Hong Kong Port - Still the Gateway to China?

Hong Kong has long been called the gateway to China with it’s port strategically located in the Pearl River Delta, however with the emergence of various ports throughout China, China now has it’s own “gateways”. In an article by Patrick Smith of the International Herald Tribune, he takes an in depth look at the current state of Hong Kong port and some of the factors that have contributed to the migration of business from the Hong Kong port to ports across the border in China.

He points out a series of influencing factors including lower costs, closer proximity of factories to ports, improving efficiency, and increasing port calls from vessels.

Hong Kong’s shipping and logistics industries, long the territory’s very reason for being, face what many executives and experts say is a challenge that could prove as serious as any since the British established a port here in 1841.

Southern China’s lower costs, improving services at its ports, shorter distances between factories and wharves and increasing port calls from ocean vessels are all eroding Kwai Chung’s competitiveness.

Experts who have studied shifts in cargo traffic say Hong Kong is fast approaching a point beyond which business lost to Guangdong’s expanding ports will not return, even if the government heeds highly unusual calls in the industry to intervene to enable Hong Kong to compete.

The ports in Southern China now control approximately 40% of the traffic from the region which was previously handled almost entirely by Hong Kong in the 1990’s. Hong Kong was once considered the port of choice due to it’s quick turn around times, efficient banking system, port efficiencies, etc, however now that China’s ports are improving operations, it is difficult to justify the higher origin charges in the Hong Kong area. Typically the cost of trucking services in Hong Kong can be $300 higher than China.

The wake-up call came late last year, when a steady fall in direct shipments — factory-to-container-to-truck-to-cargo hold — turned into a plunge. Hong Kong is now losing direct cargo traffic from southern China at a rate of 9 percent a year.

Apparently for the first time, shippers, traders and the industries dependent upon them, which account for a quarter of Hong Kong’s employment and almost $40 billion in economic output, are facing the long-term implications of a process that began when China first built deep-water container ports near Hong Kong in the mid-1990’s.

I believe that Hong Kong will be a major port for many years to come (in 2004, HK still ranked #1 in terms of TEU handled annually), but in my own dealings with importers in the U.S. I am seeing a major shift in supply chains from Hong Kong to ports throughout China, especially the ports in the Southern China region, e.g. Yantian.

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Shanghai port overtakes Hong Kong

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