When it comes to container shipping, the planned free trade zones in Shanghai and Qianhai won’t make any difference to Hong Kong’s steadily declining relevance.
It is difficult to pick up a newspaper here and not read about how the planned free trade zones of Shanghai and Qianhai near Shenzhen will rob Hong Kong of its competitiveness and steal away trade.
Free trade zone fever is sending everyone into a frenzy and the media is enthusiastically digging up official sources – named and unnamed - to comment on what it all means for Hong Kong place at the head of the table.
Latest is Asia’s richest man and Hong Kong’s once loved tycoon Li Ka-shing (no one likes the rapacious tycoons anymore). He says the city will lag behind if it doesn’t “accelerate the pace of its development”. As the property developing cartel’s leader-in-chief - and owner of the world’s biggest terminal operating company, Hutchison Port Holdings - of course he would say that. It also helps to stay on good terms with Beijing and utter all the right things.
But the bulk of the breathless reportage is being dedicated to the Shanghai free trade zone, a 29 square kilometer piece of ground that will soon house some pretty expensive real estate in the city. In fact, a prominent daily columnist in Hong Kong reckons the whole FTZ idea is merely a way of pushing up property prices as the market begins to weaken.
Whatever the reasons, the pilot FTZ project in Shanghai will be launched on September 29, less than a year after the plan was first announced by Beijing. This is all bad news for Hong Kong is the general consensus, even though no one has any idea of what the FTZ will actually do and when it will eventually do it.
Shenzhen Economic Zone was always export focused, but how will Shanghai be set up? Will imports and exports be duty free, what benefits are there to foreign shipping lines and forwarders, will foreign investment rules be relaxed?
Down in the roaring metropolis of Qianhai, 15 square kilometres of muddy wasteland has been set aside for the market leading, revolutionary, high level, high quality, high value-added, modern, innovative and economy-boosting FTZ.
The pilot project is aimed at growing Guangdong’s economic development, apparently without competing against Hong Kong and Macau. Once again, no one knows what this zone will do, so it is hard to see why Hong Kong should get its panties in a bunch.
Shenzhen was once a sleepy fishing village, so it wouldn’t be wise to completely dismiss the FTZ plans, but let’s face it, Hong Kong’s greatest competition does not come from outside its borders. Manufacturers in the factories of South China are closer to the ports in Shenzhen than they are to Hong Kong and it is cheaper to export containers via those terminals. As with most things, it all comes down to price.
Once upon a time the clueless bunch of bureaucrats running the Transport and Housing Bureau - and those who ran its predecessor, the Transport and Agriculture department, or whatever it was called – may have been able to slow the loss of market share in direct exports by equalizing the costs of shipping via Hong Kong vis-à-vis Shenzhen, but the port decline was always inevitable.
In the past few years, Hong Kong has become a transshipment port. So any strategy on how to combat the influence of the mainland’s FTZs should not involve the port. It’s falling relevance was predicted by a GHK study almost 10 years ago, and nothing the brains trust in charge of transport policy do will ever change that (motto: The Status Quo is the Way to Go!).
The government can consult stakeholders and role players, conduct studies and balance the interests of all parties as much as it wants, but there is no point. The terminal operators have moved half their eggs into new Shenzhen baskets next door and will straddle the fence until Hong Kong port is transformed into luxury waterfront property.