Spy cranes or not, the U.S. will come after China’s shipping industry

A congressional probe of Chinese-built cargo cranes revealed the shocking finding last week that there was communications equipment emplaced within the cranes that did not appear to support normal operations. The Chinese company that produced the cranes, the Shanghai Zhenhua Heavy Industries (ZPMC), denied the findings and called the probe “misleading”.

The topicality of the congressional probe—just a little more than a year since the notorious “Chinese balloon incident”—will undoubtedly fuel an already mounting fear over China’s threat to American security. Given the nature of intelligence security-related probings that genuinely lack transparency, the question whether Beijing is actually spying on Americans via various day-to-day equipment and products is taken to be a fact within the Beltway, whether that truly be the case or not. 

However, similar to the other espionage cases over Huawei’s equipment and Bytedance’s TikTok app, current attention and actions on Chinese-built cargo cranes are not merely driven by intelligence security concerns, but also by economic interests and a pursuit for supply chain resilience. The clash between the world’s two largest economies in the shipping industry is inevitable and the ‘spy cranes’ probe is just the prologue of this new episode of the U.S.-China strategic competition. U.S. reliance on China for global shipping is the fundamental cause for Washington to come after Beijing over shipping-related issues. Recently reported Biden administration’s concern over America’s “overreliance” on Chinese cranes is merely just the tip of the iceberg. 

From shipbuilding to container manufacturing, and from shipping services to port services, China plays a central role in literally every sector of the global shipping industry. It has reportedly been the world’s largest shipbuilder for 13 consecutive years. Over the last two decades, the number of —heavily subsidized—Chinese shipyards grew from less than 10% of the total global market share to over 50% by the end of 2023. China is also the world’s largest shipping container manufacturer. China’s state-owned China Ocean Shipping Company (COSCO) is the world’s 4th largest shipping company. The shipping giant formed an alliance with the French CMA-CGM (3rd largest), the Taiwan-based Evergreen (7th), and the Hong Kong-based OOCL. It is perhaps worth noting that out of the top 20 global shippers, none is based in the United States, while there are three in mainland China. China also leads in global port services. China reportedly has stakes in 44 ports abroad. Domestically, China controls 7 out of the world’s 10 busiest container ports. 

China’s role in the global shipping industry is yet another testament of its close integration with the global supply chain network. Therefore, Chinese involvement in global shipping will inevitably become the top of the list for the United States as Washington continues to de-risk or, to put it more bluntly, reorient supply chains away from China.

The trade impasse between China and the United States is also another factor that will prompt the U.S. to step up its actions against China on global shipping. Maritime shipping is the vehicle of global trade. Over 80% of the international trade is carried through the sea. The flow of globally traded goods not only determines one country’s position in the global supply chain but also impacts trade balances and practices.

Ever since the Trump era trade war, it is not a secret that Washington seeks to reshape its trade relationship with Beijing. Eight years later, the United States and China have yet to reach a truce over their trade disputes with unresolved issues continuing to trouble the two sides.

Following nearly six years of tariffs and sanctions, the U.S. goods trade deficit with China, which is arguably the top issue, narrowed to its lowest level since 2010. That said, the U.S. did not achieve this through increasing exports to China, which was what the Trump administration had originally hoped for. Instead, as a recent Xeneta finding shows, despite a sharp drop of goods shipped directly from China, many Chinese shipments now make their way to the U.S. via Mexico. This made Mexico the biggest exporter of goods to the U.S. in 2023, which increased the U.S. trade deficit with Mexico by 17%. As long as such goods continue to ship from China to the Americas via the world’s busiest Pacific shipping route, the U.S. will not fundamentally reduce its overall trade deficit concerns by simply blocking imports. 

United States Trade Representative (USTR) Amb. Katherine Tai has contended that tariffs are not sufficient to address some of the key issues and has called for new tools to better compete with China on trade. As the Office of the USTR reviews the United States-Mexico-Canada Agreement (USMCA), now with the China challenges particularly in mind, how to stop China from shipping electric vehicle components for assembly in Mexico or Canada will be of particular interest for the U.S. in the time going forward. And relatedly, it is only a matter of time before Washington seeks actions on tackling China’s cross-Pacific shipping advantage to protect and boost its own trade toolkit.

The U.S. Congress has already prepared both the initial toolkit for Washington to come after Beijing on shipping and the enforcement means too in the form of a supercharged Federal Maritime Commission (FMC). The Ocean Shipping Reform Act of 2022 and the subsequent Ocean Shipping Reform Implementation Act of 2023 gradually expanded the authority of the FMC with a specific aim at foreign shipping companies—particularly Chinese companies—to address “the United States’ longstanding trade imbalance with China and other countries.” It is also worth noting that in the originally proposed text of the Ocean Shipping Reform Act of 2022, the FMC is required to carry out its actions “in harmony with fair and equitable international shipping practices.” Meanwhile, in the final version, which President Biden signed into public law on June 16, 2022, this line has been expunged. Intentional or not, the absence of this important restraint implies that Washington’s future actions on shipping could become as disruptive, “unruly and self-interested” as its current trade practices vis-a-vis Beijing.

The ‘spy crane’ probe is not the first time that China and shipping have come under the spotlight in recent years. During the COVID-19 pandemic, U.S. Congress accused Chinese shipping companies of shipping back empty containers without waiting to load returning U.S. agricultural exports. President Biden criticized foreign shipping lines for stoking inflation and suggested that the FMC should crack down on these companies. Citing data and standards-setting issues, the U.S.-China Economic and Security Review Commission expressed deep concern in 2022 about China’s transportation and logistics management platform LOGINK. Following these years of grievances, together with intelligence security, supply chain resilience, trade, and domestic economic interests all coming together, the U.S. seems to have more than enough reasons to step up its effort to come after China’s shipping industry.

A storm is gathering over the Chinese shipping industry and given the highly integrated and complicated structure of the global shipping system, the implications for how far the U.S. is willing to take on China on shipping should be a matter of worry to all.