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The Three Gorges Dam wasn't built to create a river highway, and indeed none of the controversy and little of the debate that surrounded planning for the world's largest dam had anything to do with transportation. From Beijing's point of view, the main selling points of the dam were power generation and flood control, and for critics its chief downsides were environmental and social--the flooding of the gorgeous Three Gorges and thousands of villages on the banks of the fabled Yangtze River. Transport was a peripheral consideration.
But now that the dam is built, and the reservoir is slowly rising en route to its eventual western tip at Chongqing, its dramatic impact on the movement of cargo--particularly heavy products like cars--is becoming clear. The Yangtze flows deeply enough to carry heavy ships to the site of the dam, some 1,900 kilometers west of its ocean outlet at Shanghai, and the dam will allow officials to regulate the river's flow upriver from there. The reservoir will thus extend this river highway an additional 508 kilometers inland, opening the interior of China to export manufacturers year round, and positioning Chongqing to fulfill its ambitions of becoming the Detroit of China.
Chongqing, population 10 million, straddles the Yangtze in the center of China. Since 1997, when Beijing gave the metropolis a leading role in its Go West campaign to develop the nation's poorer western half, the government has dumped cash into capital construction: bureaucrats boast of burning through billions of dollars to build highways, bridges, museums and stadiums. But nowhere is the city's potential clearer than on a quiet bank of the river. Amid farmers' fields in an eastern suburb, workers are constructing piers that now reach out to water that has yet to arrive, but will become the biggest and most state-of-the-art cargo port on the river's upper reaches. Backing up behind the Three Gorges Dam since 2003, the reservoir is expected to reach Chongqing by 2009, allowing 7,000-metric ton ships to reach the city year round. (Currently only 2,000-metric ton ships can reach Chongqing during the winter.)
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As the reservoir inundates villages and temples in its way, it's also giving birth to new development along its future banks. Since 2004 Beijing has blasted shoals from the river to clear shipping lanes; required boats to install radar using Global Positioning System technology to allow night operation; opened a $120 million port in Wanzhou city, 230 kilometers east of Chongqing, and stepped up regulations to reduce river accidents. Such improvements helped raise total shipments on the river by 16 percent last year to 390 million tons, which made the Yangtze the world's second most heavily traveled river, after the Mississippi's 400-plus million metric tons. In Chongqing, the amount of river freight handled has more than doubled since 2001, and He Shengping, vice director of Chongqing's Communications Committee, expects that amount to double again by 2010, when he estimates the cost of shipping on the river to fall by about 35 percent.
Many multinationals are now eyeing the Yangtze as a possible solution to the logistical nightmares of shipping inside China. Even though the length of China's highway network has doubled since 1980, it remains sparse, according to World Bank transportation specialist Michel Bellier. The problem is most acute in western China, where trucks must share local roads with bicycles and pigs, and must often pay high tolls to corrupt officials, says Christopher Torrens, director of the Shanghai office of the consulting firm Access Asia. Rail lines are worse: during the first half of last year they could meet only 35 percent of all freight requests, and companies complain that goods often arrive late or damaged.
Those bottlenecks are increasingly troublesome to foreign firms, drawn to western China by fast growth and low costs. GDP in the region grew 12.8 percent last year, 3.3 percentage points higher than the national average. Yet, according to Wu Yue, a professor of economics and law at Chongqing's Southwest University of Political Science and Law, wages and real estate in Chongqing still cost roughly half as much as in Shanghai. Those numbers have enticed dozens of multinationals--from Intel to Nokia and Swatch--to open offices in cities like Chongqing, Chengdu and Xian.
As these companies move inland, their logistical costs surge. Jiang Zhongsheng, Chongqing general manager for the state-run China Merchants Logistics Group, estimates that 20 percent of product costs in China stem from logistical fees, much higher than the 3 percent rate for efficient firms in the United States; the farther that firms move into China, the more the costs go up. For clients like British Petroleum, Coca-Cola and Procter & Gamble, he says, "lowering logistical fees is a major concern."
The Yangtze is a good place to start. According to Jiang, shipping goods by river costs one third as much as by road. Ford, which is expanding a factory in Chongqing to produce 150,000 cars a year, ships imported parts up the river from Shanghai and finished cars downstream. According to a company spokesperson, "Journey duration and reliability have improved significantly since the new dam became operational," and executives expect costs to fall as competition between shipping companies increases. When Harley-Davidson executives visited Chongqing last year to explore joint-venture possibilities, they saw Yangtze transport as an important incentive, says Yin Mingshan, the president of Chongqing's Lifan Motorcycles.
The first movers are logistics companies themselves. Japan's Kawasaki Kisen Kaisha opened a Chongqing branch in 2003. China Merchants opened its office last December and is currently building a 70,000-square-meter warehouse. "Chong-qing," says Jiang, "is the gateway to western China, so we're confident that transportation needs will rise." Other companies, says Access Asia's Torrens, may take advantage of improved river transport by moving labor-intensive operations upstream while keeping final assembly and management in the east. "The river," he says, "could itself become a supply chain." Ford is counting on it: executives plan to increase river traffic from domestic suppliers along the river.
With the waters still rising, other firms are taking a wait-and-see approach. China's Ministry of Communications announced in January that it will spend $200 billion over the next 25 years to nearly triple the size of its highway network, which will make trucking more competitive. Executives also worry about hidden costs. Since oceangoing vessels carry as much as 100,000 metric tons of cargo, most export goods coming from Chongqing would have to be unloaded downriver and transferred to larger ships, a time-consuming and costly maneuver. Heavy silting in the river will require costly dredging, an expense that might be passed on to shippers. "The government says that it is prepared to go to whatever length to keep the river open," says Sam Chambers, East Asia editor for shipping-industry journal Lloyd's List. "But they aren't telling anyone that the costs will be astronomical."
Try telling vice director He that the prospects aren't crystal clear. "Chong-qing," he insists, "is likely to become China's Detroit." China Merchants is also gung-ho: it plans to expand its staff to 100 this year. General manager Jiang says that the company has to be ready for the coming surge in Yangtze business. The question isn't if, he says, but when.
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