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A.Strategies and General Introduction B.Management participation C1.
Human rights
G3 Content Index
  Economic performance indicator and keynote report
    I. Management approaches
    II. Performance indicators
  1. Direct economic value created and distributed by COSCO Group
2. Influences of climate changes
3. Fixed welfare plans
4. Key financial supports provided by the government
5. Minimum salary and comparison with the standards
6. Local suppliers and purchase policies
7. Employing local employees and senior executives
8. Public services
  9. Key indirect economic influences



In 2009, COSCO Group completed the shipping volume of 409.7906 million tons, with the freight turnover of 1962.618 billion tong sea mile. The market occupancy in container shipping market was 4.2%, the market occupancy in dry and bulk cargo shipping market was 8.8% and the market occupancy in tanker market was over 1.5%.

Its logistics business ranks the first place in Rankings of Top 100 Logistics Companies of China for five times in a row, and ship-repairing business also takes a lead in domestic market. Although affected by international financial crisis and sharp deterioration of international trade situations, the entire shipping industry was in a valley. Despite of this, operating revenue of COSCO Group still reached 118.823 billion yuan, building up the brand of Chinese shipping industry worldwide. Operating revenues of COSCO Group in recent years are as follows:
Indicator/Year 2003 2004 2005 2006 2007 2008 2009
Operating revenue (100 million yuan) 758 935 1,123 1,229 1,585 1,906 1,188

Effective cost control is a key element for an enterprise to make profits and achieve success. As shipping industry has the obvious feature of market periodicity and shipping market is in depression at present, the meaning of cost reduction is far from creating of benefits, but also is closely related to existence and sustainable development of enterprises.

COSCO Group has attached great importance to cost control work. In 2009, it continued to promote the ¡°Lean Management¡± program focusing on cost reduction within the whole group, and enhanced the controlling strengths on key cost points and administrative expenditure in business. Measures taken by shipping, logistics, shipbuilding and ship-repairing enterprises are as follows: Firstly, establish cost control mechanism, decompose cost indicators, detail control measures, improve cost evaluation system and control operation costs; Secondly, enhance education on sense of cost and elevate the cost-saving consciousness of employees; Thirdly, carry out many forms of activities and mobilize the cost control initiative of employees; Fourthly, explore the potentials and manage the key costs; Fifthly, solve the cost-saving difficulties by using tools such as lean management and QC team, and try to reduce costs.

(1) Reduce fuel consumption: fuel consumption is one of the major operating costs of ocean vessels. COSCO has adopted a series of measures to reduce fuel consumption and cut cost. Please see ENVIRONMENT for detailed information.

(2) Pay attention to energy-efficient designs on new ships: COSCO Guangzhou has 8 newly-built 32,000-ton timber vessels which were designed and built in strict accordance with high standards to realize economic benefits with environmental protection. When choosing auxiliary oil-fired boiler, the new rotary-cup type has been adopted with a special boiler cabinet, which saves 168 kilograms of clean fuel every day and reduces consumption by 7 percent during voyage.

(3) Recycle spare parts and reduce maintenance costs: in 2009, COSCO Guangzhou recycled and renewed 2.3 million yuan worth of spare parts, and cut the cost of spare parts by 3.5 million yuan.

(4) Reduce costs by taking reasonable advices: in 2009, COSCO Xiamen launched a campaign to collect employees¡¯ advices and suggestions about revenue generation and cost reduction. Actively responding to the call for ideas, employees at COSCO Xiamen put forward 21 suggestions regarding a wide range of issues, including sales and marketing, Lean Production management, production safety, technological improvement, the improvement of operating and managerial mechanisms, and the mobilization of employees, etc. After careful consideration, all 21 suggestions were regarded pertinent and feasible, and they were expected to generate more than 8 million yuan in revenue. Therefore, the company decided to place competent departments in charge of their implementation and to put in practice the employees¡¯ suggestions by process and effect tracing. As of November 2009, COSCO Group collected a total of 6,606 suggestions from its employees, and adopted 2,420 after preliminary consideration and assessment, which was expected to generate 355 million yuan in revenue. COSCO employees initiated 468 technological innovation projects which were expected to generate 110 million yuan.

