To Save the Shipping Industry From the Misery or Not?

By Xie Xie

With the serious deterioration of the shipping market, the continuous fermentation of Hanjin Shipping bankruptcy protection storm, and the spread of the news of state bail-out and coercion of creditors, as well as the shippers, the ports, the independent charterers, the shipowners and other stakeholders adopting normal or abnormal methods to avoid logistics stagnation and asset loss risks arising from Hanjin’s bankruptcy and some shipowners may benefit from this, the effect of bankruptcy of large shipping enterprises continues to spread. Will the government provide assistance with its visible hand? And, how the assistance should be provided?

In the field of liner shipping, the capability Hanjin Shipping holds and controls is about 610,000TEU,ranking the 7thin the world. As an important shipping company in Korea, Hanjin received 100 billion won long-term low-interest financing from the government after it applied to the court for bankruptcy protection to ensure the normal cargo loading and discharging. Both the President and Prime Minister expressed that dealing with the current logistics chaos was paramount. On September 7, the deputy prime minister Yoo ll-ho held the first ministerial conference, and put forward the “plan to make shipping logistics return to normal according to the procedure of reviving Hanjin Shipping”. As such, it is the follow-up measure adopted following the bankruptcy of Hanjin, rather than the rescue provided by the Korean government.

The relationship between the government and the market is always a controversial issue, in the different historical development stage, different development environment and different stage of economic cycle,the understanding of the relationship between the government and the market is different. Generally speaking, the Keynesian theory would be popular during the recession, and the market liberalism would be popular during the recovery. But in fact, since modern government came into being, the market and the government is the synthesis that all economic subjects should face, and there is no pure market without government, nor a pure government without the market, they stay with each other. Likewise,the western free market economic system cannot be without the government, with the government establishing the tax rate, interest rake, debt, welfare and other public products. The government’s hand has not disappeared, only that the in fluence is different as compared to the socialist market economy. A market without the government is “utopia” full of fantasy, and is the good expectation for the effect of the “invisible hand”. Certainly, how to use the “visible hand” is worth discussing. Using indirect means of macroeconomic regulation or using direct microscopic industrial policy,which one is better? The usual understanding is that the government should use well the macroeconomic regulation and control tools, and then build up the basic system of the market economy to let the market play a decisive role. But in some extreme cases, with the failure of the macro-control methods, the repercussion of the bankruptcy of some industries will cause bigger threats to the economy and society. Some industries which have strategic significance for the country’s long-term development also need state for cultivation and promotion.

As the strategic and fundamental industry, shipping industry plays an important role in national economy and national security, and it is an important part of national strategy at certain times. When China entered the WTO,the shipping industry made big sacrifices, and it is the leading industry in the opening up to the outside world.Chinese shipping industry is facing unprecedented market competition environment, Chinese shipping companies only account for 18% of the current container carriage, such market share may be the result of market competition, on the other hand, it is also the result of high degree of market opening. During the more than 10 years of entering WTO, China’s foreign trade has developed fast, and the economic volume has become the second in the world, shipping industry has played an important role in supporting national strategy and exchanging for the greater national interest, this is the contribution the shipping industry has made during the last round of opening up.