- The Washington Times - Sunday, July 15, 2001

The China Ocean Shipping Co. is expanding its business in the United States as the formidable force in the worldwide transportation industry tries to extend its reach.
In January, Cosco will begin service to the port of Boston, which joins a list that already includes New York, Baltimore, Miami and seven other American cities.
In Boston, Cosco is flirting with the idea of getting involved in a new venture, Boston MSD, that will broker joint ventures between American and Chinese companies in China.
Gene Hartigan, a consultant with Boston-based GB Group, said Cosco is one likely investor in the new firm, though there is currently no firm commitment. Boston MSD will focus on the technology, biotechnology and pharmaceutical industries.
"It's a concept more than a physical entity," Mr. Hartigan said.
Though Cosco's president, Wei Jiafu, has said the company is in business solely to make money, most information that has come out about Cosco in recent years has had little to do with the company's financial performance.
In 1996, the U.S. Customs Service seized one of its ships after an attempt to smuggle assault rifles into the United States. Cosco officials denied any association with the weapons found on the ship.
The following year, Congress, with an eye on Cosco's links to the Chinese military, blocked the company's plans to lease terminal facilities at the port of Long Beach, in California.
In 1999, Cosco also came under fire when a company to which it has close links, Hong Kong-based Hutchison Whampoa Ltd., signed long-term leases for ports on both ends of the Panama Canal.
But in an interview with The Washington Times, Mr. Wei denied reports tying Cosco to the Chinese military.
Cosco is a major player in U.S.-Chinese trade.
Last year, Cosco ships carried 12.1 percent of all the goods shipped between China and the United States, which amounted to 434,000 separate containers, according to a database maintained by the Journal of Commerce.
In contrast, the company's position in trade between the United States and the rest of the world is much smaller, about 5 percent.
But very little is known about how Beijing-based Cosco fares financially.
The Chinese government, the firm's only shareholder, has ordered Cosco to operate on a for-profit basis as part of China's broader efforts to reform its state-owned industries.
But Cosco releases very little data on sales, earnings or profits, making it difficult to assess the financial condition of the company.
"I'm not going to give you any of that information," said Howard Finkel, vice president for communications and marketing at Cosco's New Jersey-based subsidiary, Cosco Americas.
Shipping industry specialists say they know little about Cosco, a name that is itself shorthand for 34 subsidiaries which are based in a dozen countries.
"It's very difficult to track their financial performance, given their complex structure," said Jim Pugh, president of Port and Maritime Advisors LLC, an industry consulting firm in Leesburg, Va.
By most accounts, the only part of Cosco that regularly discloses financial data is Cosco Investments Ltd., a publicly traded company in Singapore that handles Cosco's Southeast Asia operations. That company saw profits decline by 70 percent in 1999.
The core of Cosco's business is shipping "containerized" cargo, goods packed into containers the size of small semitrailers. It owns 118 seagoing container vessels operated by 60,000 employees worldwide.
The company says on its Internet site that 50 percent of its business is in cargo between China and other countries.
Cosco's chief advantage is cheap labor in its home market of China, Mr. Pugh said.
In contrast, Denmark's Maersk Sea-Land and Taiwan's Evergreen Marine, two competitors in Cosco's league, have much higher labor costs than Cosco.
This advantage is difficult to quantify, given the lack of data on the Chinese company.
"I'm not sure they have any unique advantage, other than labor costs," Mr. Pugh said.
But like its competitors, Cosco must wrestle with how to transform itself from a purely shipping company into an all-around logistics firm that can take cargo on land, air and sea.
Shipping companies "are realizing that they have to get more involved in transportation than simply shipping cargo from one port to the next," said Austin Schmitt, a director at the Federal Maritime Commission, which conducted a study of Cosco's business from 1994 to 1997.
The study focused largely on Cosco's rates for service to the United States.
Wei Jiafu, Cosco's president and chief executive officer, said in an October speech that "expanding into the modern logistics business is a natural step for Cosco, and a key to the success of our development strategy for the new millennium."
To implement this strategy in the United States, Cosco needs access to terminal facilities, a sizable hurdle after Congress' action in 1997. Mr. Finkel believes Cosco must continue to seek access to the California facilities because so much of its trans-Pacific trade goes through that area.
"Long Beach is our most important hub by far," Mr. Finkel said.

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