Maritime trade adds to tide of China's
rise By Tony Sitathan
With
China fast chasing the United States and the European
Union as an economic superpower, its seaborne trade has
reached 700 million tones, making it fifth in terms of
world maritime trade. In addition, according to the
latest estimate from the Foreign Trade Division of the
US Census Bureau in Washington, China is ranked second
world-wide in terms of total imports of goods,
contributing 12.1% to global import estimates, while it
ranks fifth in terms of exports, contributing 4.4% to
worldwide exports.
According to analysts,
China's total maritime trade could reach US$700 billion
(5.79 trillion yuan) this year. In order to handle the
increasing trade volume, two of the region's main ports
are undergoing some changes; Shenzhen is slated to
become South China's low-cost export hub, while Hong
Kong will concentrate on high-end exports, though
Shenzhen is likely to compete openly with Hong Kong in
the future.
Andy Xie, head of the Asia-Pacific
economic team from Morgan Stanley in Hong Kong,
maintained almost three years ago at the Global Economic
Forum that China would one day follow in the footsteps
of the US and cross the $10 trillion mark in terms of
overall trade. "It will probably take place within two
decades and could happen in 15 years," he said. At the
rate the Chinese economy is currently developing,
however, China could probably reach this estimate much
earlier than anticipated.
Another US investment
bank, Goldman Sachs, painted a rosy picture of China's
economy for this year by raising its expectancy on
China's gross domestic product (GDP) growth in 2004 from
8% to 9.5%. Earlier, there was talk of overheating, but
Beijing, fearing that growth would be slashed to below
the 8% mark, was quick to intervene, devising cooling
measures such as import restrictions on commodities and
credit squeezes for trade loans.
In its report,
Goldman Sachs said that China was still in the initial
stage of a new growth cycle, and China's economy was
expected to maintain speedy growth before any
inflationary and checking account pressure affected its
high domestic demand. It said that in 2004, "the three
wagons" hauling economic growth - consumption,
investment and export - will continue running fast.
"As a result, China's trade volume, both imports
and exports, has been increasing in the region of 5-25%
a year over the past few years, somewhat volatile due to
the impact of the world economy and uncertainty caused
by events like SARS [severe acute respiratory syndrome].
China's total maritime trade is estimated to be around
$700 billion," revealed Peter Read, managing director of
Fusion Consulting, a business intelligence consultancy
based in Singapore and Hong Kong.
Port
repositioning According to a recent business
intelligence report on the Pearl River Delta by Fusion
Consulting, cargo-flow decision-makers, terminal
operators and industry experts all agree that more bulk
shipments will go through Shenzhen's ports in the
future, while Hong Kong's ports will be increasingly
reserved for priority and specialized goods.
The
report, based on Fusion Consulting's executive
interviews with more than 85 consignees, buying offices,
manufacturers and exporters, shows that almost all
industry participants expect more shipments to go
through Shenzhen than Hong Kong, with cost as the key
driver influencing their choice of ports.
Hong
Kong's high-end shipments will continue to increase as
its port's modern facilities offer better capacity for
refrigeration, speed and high technology. Hong Kong is
also expected to benefit from the boom in South China
trade when the Hong Kong-Macau-Zhuhai Bridge is
operational, especially if trucking tariffs become more
competitive.
Almost 88% of the executives
interviewed named cost as the first or second driver
influencing their choice of port in south China.
Currently close to 60% of the executives, who come
mainly from southern China, export more than half of
their China sourcing via Shenzhen ports. Only 10% do so
through Hong Kong ports.
However, 17% of those
interviewed claim that they would choose Hong Kong ports
over those in southern China if trucking tariffs were
reduced in line with the trucking cost to Shenzhen
ports. Hong Kong has advantages that include a higher
number of direct calls to the US and Europe,
transshipments to Taiwan and a better capacity for
handling specialized goods, such as dangerous goods or
those that require refrigeration.
The bulk of
the exports leaving China are currently from the
electrical goods, electronics and toy sectors. These
products, along with building materials, furniture and
chemicals, have the fastest anticipated future export
growth, Fusion Consulting reported. "The electrical,
electronics and toys sectors are expected to keep
growing. The total number of factories in these sectors
only accounts for 30% of all factories in Guangdong, yet
they already create nearly 75% of the export value,"
said Marine Mallinson, a director at Fusion Consulting
in Hong Kong.
Guangzhou and Shenzhen, two cities
in Guangdong province, now account for more than 50% of
Guangdong's economy. Although Zhongshan, Zhuhai and
Foshan in the western Pearl River Delta (PRD), along
with Dongguan and Shenzhen in the eastern PRD, have the
strongest future growth dynamics. Zhongshan's annual
production and export growth rates for the period
2001-2005 are estimated at 32% and 27%, respectively,
while Shenzhen's production and export growth rates for
the same period are forecast at 24% and 18%,
respectively.
Several international logistics
players have already established operations in China
waiting to experience the boom in the both international
and domestic trade volumes. A Singapore-based operations
manager from DHL Worldwide Express, a global shipping
company, pointed out that now more than ever more
qualified people are needed to handle the intra-China
trade between cities. He said DHL, like the other
courier and international freight forwarding companies,
had recently increased the number of newspaper
recruitment advertisements in the major media in
Singapore. "These are all possible avenues to attract
potential candidates to fill the numerous vacancies
opening up in China," he said.
Read of Fusion
Consulting also said that China is poised to handle a
growing share of high-end trade, but Hong Kong, with its
ability to satisfy demanding quality and speed
requirements, would continue to play a very significant
role. In terms of port calls, China (including Hong
Kong) ranked fifth in the world with 78,000 calls in
2002; Singapore was 10th with 45,000; and Malaysia 16th
with 29,000 calls. For individual ports, Singapore is
first in the world, while Hong Kong stands at No 2, Port
Klang No 9 and Shanghai No 17.
Shenzhen's ports,
meanwhile, don't compare well to Hong Kong; berthing
charges are much lower and skill level is lower still.
Productivity is also lower compared to Hong Kong, though
all that should change over time as China begins to see
the advantages of improving Shenzhen's productivity as
it plunges deeper into global trading. Of course, it is
in China's interest not to kill Hong Kong, which has
been key to the region's thriving maritime trade since
British colonial days. It could also serve as a
showpiece to Taiwan that China can live successfully
with an open trading partner like Hong Kong.
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