(5) Reduce expenditure at information center by rational application of new technologies: the information center of COSCO Bulk has introduced a series of measures to save energy and reduce cost. These include: managing servers with virtualization technology to build green machine rooms (in 2009, more than 30 servers were laid off and the number of air conditioners was brought down, which saved 100,000 kilowatt-hours); promoting the use of IP telephone and self-developed internal instant message tool Spark, which saved 350,000 yuan in communication expense; and finally, seizing opportunities to introduce competitive mechanism, and relocating and re-positioning businesses involving the data routes of major operators. The company managed to cut expense on communications routes by 15,600 yuan every month, totaling 200,000 yuan in 2009.

(6) Cut costs through lean production management: COSCO Pacific established a cost control committee consisting of financial officers and leaders from different departments. The committee is responsible for overall cost structure analysis and sets cost-control targets for each subsidiary based on the different operations and management characteristics of the headquarters, wholly-owned companies and holding companies. In 2009, the company managed to save 73.46 million yuan through lean production management and cost-control measures and successfully achieved the cost control targets set by the Group. The quality control group generated revenues of 48.25 million yuan.
All companies of COSCO Group have established different forms of salary and welfare systems in accordance with the national laws, regulations and related polices and in combination with practices of the industry and enterprises, protecting basic rights and interests of employees.

While gaining economic growth, all units of COSCO Group have increased the salaries and welfares of employees stably, improving employees' recognition on the enterprise and enhancing the cohesion.

COSCO Group bought various social insurances for its employees in accordance with the laws, covering items such as endowment, medical, work injury, maternity, employment issuances and housing funds, ensuring legal rights and interests of employees. In 2009, basic endowment insurance fees paid for COSCO Group¡¯s employees reached 1.065571 billion yuan, up 13% year-on-year. Among the basic endowment insurance fees paid in 2009, 20% were paid by COSCO Group, while 8% were paid by employees.

Besides aforesaid social insurances, COSCO Group also established supplementary medical insurance, work injury insurance and annuity of enterprises for all its employees. In 2008, the detailed implementation plans of the annuity of the enterprises have been approved by SASAC, and in 2009, the plans have been put into records by the Ministry of Human Resources and Social Security. In 2009, COSCO Group continued to promote enterprise annuity work and had entered the implementation stage.
¡ùSince 2004, COSCO Group¡¯s profits accumulated to 100.15 billion yuan. The Group achieved satisfactory results in the business assessment conducted by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council and was graded an A-Level Enterprise in the tenure assessment conducted by SASAC.

¡ùIn 2009, COSCO Group reaped 1.397 billion yuan in profit and met its overall profit target despite the continuous impact of the financial crisis and the periodical change of the global maritime market.

Table for total profits of COSCO Group in past six years

Indicator/Year 2003 2004 2005 2006 2007 2008 2009
Profits realized (10,000 yuan) 189,481 1,217,889 2,007,100 1,504,100 3,405,542 1,740,386 139,725
In 2009, international financial crisis brought great influences to shipping market. Listed companies affiliated to COSCO Group further improved related system, improved the governance structure and mechanism of the company, promoted comprehensive risk management, effectively controlled the market risks and achieved good results.

China COSCO has achieved the good performance of social contribution -0.11 yuan per share in 2009. Social contribution per share was in accordance with the requirement of ¡°Strengthening Listed Company Social Responsibility and Commitment <Shanghai Stock Exchange Listed Companies Information Release Guide> Notice¡±, based on the basic earnings per share the company created for its shareholders, added the annual tax the company created for the state, the wages paid for its staffs, the interests paid for banks and other creditors, the donation of thecompany and the value amount the company created for other relevant stakeholders, deducted other social costs caused by environmental pollution hence formed the social contribution per share the company created for the society. It helped public get.

a more comprehensive understanding of the real value the company created for its shareholders, employees, customers, creditors, communities and the whole society.

