic rival’ in 2019.
Follow the Money recently found that Chinese investments in European ports increase the risk of espionage.
Grants and state aid
State-owned enterprises (SOEs) play a crucial role in China’s economy. They receive tax breaks, grants and cheap loans, allowing them to easily compete with European Union companies in the global market, where state aid is out of the question.
Maritime giant Cosco Shipping is a typical example of a state-owned company under the direct influence of the Chinese Communist Party (CCP). Between 2010 and 2018, it and other companies in the shipping sector received state aid worth 132 billion dollars.
In October, the US weekly Newsweek substantiated with internal Cosco documents that each ship has a CCP committee on board.
The China Ocean Shipping Company was founded in 1961 as the People’s Republic of China’s first international shipping company. In 1990, it created the Cosco Group, a multinational conglomerate involved in everything related to cargo shipping and logistics.
In 2008, Cosco set foot in Europe by leasing the port in Piraeus, Greece, for a 35-year term. In 2016, it even acquired a controlling stake in the port’s governing body.
That same year, it acquired another state-owned company for 9 billion dollars: China Shipping Container Lines. The acquisition was part of a trend: big shipping companies were gobbling up smaller ones all over the world.
This was followed a year later by the Hong Kong-based Orient Overseas Container Line (OOCL) acquisition. Thus, Cosco not only acquired extensive management and logistics expertise: it became the world’s fourth-largest container carrier.
The acquisitions of China Shipping and OOCL also gave Cosco control of their branches in Rotterdam. That was not all. In 2016, Cosco Shipping Heavy Transport was established in Rotterdam, with ships carrying drilling rigs and (parts of) offshore wind turbines, for example. Bunker company Chimbusco, a global supplier of marine fuels based in Rotterdam, is also part of Cosco.
The port of Rotterdam is part of the Netherlands’ vital infrastructure, and any disruptions could significantly damage the economy and disrupt the import and export of goods. Recently, the National Coordinator for Security and Counterterrorism (NCTV) listed the handling of shipping (just like like aviation) in category B of vital processes.
According to previous investigations by Follow the Money in cooperation with RTL News, Cosco is not the only Chinese state-owned company operating in vital processes in the Netherlands.
Concerns about cargo scanners
Chinese (state-owned or private) companies are increasingly active within the logistics sector. To start with, in the port of Rotterdam.
At the Euromax Terminal in Rotterdam, the large container ships of Cosco and other shipping companies are unloaded with huge semi-automatic cranes. These belong to the Chinese state-owned company ZPMC (Port Equipment Crane Services), which established itself as a cooperative in Rotterdam in 2013.
There, containers pass through a customs cargo scanner. Chances are that this scanner was supplied by China’s Nuctech, which set up shop in Rotterdam in 2017. Customs is not allowed to disclose whether this is the case. ‘It is business-sensitive information,’ a spokesperson says.
In early 2021, the Minister of Justice and Security, Dilan Yesilgöz-Zegerius (VVD), and Dutch State Secretary for Finance, Helma Lodders (VVD), informed the House of Representatives that customs in the port of Rotterdam had seven large cargo scanners, four of which were supplied by Nuctech. There had been concerns among MPs following reports that sensitive import and export data could potentially leak to the Chinese government via the Nuctech scanners.
In the US, Canada and Lithuania, Chinese scanners are already banned because of potential espionage risks. According to the US Senate, Nuctech is indirectly linked to the PLA, China’s military.
Minister Yesilgöz and State Secretary Lodders informed the House that customs would conduct an audit into the security of the scanners. That investigation was completed in mid-2021. However, Customs claims that the results were classified as a state secret.
About a quarter of containers arriving in Rotterdam come from China, sometimes in Cosco container ships. They are unloaded at a terminal partly owned by the same Cosco, with automatic cranes operated by a Chinese state-owned company, and possibly checked with Chinese scanners.
Containers are likely transported inland with companies that are also Chinese-owned. For instance, quite a few freight forwarders have been acquired in recent years.
For instance, the Venlo-based logistics provider KLG Europe. ‘That company was one of my favourites. They genuinely work smart. KLG specialises in efficient distribution through a convenient route planning system they developed themselves,’ says Bart Kuipers, a port economist at the Erasmus Centre for Urban, Port and Transport Economics (UPT). ‘You see the Chinese making smart acquisitions. And I find that cleverness more worrying than the number or size of acquisitions. KLG is a gem; the Chinese can learn a lot from them.’
