Study On The Problem Of Port Expansion Equilibrium

With the continuous growth of economy, ports in China have obtained an unprecedented development. In recent several years, China has invested heavily in the construction of a huge number of large-scale and specialized port terminals. However, an increasingly prominent problem has been brought about since the coastal areas are covered with a large number of ports. Many people hold that the issues such as the repeated construction, the homogeneous competition and the overcapacity are threatening the sustainable development of the Chinese ports. Although there is the question whether the massive investment in the port construction is reasonable, the trend has not slowed down anyway. The main reason, apart from the gap between the port capacity and the demand during the shipping boom, is the high enthusiasm for the port development from the local governments at the provincial or municipal level.Based on the above background, this paper aims to study the critical condition in which the port ends the investment in the capacity expansion and the final equilibrium that would exist. It is hoped that the paper would have a positive role for understanding the characteristic of port development in China and giving local governments guidelines to develop ports in a rational way.The paper firstly identifies the benefit brought by the port investment, and studies the method and the temporality for calculating each benefit. Secondly, it explores the critical condition in which a single port would stop the investment when the competition from other ports is not considered, and then it makes a further study of the critical condition and the final equilibrium in the case of two competitor ports. Finally, with the application of the method to the two major ports in Liaoning Province, i.e. Dalian and Yingkou, it analyzes the dynamic process of the capacity expansion, the timing for the two ports to stop investing and the possible final equilibrium.The study result indicates that the investment in the port expansion makes an outstanding contribution to the political achievement of the local government, and that the method proposed in this paper can be used in the studies of the port expansion in other regions of China.