On May 31, 2009, China COSCO ranked 337 with a market value of 14.8554 billion dollars on the latest Financial Times¡¯ Global 500.

¡ùOn April 24, 2009, the World Eminent Chinese Business Congress, the 4th Eminent Chinese Business Leaders¡¯ Forum and the 8th Spring of Diplomats Conference were held at the Great Hall of the People in Beijing. China COSCO was awarded the honorary title of Listed Chinese Company with Most Growth Potential in 2009.

¡ùOn June 26, 2009, the 2008 China Listed Company Value Award and the 1st Most Popular Website of Listed Company Among Investors Award Ceremony were held in Beijing. Through a number of procedures, including finance assessment, corporate management assessment, public and institutional voting, and the assessment by a panel of experts, China COSCO was awarded four titles: one of the Top 100 Listed Companies with Most Value, Excellent Management, Excellent President¡¯s Secretary and Most Popular Website of Listed Company Among Investors. This is the second time COSCO Group has won the award.

Indicators of listed companies of COSCO Group (As of Dec. 31, 2009)

Company Listing place Total market value (100 million yuan) Share proportion (%) Market value calculated by share proportion (100 million) ROE on net assets (%) Dividend per share at end-period Basic profit per share
China COSCO Hong Kong/Shanghai 1278.3 52.8 674.9 -11.76 0 -0.74yuan
COSCO Pacific Hong Kong 197.8 51.2 101.3 6.3 0.21 HD dollars 0.52HD dollars
COSCO International Hong Kong 44.2 59.87 26.4 14 0.084HD dollars 0.5625HD dollars
COSCO Investment Singapore 129.5 53.35 69.1 9.9 0.03 Singapore dollars 0.05 Singapore dollars
COSCO Shipping Shanghai 138.2 50.73 70.1 2.84 0 0.10 yuan
In 2009, COSCO Group paid a total of 3.17252 billion yuan of tax to the government while ensuring the overall profits of the group in crisis.
Indicator/Year 2002 2003 2004 2005 2006 2007 2008 2009
Profits realized(10,000 yuan) 106,064 181,792 327,812 578,271 523,653 865,959 1,079,733 317,252

(1) Care for people's life and pay back to the society

COSCO Group actively shoulders social responsibilities, supports social investment activities, cares for people's life and pays back to the society. Over a long period of time, all companies affiliated to COSCO Group have been engaged in social investment, charity and public welfare activities actively while focusing on its own development.

Since 2003, accumulated donation made by CO SCO Group for social projects totaled 228.2709 million yuan. (See table below)

Indicator /year 2003 2004 2005 2006 2007 2008 2009
Investment capitals provided for social projects 866.1 584.37 3,794.63 3,355.68 5,875.96 6,142.35 2,208

In 2009, COSCO Group, through COSCO Charity Foundation, donated a total of 22.08 million yuan to social projects.In August 2009, Typhoon Morakot brought serious disaster to Taiwan. COSCO Group and COSCO Charity Foundation donated 10 million yuan at the first time to support restoration of homeland of Taiwan compatriots in areas stricken by Typhoon Morakot.
(2) Standardize the operations of COSCO Charitable Foundation and fulfill social responsibility
COSCO Charity Foundation, founded by COSCO Group in 2005, is the first non-public offering, non-profit earning charity foundation that founded by state-owned enterprise. The foundation of COSCO Charity Foundation marked that COSCO Group is to initiatively and actively shoulder and fulfill their social responsibilities and take this target into enterprise development strategy hence build up the enterprise responsibility system with fulfilling economic, environmental and social responsibilities as its main contents.

