As China’s infrastructure improves, Hong Kong worries about its status as a logistics giant.
April 6, 2006 by SwizStick
Filed under Uncategorized
Despite strong economic growth linked to the mainland, Hong Kong worries about its prospects of maintaining its status as a logistics and financial hub as southern Chinese cities continue to develop their infrastructure:
Hong Kong has become one of Asia’s strongest economies, expanding by more than 7 percent annually in the past two years with help from robust exports, including re-exports of Chinese goods.
Air cargo through the city is expanding as a result. But growth in sea trade has diminished because the cost of shipping a 40-foot container through expanding ports in southern China, including trucking, is US$200 less than through Hong Kong.
The city’s share of southern Chinese ports’ trade with Europe and countries across the Pacific slumped to 40 percent last year from 75 percent in 2000, according to consultants McKinsey & Co, and Hong Kong lost its place as the world’s busiest container port to Singapore.
“The withering away of our seaport trade is weakening Hong Kong’s position as a supply chain management centre,” said Robin Chiu, director-general of the Federation of Hong Kong Industries.
Demand for more sailings and better service from Yantian port in Southern China has been growing. Major U.S. importers see Yantian as a viable alternative to Hong Kong, saving money not only on the oceanfreight cost but also on product cost and transit time. Previously suppliers would often have to arrange to send their goods across the border to the terminals in Hong Kong, thereby increasing cost of goods, as they would add the transportation charges to Hong Kong to their invoices. There is also a slight saving in transit time as suppliers located in Dongguan and other southern Chinese cities can avoid the leg to Hong Kong, delivering direct to the steamship lines in Yantian. I think it is inevitable that Hong Kong’s logistics status will decline as China develops its infrastructure, making it easier for businesses to ship product directly from factory location instead of via Hong Kong.
Instead of worrying about Hong Kong’s decline as a logistics center, Hong Kong should instead focus on its other strong industries:
Thousands of jobs have been generated by a flood of tourists from the mainland in the past two years as well as the city’s position as a global financial centre at a time of massive fund-raising by mainland companies on the Hong Kong bourse.
This is just another example of changing industries around the world. The continuing decline of U.S. manufacturing, which has been painful for many communities around the U.S., has given rise to growth in the Services industry. The lesson to be learned is that the economy can change very quickly, especially in this global market. Those economies that plan ahead and learn to adapt quickly to changing environments will have an edge on their competitors and usually turn out ahead.
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