A US company has just contracted with east China's Lianyungang port for a 51 percent share of its Xugou project, heralding a law change allowing foreign companies to hold controlling stakes in Chinese ports.

Latest investment guidance for foreign capital issued by the Chinese government has ended a regulation limiting foreign ownership of ports to less than 50 percent, said the Ministry of Communications here Tuesday.

The move is expected to unleash a new tide of investment in China's ports, said Wang Jinwen, director of ports administration of the ministry's shipping department.

The investment by the US United Yield International Limited in Lianyungang is another step following the joint investment by two world shipping giants, A.P. Moller Maersk Group of Denmark and P & O of Britain, to East China's Qingdao port this year.

The US United Yield International Limited is a 51 percent shareholder in the Xugou project, while the Lianyungang Port group and two other Chinese companies hold the remaining 49 percent.

Wang said ports were the earliest section among China's infrastructure construction to open to foreign capital, with its first foreign-founded project launched in 1979. The Chinese government would encourage foreign capital to participate in China 's ports construction and operation.

Wang said the new investment guidance not only allows for foreign capital holding shares in China's ports construction, but also for wholly foreign-founded projects.

There are some cases of foreign capital holding more than 51 percent in China's port projects, but no reports of wholly foreign- founded port projects in China, said Wang.

Wang said that with China's entry to the World Trade Organization (WTO) and its further opening policy, the Chinese government has realized that overseas investment can not only help speed port construction, but also to improve the capacity of China 's ports.

Currently, over 90 percent of China's foreign trade and half of the country's domestic transport goes through ports. The number of containers handled by Chinese ports has maintained an annual growth rate of 30 percent in the past decade.

In 2002, the number of containers handled by Chinese ports amounted to 37 million TEUs, about 30 times the volume of 1989. China hopes to increase the capacity of its national ports to 3 billion tons by 2010, with the number of containers to hit 100 million TEUs.

So far, the Chinese government has invested more than 100 billion yuan on ports and inland waters.

Wang said more Chinese ports were using foreign capital and other financial resources, and the new law on ports has for the first time given equal treatment to state-run, private and foreign- funded ports in China.

The Chinese government would also issue a series of regulations on overseas investment in China's ports, which will help ensure the sound operation of foreign capital in China's port construction and operation.

Wang expressed his hopes that with the expanded investment channels and improved service level, China's ports will be further opened to foreign capital in the coming years.

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