COSCO Charity Foundation aims at changing COSCO¡¯s social responsibility action into rule-based, standardized, specialized and day-to-day enterprise behavior. It provided a good operation platform for the enterprise to fulfill its social responsibilities. In accordance with relevant requirements by the Ministry of Civil Affairs, the Constitution of the Foundation, and the Notice on Enhancing Management of Donations by Central Enterprises issued by SASAC, COSCO Charitable Foundation had two board meetings in 2009 to ensure smooth and standardized operations, discussing the development, construction and major donations of the Foundation, and reviewing and voting on the change of board members, organization structuring, recruitment, financial budget and accounting, project development, work report and work plan, etc.

¡ù Institutional enhancement: a new publicity department was established in 2009 and staffed by full-time employees, which formed a capable, efficient team consisting of both part-time and full-time workers.

¡ù Strictly observe the financial regulations and enhance financial management: conduct financial accounting in strict accordance with the Accounting System for Non-Government, Non-Profit Organizations and the Accounting System for COSCO Charitable Foundation, and review and supervise each investment; invite third-party auditors to audit the annual financial report; manage income from investment in a timely manner, and prepare and submit the statistical statement in accordance with relevant requirements. Second, enhance capital management and earmark a fund for its specified purposes only to ensure the rational, effective use of capital; check cash and bank accounts on a regular basis, strictly observe the payment procedures and make good use of the donations. Third, enhance taxation management and actively seek for preferential taxation policies. The Foundation has completed all the work relevant to annual corporate income tax filing, went through all tax-related items, and consulted competent authorities for the establishment of tax items and the prevention of tax risks. It has also applied for preferential taxation policies, and enhanced its connection and communication with the State Administration of Taxation and the Ministry of Finance. COSCO Charitable Foundation became in 2009 one of the first charitable organizations to receive pre-tax charitable donations, which created excellent preconditions for the Foundation to utilize capital.

COSCO Charity Foundation has been hard working towards institutionalized and standardized construction. It has committed to the development and refinement of fund management and fund use standard, scientific management of social investment projects, rational use of social investment funds. It has also given full play to the positive role of social investment so as to achieve centralized management of the social investment funds and investment projects of all members and units.
Ever since its foundation, COSCO Charitable Foundation has been devoted to systematic, standardized construction. The organization has formulated and improved its regulations on the management and use of funds, managed social investment projects in a scientific manner, utilized social investment funds in a rational manner, given full play the benefits of social investment and realized the concentrated management of social investment funds and investment projects by different member companies. To guarantee that every donation expresses the will of the donator(s) and is used for its specified purposes, we endeavor to do an excellent job every time and keep a close eye on our projects and development processes.

COSCO Charity Foundation adhered to ¡°Carrying forward the national spirit, dedicating COSCO LOVE, supporting public welfare and promoting social harmony and development¡±. It has carried out a series of social relief activities in support of the people suffering from poverty, disaster, disability and homelessness. It also has given assistance to medical and education affairs. In accordance with ¡°COSCO Charity Foundation 2009 Work Guideline¡±, through rigorous research and feasibility analysis, COSCO Charity Foundation has carried out 16 projects in 2009, the projects funds amounted to 24.33 million yuan.

