New Characteristics = of China=A1=AFs Shipping Market

FUTURE=20 SPACE EXCHANGES

-NEW CHOICE AND = NEW=20 OPPORTUNITY

Shanghai Shipping=20 Exchange

1. New Characteristics of China=A1=AFs Shipping=20 Market

1)=20 Growing up of China=A1=AFs economy under unfavorable = situation

Under the unfavorable external = environment=20 of slowdown of the global economy with the US economy stepping into = recession,=20 the Japanese economy going into difficulties, the southeast Asian = economy=20 confronting with problems and the European economy slowing down, China = had kept=20 stable growth in the national economy, the excellent beginning of the = Tenth=20 Five-year Plan. China=A1=AFs GDP in 2001 reached 9580 billion yuan, an = increase of=20 7.3% as compared with that in the previous year, keeping the tendency of = rapid=20 growth. (table)

2)=20 Conflict between supply and demand on China=A1=AFs Container market to = be=20 sharpened

The capitals invested worldwide = by=20 ship-owners in building new container ships reached US$13 billion in = 2000 and=20 the new carrying capacity deployed in service in 2001 was over 620 = thousand=20 TEUs, which has surpassed the carrying capacity at the peak time in 1997 = and=20 1998. In the following two years, about 100 container ships with the = carrying=20 capacity of over 5000 TEUs will be delivered and deployed on the three = east-west=20 trunk lines in the world, however, the container volume on the shipping = market=20 is expected to increase only by 3.9% and the annual container throughput = by the=20 worldwide container terminals will be increased by less than 3%. = According to=20 the current market situation and forecast of container volume, the = surplus of=20 the carrying capacity on the trans-Pacific shipping lines has reached = 30% and=20 20% for the Asia-Europe shipping lines. Because of the intensified = conflict=20 between supply and demand, the stowing rate has been obviously = decreased. The=20 index of supply and demand has been dropped down from 95.6 in 2000 to = 92.7 by=20 now.

Due to the fact that large = number of new=20 buildings has caused serious surplus of the carrying capacity and = increase of=20 container volume has been far less than the increase of the carrying = capacity,=20 the freight rates for the main shipping lines have been dropped down and = the=20 competition has been intensified. Confronted with such sever situation, = shipping=20 companies have taken large-scale measures to optimize their carrying = capacity by=20 reducing carrying vessels so as to cut down their cost.

2. New Channel for = Developing Shipping Transactions

1)=20 Demand for New=20 Transaction Methods In The Shipping Market

Under the new market environment, the competition has = become=20 intensified and the risks have become even greater, therefore, all the = parties=20 involved in the shipping market are seeking new effective transaction = method to=20 avoid risks in order to keep stable development in the = competition.

² =20 Demand=20 from cargo-owners

² =20 Demand=20 from shipping companies

² =20 Demand=20 from market operation

2)=20 Concept of Future Space Exchange

Future space exchange is a = long-term=20 contract of spot transaction and a completely new transaction on the = shipping=20 market. Shipping companies will make reasonable estimation of freight = based upon=20 the market conditions, and sell their slots one month to 6 months in = advance=20 according to different shipping lines. Cargo-owners, freight forwarders = or=20 non-vessel operating carriers may choose on internet suitable voyage = with=20 reasonable freight rate and proper time schedule based upon availability = of the=20 goods and plan for shipment, and get the right of space-booking against=20 provision of security or production of bank guarantee. Besides, = cargo-owners or=20 forwarding agents may quote their bidding for the expected freight rate = and the=20 transactions may be made through communication and negotiation between=20 ship-owners and cargo-owners or forwarding agencies to their = satisfaction.=20

3) = Mutual=20 Benefits among Ship-owners, Cargo-owners and Agents through Future Space = Exchange

² =20 Helping shipping companies to = optimize=20 carrying capacity and ensure normal benefit

² =20 Helping cargo-owners to know = freight=20 rates and confirm costs and slots

² =20 Helping agents to control = best business=20 opportunity and improve market operation efficiency

² =20 Helping the competent = authorities in=20 charge of transport to exercise macro-control over the shipping market=20

3. Practicability = and=20 Availability of Future Space Exchange

1)=20 Fast Development of Transaction on Internet in E-Commerce Times

With the development over the = previous=20 years, many shipping companies have established hundreds of websites. = The=20 websites have mainly covered the following aspects: Auction-sale of = slots on=20 internet, ship-chartering, transaction of ship=A1=AFs spare parts, = information=20 service, ship management and consulting, maritime insurance and = qualification=20 investigation etc.

2)=20 Introduction of Experience for Baltic Shipping Exchange

The experience in Forward = Freight Agreements=20 and operation of the E-commerce platform by the Baltic Shipping Exchange = have=20 fully approved the practicability to apply the futures hedging principle = and the=20 latest e-commerce technology in the shipping market, and the Baltic = Shipping=20 Exchange has provided precious experience to Shanghai Shipping Exchange = in the=20 practice of future space exchange.

3)=20 Solutions and all-round services to be provided by Shanghai Shipping=20 Exchange

Through practices over the = previous 5 years,=20 the Shanghai Shipping Exchange (SSE) has accumulated rich experience in=20 providing shipping information services, rendering shipping transaction = medium=20 service and conducting association and coordination. Based on the = principle of=20 Transparency, Equity and Fairness and with the excellent reputation, the = Exchange will play the role as a fair judge in the future space exchange = and=20 make contributions to the healthy development and improvement of the = future=20 space exchange.

4. Framework of Future Space Exchange in Shanghai = Shipping=20 Exchange

1) = Future=20 space exchange adopted by SSE

² =20 The = subject matter=20 :The international sea-borne container liner trade

² =20 The = method of the=20 transaction =A3=BATo be mainly conducted on internet.=20

² =20 During = the=20 transactions, the principle of Transparency, Equity, Fairness and = Faithfulness=20 will be followed. ( = table )

2)=20 Circular Chart for Future Space Exchange =

5.=20 Summary

The development trend of the = world economy=20 and international trade will directly affect the stability and = development of=20 the shipping market. Under the grand environment of slowdown of the = global=20 economy, reduction of the international trade volume, China=A1=AFs = accession to WTO=20 and the promulgation of the Regulations for International Shipping = Service of=20 the People=A1=AFs Republic of China, the competition on China=A1=AFs = shipping market will=20 become increasingly intensified and all the parties involved are trying = their=20 best to seek for healthy development in this constantly changing=20 market.

The future space exchange calls = for response=20 from the shipping market and requires comments from friends of the same = trade.=20 We sincerely hope that the push of future space exchange will provide = such a=20 platform for the shipping service industry as to put today=A1=AFs = limited capital to=20 gain tomorrow=A1=AFs opportunity and benefit. With the involvement and = cooperation by=20 the ship-owners, cargo-owners and freight forwarding agents, the future = space=20 exchange will create a new situation for transactions on China=A1=AFs = shipping=20 market, and bring the new choice and opportunity for development for the = ship-owners, cargo-owners, forwarding agents, shipping agents and = non-vessel=20 operating carriers to avoid risks on the shipping market.