Carnival Corp. took a further step into China by signing a memorandum of understanding with a Chinese company that could lead to the formation of a Chinese cruise line.

Carnival and China Merchant Group (CMG) agreed to "explore the possibility" of two joint ventures. One would own and operate cruise ships "as part of the first-ever domestic Chinese cruise line specifically targeted to the Chinese market."

A second venture would develop ports throughout north Asia, starting with a flagship port called Prince Bay Cruise Terminal, which CMG is already developing near Shenzhen, just north of Hong Kong.

Founded in 1872, CMG is one of the oldest and largest state enterprises, with a portfolio of transport, infrastructure, finance and real estate assets.

"With CMG's amazing track record, reach and influence in the market, we are working with a strategic partner that can help us explore immediate ways to impact cruise growth in China, including the possibility of a new Chinese cruise brand and new destinations," said Carnival Corp. COO Alan Buckelew.

The two cemented their partnership in a ceremony at the Hilton Shenzhen Shekou.

For Carnival it is the second memorandum of understanding signed with a major Chinese partner. Last year, it entered into a memorandum of understanding with China State Shipbuilding Corp. (CSSC).

The primary goal of that partnership was to explore joint construction of a cruise ship in China. Subsequently, the Italian shipyard Fincantieri was added to the venture.

Carnival's memorandum of understanding with CSSC also mentioned the companies might explore other joint venture opportunities, including port development and a potential domestic cruise company.

It isn't clear how Carnival's new pact with CMG would affect that earlier agreement.

Carnival has been operating cruises from China and selling cruises there since 2006 when it first dispatched a Costa Cruises vessel to spearhead the company's development in the market. Today, the Costa Atlantica, Costa Victoria and Sapphire Princess sail from China year-round, and they will be joined by the Costa Serena in April.

However, building a ship in China and operating it in partnership with Chinese interests would fit the general model the Chinese often use in business with international companies and advance the diversification of the economy sought by Chinese officials.

Carnival said the ship-owning venture with CMG would explore the possibility of sourcing new ships that are designed and built in China, along with the option of acquiring existing ships.

Another joint venture in the Chinese market between Royal Caribbean Cruises Ltd. and the online travel firm Ctrip is using the former Celebrity Century as its inaugural ship.

The new SkySea Cruises is expected to begin operations midyear following the retirement of the Century from the Celebrity fleet in April.

One of the oft-cited obstacles for further cruise development in Asia is the paucity of port and excursion infrastructure. Carnival and CMG are exploring the possible construction of turnaround and transit ports within and around China as well as elsewhere in northern Asia, they said.

The major itineraries from Shanghai visit other ports in China as well as South Korea and Japan. Itineraries from Hong Kong have tended to focus on Taiwan, southern China and Vietnam.

The Chinese government expects 4.5 million cruise passengers to be sourced from China by 2020.


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