In 2007 and 2008, COSCO Group was awarded the titles of China Charity Award¡ªMost Charitable Chinese Enterprise and China Charity Award-Special Contribution Award. In 2009, the Group was awarded the title of ¡°National Charitable Company¡± by the China Charity Federation. On November 18, 2009, Forbes Chinese released the first China Charity List in China. Among all non-public funds in the country, COSCO Charitable Foundation ranked first. These awards and titles bespeak the recognition and acknowledgement COSCO Group has gained from thegovernment and the public for its charitable work. Mr. Wei Jiafu, Honorary President of COSCO Charitable Foundation, visits villagers in poverty-stricken areas.
¡ø ¡°Voyage and Dream¡± Project on junior education in Lincang, Yunnan Province continues through careful organization
In 2007, COSCO Charitable Foundation began to donate to the primary schools at poverty-stricken, ethnic minority villages in Lincang City, Yunnan Province. Sun Yueying, Secretary General of COSCO Charitable Foundation and Chief Accountant of COSCO Group visited Lincang with her work group several times to organize the implementation of the projects. By the end of 2009, COSCO Charitable Foundation implemented a three-phase project on the primary schools at poverty-stricken, ethnic minority villages in Lincang and donated a total of 3,711,950 yuan. The organization equipped 35 primary schools at five counties, namely Gengma, Shuangjiang, Cangyuan, Zhenkang and Yunxian County, with 8,712 new sets of desk and chair, 1,513 bunk beds, 714 teachers¡¯ desks, 224 platforms, 775 sets of dining table and chair, 32 experiment table and cabinet, along with TV sets, cameras, refrigerators, and electric cookers, etc. In addition, all students were provided new school bags. A total of 9,141 students and 611 teachers benefited from the project. This project, as one of the Most Influential Charitable Project in 2009, won a China Charity Award from the Ministry of Civil Affairs. The fourth phase of the project is currently underway.
¡ø Enhance control and supervision, and ensure the quality of re-built school buildings in quake-stricken areas
on-the-spot inspection; handover ceremony for the key; a corner of the new school; children learning English After the Wenchuan Earthquakes in 2008, COSCO Group donated 30 million yuan for the reconstruction of Cifeng Primary and Secondary School in Pengzhou City, Sichuan Province. The Group promised to have COSCO Charitable Foundation supervise and examine the whole project on the school buildings. Upholding the principle of ¡°quality first,¡± COSCO Charitable Foundation managed to have effective communication and negotiation with the local government, the school and the construction company despite the tight schedule, long rainy season, power cut, road block and frequent quakes. To ensure the quality of the project, COSCO Charitable Foundation invited supervision and management professionals to examine the quality of the project and construction materials and to supervise the process of the work. The professionals conducted 11 examinations on the work site and prepared 11 reports. Problems were discovered and rectified in a timely manner, which effectively ensured the quality and schedule of the project. The project was put into use in March 2010. Xiguan Primary School at Chengxian County, Gansu Province under construction .
(3) Poverty relief work in Tibet continues
COSCO Group attached great importance to aid to Tibet and poverty relief work. In perspective of the present reality of designated areas, including Lhorong County of Tibet, Yanshan County and Haixing County of Hebei Province, COSCO Group gave fully play to its corporate advantages, and adhered to the principles of improving the production and living conditions of poor farmers and herdsmen and enhancing and ¡°hematopoietic function¡± of poverty-stricken areas. The group continued to increase its efforts to provide aim to Tibet and to alleviate poverty. In 2009, COSCO Group invested a total of 12 million yuan in aid to Tibet and poverty relief.

¡ö Poverty-relief work in Tibet achieves new progress through strict control
The ring road project at Luolong County was one of COSCO¡¯s key projects in 2009. The Group invested more than 7.2 million yuan in it. Taking into full consideration the actual needs of local residents, COSCO Group decided to add a number of auxiliary projects to the original ring road projects, including the rechanneling of irrigation ditches along the road, the work on the retaining walls, drainage channels, cross-road pipes, steps, anti-crash walls and basic protection to residential houses along the road, etc. With strict control and management, these projects have passed the acceptance inspection.

In addition, COSCO Group contributed to the projects on the extension of water intake at Luolong Water Works and the medical equipment at Shuodu Town Clinic. It also helped 170 farmers and herders¡¯ families to build their shelters.
¡ö Promote the sustainable development of Luolong County with new education ideas
Training programs for grass-root cadres at Luolong County: In 2009, COSCO Group flew 15 local cadres from Luolong County to Chengdu for a 15-day training program. The cadres completed their field trips about agricultural industrialization, ecological agriculture, modern husbandry and farming industrial chains, rural development powered by tourism and comparative study on new village building, etc. Their horizons were expanded, experiences enriched, and ideas opened up.

