Economy

City's logistics sector may be challenged

By Joy Li (HK Edition)
Updated: 2010-06-25 05:25

Offshore trade growth expected to undercut HK's transshipment biz

Increasing offshore trade may pose a threat to Hong Kong's status as a logistics hub, with direct shipment, a shipping arrangement skipping Hong Kong as a transshipment station, expected to show strong growth momentum in the next three years, according to the latest survey by the Hong Kong Trade Development Council (HKTDC).

This could be bad news for the city that counts on trading and logistics as one of its economy's four traditional pillar industries.

Among the 4,520 Hong Kong traders and manufacturers responding to the survey, 61 percent project that they will increase offshore trading activities up to the year 2012 - 45 percent for direct shipments and 16 percent for transshipment via Hong Kong, respectively, weighing on the use of Hong Kong logistic facilities, e.g., harbor, airport, warehouses and goods consolidation sites.

Offshore trade, referring to goods either transshipped through Hong Kong or directly shipped to overseas markets, is not included in Hong Kong's trade statistics. However, it represents an even larger proportion compared with the domestic exports, according to HKTDC Assistant Chief Economist Daniel Poon.

After the HKTDC started the survey in 1998, shipping arrangement for exports of China-origin goods saw a rising trend toward offshore trade until the disastrous financial crisis of 2008 struck, hence the snapping of the upward trajectory in 2009, with the offshore trade proportion down to 51 percent from 56 percent in 2006, according to the latest HKTDC survey.

"Although a gradual recovery was evident in late 2009, overseas importers and retailers remained conservative and tended to place only small orders and require short delivery times, leading to higher demand for cargo delivery from Hong Kong," Poon said, explaining the temporary break of the pattern as change amid the global economic downturn.

Meanwhile, manufacturing and sourcing activities are increasingly reliant on the mainland. The survey showed that the percentage of respondents who produce and source solely on the mainland expanded from 56 percent in 2006 to 62 percent in 2009, with Guangdong province taking the largest chunk.

The rising trend to offshore trade, coupled with great leaps in producing and sourcing from all parts of the mainland, may presage a watered-down role for Hong Kong as a logistics hub, according to the HKTDC.

But the overall picture is not gloomy, since other sectors may shine. "After all, Hong Kong's services sectors are gaining and are expected to continue gaining more business from offshore activities; more importantly, such demand will generate more top-quality, skill-intensive, high-paying and high-value jobs in Hong Kong," said Poon.

Separately, the government said Thursday the city's exports and imports increased by 24.4 percent and 29.7 percent, respectively, to HK$254.2 billion and HK$279.3 in May from a year ago.

The city's exports have risen for seven consecutive months, boosted mainly by demand from the Chinese mainland and other Asian markets amid a global economic recovery.

In May, strong exports were registered in Asian economies (27.3 percent), the Netherlands (52.4 percent), and the US (24 percent), while a decrease was observed in the UK (-0.3 percent).

In response to the trade figures, HKTDC's Poon expressed cautious optimism, as the negative impact of the debt crisis in Europe was not reflected in May figures.

Europe is the largest export destination of consumption goods for Hong Kong traders and manufacturers, if a lackluster European market lingers, Hong Kong will feel the pain in the second half of 2010, with export increases likely to be under strain and, he predicts, to be under 20 percent after June.

China Daily