Trade delegation promotes Hong Kong as logistics door to China

Trade delegation promotes Hong Kong as logistics door to China Hong Kong will continued to be surpassed in annual container throughput supremacy by other ports, especially ones in China, but will retain pre-eminence in handling high-value cargo because of its efficiency, a top economic development official said Wednesday.
   Hong Kong lost out to Singapore (23.2 million vs. 22.4 million TEUs) as the world’s busiest container port in 2005 and is followed by Shanghai, China. But within a decade Shenzhen, China, is expected to overtake the entire industry in annual lifts, if all three of its ports are counted as one.   
   Hong Kong officials say they are worried about the new trend.
   “The main economic value isn’t in moving the boxes, but managing the movement of boxes. Hong Kong companies are the biggest investors in China terminals,” Mike Rowse, director-general of Invest Hong Kong, told a group of reporters on a trade mission to Washington to drum up foreign business.
   “If the only part of the process that’s based in Hong Kong is the profit, that’s fine by me,” he said.
      Over the next 30 years the Port of Hong Kong will decline in relative importance to the city’s overall economy, but it will always be a primary center for regional logistics coordination and investment, as well as a place for moving high-value products while the bulk of goods are handled by other ports, Rowse said.
      But that stoicism is belied by the fact that the government previously proposed cutting terminal and harbor fees to recapture business from other southern Chinese ports.
   Similarly, Hong Kong International Airport will continue to play a major role as a freight hub. The Shenzhen airport and new Baiyun International Airport in nearby Guangzhou province are not taking any business away from Hong Kong but are taking a big chunk of the new growth, Rowse explained.
   Baoan International Airport in Shenzhen is the local home to FedEx and Lufthansa, among others, while DHL uses Hong Kong as its hub. FedEx will move its Asian hub from Subic Bay, the Philippines, to Baiyun Airport in 2008.
   Hong Kong is the sixth largest recipient of foreign direct investment in the world, reaping $33 billion in 2005. But the government is plugging away to attract more business to the Greater Pearl River Delta, selling the region as an integrated whole that can provide the necessary financial, trade and legal support along with technology, and cheap land and labor on the mainland.
   Foreign companies should take advantage of the Closer Economic Partnership Agreement of 2003 between Hong Kong and China, which is essentially a free trade agreement between two parts of the same country, Rowse told an audience of 150 businessmen at the Ronald Reagan Building. A company can set up in Hong Kong and invest in operations in Shenzhen thereby getting the best of both worlds: stronger intellectual protection laws and other privileges, and access to the mainland via a Hong Kong subsidiary, Rowse said.
      DHL Express announcement Thursday that it will invest $35 million in a new facility for local ground shipments in Hong Kong is the type of business activity Rowse and fellow trade development officials from Shenzhen were trying to encourage U.S. businesses to make in the South China region.
      DHL, which has experienced double-digit growth for five consecutive years in Hong Kong, said the new sorting and distribution facility will expand its package handling capacity there by 20 percent, to 45,500 shipments per day, when it opens in the second quarter.
   The investment brings DHL’s total commitment in Hong Kong to $645 million, including $210 million for expansion of its Asian super-hub at the airport. The expansion of the main regional hub is scheduled to be completed in the second half of the year and be fully operational in 2008, with capacity for 40 million shipments per year. Other investments include Air Hong Kong, two other local service centers and office facilities.
   Air Hong Kong is a dedicated freighter service operated as a joint venture with Cathay Pacific airline.
   Rowse said the coastal regions will continue to experience strong growth fueled by export manufacturing, but that government incentives under the latest five-year plan are directed at spreading the country’s economic engine to the center and west of the country.
   “You either move the wealth to the people or the people will move to the wealth,” he said, suggesting that the later would disrupt the country.
      As for U.S. claims that the Chinese renminbi is undervalued and contributing to the trade deficit with China, Xinyue Geffner, regional head of the Americas for Chinese international development at HSBC bank, said that China has a labor surplus of 200 million people and if the government allows a fully convertible concurrency it could cause a major shock to the economy.