KLG, a family-owned business based in Limburg, founded in 1918 by Cornelis Kuijken, was sold by his grandsons Kees and Ad because there was no successor. It was acquired in September 2019 by Sinotrans, the largest logistics provider in China. Its articles of association revealed that the company is under the Chinese Communist Party’s thumb (see box).
Sinotrans is part of China’s state-owned China Merchants Group, which operates under the auspices of China’s Ministry of Transport. The company has an annual turnover of around 10 billion dollars.
Its articles of association evidence close ties with the CCP:
‘In accordance with the relevant provisions under the Constitution of the Communist Party of China, the Company established the organization of the Communist Party of China and carries out activities of the Party. The Party Committee shall play the leading functions, provide the directions, manage the situation and ensure the implementation. Meanwhile, the Company shall provide necessary facilitations for the activities of the Party Organization, set up a working agency for the Party, allocate sufficient personnel to handle Party affairs and guarantee working funds for the Party Committee.’
The acquisition of KLG Europe is no exception. Another example: in September 2021, Chinese logistics giant SF Holding announced that it was acquiring 51.8 per cent of the shares in Kerry Logistics, a large multinational freight forwarding company with a sizable operation in Hoofddorp and active in both the port of Rotterdam and Schiphol Airport.
Follow the Money found more Chinese companies and companies partly owned by Chinese companies in the logistics sector. Small ones, with less than 1 million euros in assets, are not included in the overview below:
This article began with a tour of the Maasvlakte, where all five major container terminals are foreign-owned. Less known is that, besides Cosco, there is a second Chinese state-owned company with a stake in container handling: China Merchants Port. Through a joint venture with French container giant CMA CGM, this company has held a 30 per cent shared stake in the state-of-the-art Rotterdam World Gateway terminal since 2020.
So, of the five largest terminals, there are two in which a Chinese state-owned company has a stake. But if we take a closer look at Hong Kong-based Hutchison, we see that China’s influence reaches further.
Together with Cosco, Hutchison owns the Euromax Terminal. It also owns ECT Delta – with Euromax, Rotterdam’s largest container companies – and acquired APM Terminals Rotterdam from Danish Maersk in 2021. This makes three of the five largest container terminals fully Chinese-Hong Kong-owned, and one is partly owned. Only APM Terminals Maasvlakte II belongs to Danish Maersk.
Hutchison’s tentacles extend beyond the three largest container terminals
But Hutchison’s tentacles extend beyond the three largest container terminals. In Rotterdam alone, the Hongkongers own several subsidiaries in mooring system rental, container storage and transport, and refrigerated container maintenance and construction.
Outside of Rotterdam, Hutchison has a significant stake in a terminal at the port of Moerdijk in North Brabant, the Netherlands’ fourth-largest seaport, and it owns Venlo’s inland port.
Hutchison also plays a significant role in North Holland. In July 2018, it acquired a 50 per cent stake in TMA Logistics. Located on the North Sea Canal, TMA has terminals in Amsterdam, Velsen and IJmuiden, a transhipment facility in Harlingen and warehouses in Amsterdam, Velsen and Alkmaar.
TMA Logistics is aiming to become a major player in container transport between Rotterdam and Amsterdam, judging from its 2020 financial statements.
It also played an important role in the construction of the Fryslân wind farm, which opened late last year. The storage and transhipment of components for large wind farm projects take place via the terminal in Amsterdam. TMA hopes to increase its share in offshore wind turbine construction in the coming years.
Chinese stakes in terminals:
Cosco: 35 per cent in ECT Euromax
China Merchants Group: a 49 per cent stake in JV Terminal Link, which in turn has a 30 per cent stake in Rotterdam World Gateway.
Sinomarkt KTS Development ltd which has a 50 per cent stake in Vesta Terminals B.V., which in turn owns:
- 100 per cent Vesta Terminal Flushing (Vlissingen)
- 100 per cent Vesta Terminal Antwerp nv (Belgium)
- 100 per cent Vesta Terminal Tallinn Oü (Estoni
Hong Kong stakes in terminals:
- 100 per cent ECT Delta
- 65 pre cent ECT Euromax
- 100 per cent Hutchison Delta II
- 100 per cent Venlo
- 50 per cent Moerdijk
- 100 per cent Duisburg (Germany)
- 100 per cent Willebroek (België)
- 100 per cent Terminal Amsterdam
- 100 per cent Terminal Velsen
- 100 per cent Antwerpen
- 100 per cent Overslagterminal IJmuiden
- 51 per cent Harlingen
Hutchison’s holdings have not caused much commotion. It is headquartered in Hong Kong, a group of islands that has been a special administrative region of China since 1997. At the time, it was stipulated that the same laws as in communist China would not apply there for a period of 50 years.