Kelsang Metok Fellowship and Stipend: to fund and encourage the education for school-year children at Luolong farming and husbandry district in Tibet, COSCO Group established the Kelsang Metok Fellowship and Stipend. In 2009, a total of 41 and 58 students won the fellowship and stipend, respectively. By the end of 2009, the Kelsang Metok Fellowship and Stipend, total worth 823,600 yuan,were awarded to 426 students, which contributed greatly to the education for school-year children in the area.
(4) Establish COSCO Group Scholarship
As an encouragement for students majoring in ocean shipping at Dalian Maritime University and Jimei University, and to turn out more talents for China¡¯s maritime undertaking, COSCO Group established in 2008 a five-year COSCO Group Scholarship at Dalian Maritime University and Jimei University, respectively. The Group would pay 200,000 yuan as scholarship to each university every year.
(5) Ship disaster-relief materials to Taiwan

In August 2009, Taiwan received a hard blow by Typhoon Morakot. The south China branch of COSCO Container Shipping was put in charge of the shipping of disaster-relief materials to Taiwan. The company loaded 246 40-foot containers with disaster-relief materials (including 1,000 portable shelters) and transported them in four dispatches to Kaohsiung Port through Yantian Port in Shenzhen.

(6) Provide supplies for convoy fleet
On December 26, 2008, more than 800 officers and soldiers with Chinese People¡¯s Liberation Army Navy were sent to serve in the Gulf of Aden and Somali waters. In March 2009, the convoy fleet was in urgent need of supplies. Lequn Ship from COSCO Hong Kong learned about the situation and offered more than 200 kilograms of meat, dried goods and soybean to the navy, keeping only basic food supplies to itself.

Meanwhile, the south China branch of COSCO Container Shipping loaded 3 reefer containers with 8 tonnes of fresh vegetable and carried them to the Gulf of Aden on COSCO Hamburg Ship from Shekou, Shenzhen on April 2 to provide supplies to the convoy fleet.

Later, COSCO Container Shipping sent more supplies and goods to the navy on Yuguhe Ship and COSCO Indian Ocean Ship.
(g) Participate in the 60th anniversary ceremony of Chinese navy and offer fuel and water to foreign naval vessel
On April 23, 2009, a total of 21 foreign naval vessels from 14 countries joined a grand international fleet in Qingdao for a display to mark the 60th anniversary of the founding of China¡¯s People¡¯s Liberation Army Navy. For the first time in history, naval vessels from different foreign countries were invited to participate in a grand military review in China. Chimbusco Qingdao was appointed the exclusive fuel and water provider for the foreign naval vessels. On April 20, the wind force on Qingdao sea was 7 to 8 scale, with occasional 10-scale wind. Managers of Chimbusco Qingdao were onboard to direct the supply of fuel and water amid strong wind and high waves. The ship provided safe, high-quality water and fuel in a timely manner to a Korean destroyer, a Singaporean invisible missile escort vessel and an Australian depot ship and won sincere praises from these vessels.
(h) Take active part in marine salvage

Upholding international humanitarianism, COSCO employees exhibited their excellent professional skills and respectable dignity in the face of danger and threat to personal and property safety. Throughout 2009, COSCO Group participated in a total of 16 marine salvages. On April 8, 2009, Chimbusco Lianyungang received an urgent notice from local marine bureau asking for maritime salvage for Lihua No. 6, a ship loaded with 4,500 tonnes of diesel but hit by another ship. After 8 days of hard work, the Lihua No. 6 was dragged to the safe sea area and all the diesel was unloaded. There was no leakage, nor risk for breakage or sinking. Thanks to the timely salvage and scientific arrangement, the loss from the accident was minimized, no injury or death caused, no associated accident incurred due to inappropriate salvage. A serious ocean pollution was successfully prevented.

COSCO 2010