From the air, you can see the other side of Shanghai. Instead of the familiar tall buildings and large neon signs that are the trademark of a metropolis, you see a dense network of inter-winding roads, railway tracks and waterways extending to all cities and townships within a 300-kilometre radius in the Yangtze River Delta region.

This, many say, is the true face of Shanghai's economic might. As the logistics hub of one of China's two most-advanced industrial centres, Shanghai is expanding its transportation infrastructure rapidly to cope with ever-increasing demand.

At the heart of its infrastructure development for the future is the new deep-water port at Yangshan Isles 100 kilometres from the city's centre. When completed in 2020, the Yangshan Container Port will be the world's largest, with the capacity to handle 25 million full-sized containers a year.

To be sure, there are elements in Shanghai's grandiose plan that overlap with some existing facilities in the neighbouring cities including Ningpo, Hangzhou and Suzhou.

But Shanghai is setting its sights far beyond the region. It's ambition is to establish itself as a world-class logistics hub servicing the entire nation. "We have an all-encompassing plan to achieve that goal," says Ming Mei, managing director of Prologis (China), a New York-listed industrial property developer.

"We have witnessed Shanghai government's huge input in infrastructure, such as the Yangshan deep-water port, the Pudong International Airport, the planned logistics bases." Ming says. "These facilities in use are fully in line with international standards."

Prologis has built three logistics centres covering 48,000-square-metres in Shanghai's Northwest Logistics Park, which will start operation at the end of this month to serve the region's manufacturers, retailers and third-party logistics providers. Prologis will complete another 34,000-square-metre facility in the park by the end of this year.

The 263-hectare Northwest Logistics Park, located in Shanghai's northwestern suburb along several major expressways linking neighouring provinces, is the key base to do distribution between Shanghai and the whole region.

Northwest Logistics is one of the three major logistics bases fostered by the local government to promote Shanghai's logistics system. The other two are in the Waigaoqiao Bonded Zone, near Shanghai Port, and the Pudong International Airport.

In its 10th five-year development plan (2001-05), Shanghai's municipal government listed logistics as one of the four key industries to foster, alongside biological pharmacy, new materials and environmental protection.

"Shanghai accounts for 5 per cent, or so, in China's GDP (gross domestic product), and it calls for a sound logistics system that matches the size of the economy," says Huang Youfang, vice-president of the Shanghai Maritime University.

"In particular, the boom of the manufacturing sector generates huge demand for modern logistics," says Huang, who is also vice-president of China Logistics Institute.

Shanghai, traditionally China's top manufacturing base, boasts the country's largest shipyards, automobile workshops, steel factories and many other name-brand consumption products.

But it is moving towards a greater future: An international financial, trade and shipping centre. "The potential of logistics is big, as the local economy upgrades from labour- and resource-intensive industries to high-end services," Huang says.

Although the service sector makes up about half of Shanghai's GDP, which is much higher than the country's average, it still lags behind many developed economies, where the service sector contributes more than 70 per cent, he notes.

Coupled with Shanghai's ambitious logistics blueprint is massive input in infrastructure.

Shanghai's Pudong International Airport, which just completed its second runway earlier this year, is going to start building its third runway by the end of this year. It plans to have five runways by 2010. The airport now handles 70 per cent of the country's international air cargo.

"Considering the huge amount of cargo that must be exported from China's manufacturing-driven economy, air and ocean ports leading to the outside world are the key in the logistics infrastructure system," says Huang.

Late last month, a 32.5-kilometre bridge was connected to the shore in southeast Shanghai and the Minor Yangshan Isle. It will be open to traffic in November, and it will be the only bridge to the isle, where Shanghai is building the world's largest deep-water container port.

The first phase of the Yangshan Port will be finished by the end of this year, with five berths deeper than 15 metres, and it will be able to dock the world's largest 8,000-TEU ships. It will generate 2.2 million TEUs handling capacity in a year.

The overall blueprint for Yangshan, costing around US$6 billion, is to have about 50 deep-water berths by 2020 and a handling capacity of 25 million TEUs.

