The following special report was filed by Perry Trunick, Logistics Today’s executive editor, from Hong Kong:
What do you do if your region loses nearly 1 million manufacturing jobs? If you are the former city-state of Hong Kong, you align yourself with the region that attracted those jobs.
Following Hong Kong’s return to Chinese rule in 1997, the asset bubble burst and the SARS crisis erupted. Both events were devastating to the Hong Kong economy, but “change” is Hong Kong’s middle name, and the commercial giant began a process of transformation that ensures its place as one of China’s leading logistics hubs and business centers.
Moving forward from the concept of one country, two systems, Hong Kong began to dissolve the border between it and China to the degree that Warren Bishop, of the Hong Kong Air Cargo Terminal Ltd. (HACTL), says he can’t continue to call it a border but uses the term “boundary” instead. What he and Invest Hong Kong’s Simon Galpin are defining is a fundamental change in Hong Kong’s economy that maintains its links to many of the manufacturing operations that were once located there but capitalizes on the strengths of the city and the region in a transformation that has made it responsible for nearly 40% of the booming Chinese export market.
Hong Kong’s Closer Economic Partnership (CEPA) with mainland China is a free trade pact that establishes the platform for a regional approach, born of necessity, that uses the strengths of Hong Kong’s port, airport and logistics infrastructure in close cooperation with the manufacturing base of the Greater Pearl River Delta. The border between Hong Kong and Shenzhen, a special economic zone, has become much more open and fluid, resembling the U.S.-Canada border, says HACTL’s Bishop. That has enabled the massive air cargo operator at Hong Kong’s airport to form a number of business units and services that speed the flow of goods from manufacturing sites in southern China to markets around the world.
HACTL’s Superlink cross-boundary trucking operation is an example. Using seven inland depots for consolidation and clearance, goods are trucked in bond to Hong Kong, pausing only briefly at the former tough international border for some document checks at Chinese Customs. The airport-direct export process is mirrored with northbound imports. Goods arriving in the morning at Hong Kong’s Chep Lop Kok airport can be in Guangzhou by 3 p.m., says Bishop.
With five major airports in close proximity, the regional approach is a beginning of cooperation over competition. The Guangzhou airport, for instance, handles an estimated 100,000 tonnes of cargo to Hong Kong’s 3.1 million tonnes. During peak times (September through November), Hong Kong handles 8,000 tonnes per day and 40 freighters. The integration of the Greater Pearl River Delta means an average of 26 hours for goods to move from the factory to export air cargo. Bishop says they want to see that drop to 20 hours.
Volumes, frequency and networks are a major part of Hong Kong’s role on the ocean side as well. It reached a record 24 million twenty-foot-equivalent units (TEU) of containerized ocean freight in 2004. That’s only a growth rate of 7%, says Janice Tse, deputy secretary for economic development and labor, but Hong Kong is a mature port. Instead of taking the view that Hong Kong wants a bigger piece of the pie, she says the pie that is the manufacturing base of the Greater Pearl River Delta is getting bigger and can benefit the ports and airports of the region. The goal is to maintain the region’s position as one of three current major manufacturing regions as China’s strategy expands production to even more regions of the country. (The other two regions center on Shanghai and Beijing.)