But that promise has come to little fruition. The CCP is tightening its grip on governance, politics and public life in Hong Kong, with the provisional low point being the 2020 National Security Law. Since then, life imprisonment can be imposed for ‘secession’, ‘subversion’, ‘terrorism’ and ‘collusion with foreign armed forces’.
Much-needed sales channels
Can large companies like Hutchison, which are important for the Chinese economy, still operate independently of the CCP? And if so, for how long?
Cosco acquired Hong Kong shipping company Orient Overseas Container Line (OOCL) in 2017 from the family of Tung Chee-Hwa. He was Hong Kong’s first chief executive after the region was handed over to China in 1997.
The shipping and logistics sector is important to Xi Jinping’s Belt and Road Initiative. This New Silk Route is not only politically important but also economically: it provides Chinese businesses with much-needed sales channels for their goods.
‘That things in Hong Kong would turn around so quickly and dramatically has surprised everyone’
Haico Ebbers, professor of international economics at Nyenrode Business University, is not worried yet: ‘You see the CCP’s influence on Hong Kong’s political process increasing more and more, but there is no sign of any influence on business yet. I still see Hutchison as a private company.’
This is also Bart Kuipers’ opinion: ‘Hutchison is still not a Chinese state-owned company, and they themselves don’t feel that way either.’ But, he adds: ‘Hong Kong’s position has totally changed. That things over there would turn around so quickly and dramatically has surprised everyone.’
While a Chinese takeover of Hutchison seems far away, future scenarios for the port of Rotterdam do take it into account.
For instance, the Clingendael Institute, in collaboration with Erasmus UPT, recently published Navigating an uncertain future, a scenario study on the influence of China on the future Dutch maritime-logistics hub function. In it, the authors describe four future scenarios.
One of them outlines the possibility that Chinese players will become global logistics leaders, and non-Chinese players will be left behind. In this scenario, Cosco will be the dominant player in Rotterdam, and Hutchison will be acquired by a ‘Chinese operator’, resulting in Rotterdam as a ‘hub function for China’.
Simon Murray, former managing director of Hutchison, also does not rule out a Chinese takeover. In 2019, he told Reuters news agency: ‘Everybody who is anybody at all in Hong Kong has got one eye on how the mainland sees that. And you’ve got to build your bridges with them, otherwise they could confiscate.’
Murray was the longtime right-hand man of business tycoon and billionaire Li Ka-Shing, former CEO of Hutchison (his son, Victor Li, succeeded him in 2018). In the same article about his son Li, Murray said: ‘His attitude towards China is of of fear: these guys can take away everything I have.’
According to Reuters, managers of China’s largest state-owned companies were reportedly given clear marching orders by their regulator SASAC in September 2019: tighten your grip on Hong Kong companies.
The Navigating an uncertain future report by the Clingendael Institute and Erasmus UPT recommends that the EU attach a condition to new Chinese investments in the maritime logistics sector requiring equal access for European companies in China. If this is possible, the EU should consider reducing existing Chinese investments in the maritime logistics sector.
Ports and terminals are not on China’s ‘negative list’ of sectors in which foreign companies cannot invest (or have limited access to). Denmark’s Maersk, for example, has stakes ranging from 9 to 49 per cent in terminals and ports in five Chinese cities (Qingdao, Guangzhou, Tianjin, Xiamen and Shanghai).
Yet, there is no level playing field. For instance, China and the Netherlands both require connections between inland and seaports to be provided by ships flying their own flags. But Chinese companies are allowed to invest in Dutch companies carrying out that transport in the Netherlands. In China, on the other hand, only purely Chinese companies are allowed to do inland shipping.
European companies also face a competitive disadvantage in so-called transshipment, the redistribution of goods from different ports.
German knowledge institute Merics uses the example of three Cosco ships: one is loading beer in Hamburg, another cheese in Rotterdam and the third chocolate in Antwerp. The three ships may meet at a European port to redistribute their products among the three ships so that each can set sail for different destinations with varied cargo. Such efficiency significantly reduces costs.
Ships from foreign companies are not allowed to operate in China in the same way, and Dutch ships would have to divert to Korea or Japan to do so.