That's just half of the story. At the other end of the bridge, Shanghai has planned a 297-square-kilometre town for heavy assembly industries and logistics that will easily accept and handle the manufacturing being outsourced by other countries through the Yangshan Port and the Pudong International Airport.

Prologis is the only logistics park developer in the Lingang new town. "It is a common practice in major international cities that the planning of logistics parks is integrated with the planning of air and ocean ports, and these logistics parks are operated in market-oriented ways," says Ming.

In addition to the Northwest Logistics project and the Lingang logistics park, Prologis plans to invest in three to four new projects in the Shanghai region, Ming says. He declines to elaborate.

"Shanghai has these large ports, and it is the largest industrial and commercial city and the locomotive of the Yangtze Delta, and that will guarantee the rapid growth of logistics in this region," says Ming.

Besides the large ports, Shanghai already has a very sophisticated urban-traffic-infrastructure system, which combines elevated ring roads, major bridges and tunnels, light rail, subway lines, and the world's only magnetic-levitation rail line in commercial operation. The system is still expanding rapidly, as the city gears up to host the World Expo in 2010.

Noticeably, more than 10 per cent of Shanghai's infrastructure budget is spent on information facilities, which has helped make Shanghai's logistics system one of the most efficient in the country.

From a broader perspective, Shanghai was located in an area that boasts China's best logistics infrastructure.

The Yangtze Delta, which accounts for only 1 per cent of country's land but 20 per cent of GDP, has expressways that connect with every city in the area five times more than the average expressway length in China.

The area also has seven world-class bridges including the one to Yangshan Port and the world's third-largest suspension bridge, the Runyang Yangtze Bridge, which opened to traffic last month.

According to a Ministry of Communications plan for the Yangtze Delta unveiled in March, the region will have seven national transportation hubs including rail, road and waterway pivots b y 2010.

"It is a big strategy for us to study, serve and integrate with Shanghai," Shi Heping, Party Secretary of Zhenjiang, a city three hours west Shanghai, said at a press conference in Shanghai last month. His city is trying to court Shanghai's companies to set up manufacturing units there.

Despite the sound infrastructure, however, Shanghai is still aware of a major obstacle to being a world-class logistics hub the lack of regulations that legitimize free port policies, such as those enjoyed by Hong Kong and Singapore.

Shanghai took a pioneering step to parry the disadvantage last July. In a trial programme approved by the central government, it integrated the Shanghai Port with a 1.03-square-kilometre logistics park in the neighbouring Waigaoqiao Bonded Zone. That was the first time such a move was taken in the Chinese mainland.

Under this practice, the cargo shipped to the bonded logistics park is regarded as offshore, and the exporters can get tax rebates immediately instead of waiting for months. The customs in Waigaoqiao also designed new digitalized procedures that have simplified customs clearance substantially.

Moreover, the park breaks the old "same-thing-in, same-thing-out" rule. Shipping companies are allowed to unload not-so-full containers and put the cargos into one to save costs.

The new policy is expected to stimulate deals in international transfer shipment, trade and cargo distribution.

"The integration of the port and the bonded zone has major significance in promoting the international competitiveness of China's logistics," said Xu Peixing, director of Shanghai's Port Administration Bureau.

The new practice has brought Waigaoqiao, China's first bonded zone, which was established in 1990, some clear benefits. Goods from Shanghai and the neighbouring provinces of Jiangsu and Zhejiang flooded in the logistics park in the past half year, as local companies found a better trade platform next door to them. Waigaoqiao accounted for 60 per cent of the cargo volume of the Shanghai Port last year, and the proportion is expected to rise to 70 per cent this year.

Nearly all of the world's major logistics companies including Maersk, TNT, and DHL have operational agencies in Waigaoqiao.

Imports and exports via Waigaoqiao amounted to 30.8 billion yuan (US$3.7 billion) last year, making up 40 per cent of the whole trade volume of all the 13 bonded zones in the country. Its logistics park is currently being expanded to meet soaring demands.

"But China does not have legislation on free ports so far, and we still have a tough job (in building a port that parallels Hong Kong and Singapore)," says Xu.

Shanghai's local government is reportedly discussing with the General Administration of Customs possible preferential policies that will make the new Yangshan Port more like a free port.

(China Daily 06/20/2005 page6)