According to the lead authors of Navigating an uncertain future (Xiaoxue Martin of the Clingendael Institute, port economist Bart Kuipers, and China expert Frans-Paul van der Putten), their report is based on conversations before the Russian invasion of Ukraine took place.
Kuipers: ‘That invasion makes the invasion of Taiwan more conceivable, especially given all those Chinese military exercises happening around Taiwan. No one was talking about that when we conducted those interviews for our report.’
In a recent article in Newsweek, China analyst Didi Kirsten Tatlow points out China’s habit of using trade as a weapon; for example, by suddenly blocking exports or imports of certain goods.
According to Tatlow, with its growing influence in ports worldwide, China is first and foremost interested in trade. ‘But secondly, it wants to become so dominant, including in logistics information and digital systems, that other countries can’t really afford to impose sanctions on China anymore.’
A gateway to Europe
The only thing that is now certain about the future of the Netherlands as a logistics centre is that nothing is certain.
Port economist Kuipers: ‘There was a lot of fuss about Cosco acquiring a stake in Hamburg, but almost no attention was paid to something much more important: Cosco withdrew from a major project to build a mega-terminal at the port of Duisburg, also in Germany. That had already been decided in the summer but was only recently made public. It is remarkable because Duisburg plays an important role in the Belt and Road Initiative. Naturally, there was some fear in Rotterdam that Duisburg would become a major competitor as a gateway to Europe.’
‘More European cooperation is needed to counter Chinese influence, but in Europe, you see everyone going their own way again‘
Although Duisburg’s role appears to be diminishing, expansion is in the pipeline at several ports in the Netherlands. In Rotterdam, for instance, Hutchison wants to substantially expand one of its terminals. That expansion will be accommodated in a joint venture with Swiss/Italian container company MSC. ‘Remarkable that this is not happening with Cosco, but instead with the largest container shipping company in the world,’ Kuipers responds.
Has China’s influence in Rotterdam passed its peak? ‘That cannot be predicted; it depends on government policy. On the one hand, it is becoming clear that more European cooperation is needed to counter Chinese influence. On the other hand, om Europe, you see everyone going their own way again,’ says Kuipers, pointing to Cosco’s stake in a Hamburg terminal.
The fear of China’s dominance is nothing new. Back in 2010, the Port of Rotterdam Authority said that the Chinese becoming too influential was imminent. To prevent that, the Port of Rotterdam Authority decided to allow other players onto the Maasvlakte, such as Denmark’s Maersk and DP World from Dubai. At that time – the Second Maasvlakte was still under construction – 60 per cent of container handling was in the hands of Chinese companies.
Twelve years later, not much has come of its intention to limit Chinese influence. One of Maersk’s two terminals was acquired by Hong Kong’s Hutchison last year.
Dubai state-owned DP World is one of the five partners in the Rotterdam World Gateway terminal. While Chinese companies controlled 60 per cent of container transshipment in 2010, in 2022, that share is at least as large. Thus, with the construction of the Second Maasvlakte, the Chinese stake in the port has actually increased in absolute terms.
CBS recently calculated that in 2021 China’s share of imported goods further increased. Not surprisingly, Hutchison announces that it wants to double the capacity of its inland terminal in Venlo by 2024.
But the latest figures on China’s economy are disastrous. In November, exports declined heavily due to drastic covid measures and reduced demand for goods in the global market.
Meanwhile, container transport rates also dropped to near-normal levels again. ‘The container sector is facing disaster,’ port economist Bart Kuipers predicts. ‘Rates are collapsing, and demand is decreasing. And many container ships are still under construction. That could become a commercial bloodbath, not only for shipowners but also in the terminal business. That’s when you will see many takeovers, and now unthinkable movements in the market are possible, even a takeover of Hutchison by a wealthy Chinese company.’
Translation: Delia Burggraaf
The Port of Rotterdam Authority says it has no independent policy to exclude certain countries from establishing a presence in the port of Rotterdam. In addition, it believes that, in principle, competition is good and that market dominance by one or just a few players should be avoided.
According to the Port of Rotterdam Authority, there is currently more competition than before, and APM (Maersk) and Rotterdam World Gateway (CMA CSM & Terminal Link) terminals are expanding their capacity.
‘The Port of Rotterdam Authority supports the foreign policy of the Dutch and European authorities and continues to critically examine foreign parties wishing to establish themselves in the port-industrial complex based on the area’s utilisation determination and the various components of the background check. At this moment, we are not concerned about dominance by companies headquartered in certain countries.’