Proximity of fastest growing region in China Essay

The Hong Kong HIT has been noted for its excellence in high end services, range of shipping lines and extensive coverage of destinations. Excellent institutional framework, a business-friendly environment, the professionalism of workers. The most important is Hong Kong legal system, which is trusted, tried and tested by international business. Hong Kong retains a distinct advantage in permitting the parties in maritime arbitration, to have the contract governed and construed in accordance with Hong Kong or English law. As an international financial centre, Hong Kong position itself as the business, trading and services hub for the Mainland and the region as a whole. At the same time, Hong Kong and the Pearl River Delta will continue to be the main economic engine of southern China, as well as an increasingly wealthy consumer market and a strong regional economy aiming the global export market. Hong Kong does have a number of advantages over other Mainland cities, and will continue to do so in the future. A strong and well-regulated financial sector, a free press, the free flow of information, low taxes and a simple taxation system, a pool of ighly skilled managers with international experience, proximity to major markets, and a close network of services companies are among the strengths and advantages for business in Hong Kong. Hong Kong is supporting services for the maritime sector in Hong Kong, for example export finance, trade documentation and logistics. The business-friendly tax policy and favourable customs laws make Hong Kong competitive. Sufficient terminal basin and its approach channel depth to accommodate the increasing draughts of ultra-large container ships. The Marine Department has an annual tonnage charge reduction scheme in place for Hong Kong registered ships. It has also recently reduced fees for 24 marine-related services such as port dues, seafarers? licences fees, and certificate fees. Hong Kong competitiveness is further enhanced by the Closer Economic Partnership Agreement (CEPA) with China. Weakness The absolute majority of the world bigest container ports are located in Asia. Most of the container ports belongs to Mainland China, the second bigest economy in the world. All this provides enormous opportunities for HIT, however every individual port faces new challenges and competition. Hong kong HIT is not an exception. Competitiveness of HIT has become a key issue. In other words any other Mainland port could be considered a competitor threatening the success of the HIT. As before many Chinese ports were poorly equipped to handle the sudden increase in exports from a rapidly expanding manufacturing sector, HIT was the obvious port of choice. After returning Hong Kong to China almost immediately many manufacturing industries relocated from Hong Kong to Shenzhen. A report released by the Better Hong Kong Foundation noted that Hong Kong was rapidly losing market share in cargo throughput to Shenzhen „newer and cheaper ports?. Carolyn Cartier, „Transnational Urbanism in the Reform-era Chinese City: Landscapes from Shenzhen?. Oportunities It is difficult to distinguish precise opportunities for HIT. The shareholders of HIT has indicated support for closer crossborder cooperation with other ports in the region. For instance, Shenzhen Port is controlled by the owners of Hong Kong HIT and is closer to manufacturing sources. However, many vessels continue to call at both ports. It is also important to recognise the vast amount of active industry companies located in Hong Kong which makes it (the Pearl Delta Region) a sustainable location for maritime businesses. Hong Kong advantage lies in its ability to cooperate effectively with the Mainland under the CEPA (HK and Macau, Closer Economic Partnership Arrangement) and its well advanced industry. CEPA continues to provide benefits for Hong Kong businesses. As an economy, where 90% of GDP comes from services, Hong Kong strengths lie in services. On the other hand, the Mainland services sector has been developing as a noticeably slower pace compared to its manufacturing sector. The potential hence for overseas firms under CEPA is enormous. A problem with a large number of China FTZ was that they were not connected to ports. Thus cargo had to undergo customs check procedures prior to entering the FTZ or port. The opportunities for businesses in the services sector is enhanced by CEPA. The best way for overseas service suppliers to leverage on CEPA to gain access to the Mainland market is to set up a service company in Hong Kong, or partner with, invest in or even acquire service suppliers in Hong Kong. Overseas service suppliers acquiring an existing Hong Kong service supplier need to operate in Hong Kong for one year to demonstrate they are carrying on substantive business operations after the acquisition. If a foreign services supplier acquires less than 50 percent equity interest in a Hong Kong service supplier, the one year time bar does not apply. Better transport infrastructure will improve access to Mainland markets and enhance CEPA aims. For example, the integration of regional transport networks will be enhanced by the development of the Hong Kong-Zhuhai-Macau Bridge which has an expected completion date of 2016. Notably, it is an ongoing process of liberalization between the Mainland and Hong Kong. Hong Kong long-term economic prospects based on being able to maintain competitiveness and importance as a major centre for international finance, trade, transport and logistics, professional services, communications and tourism. In the past five years, Hong Kong has been positioning itself to sustain reasonable economic growth in a rapidly-changing, knowledge-based world. Reforms have been launched in the key areas of financial services, education and the public sector to enhance Hong Kong attractiveness as a business hub with a highly-skilled workforce and a small, efficient government. Major steps have been undertaken to improve the environment, consolidate and enlarge Hong Kong position and to build the infrastructure needed to ensure continued development as a hub for trade and transport in Asia, and in particular the rapidly growing Pearl River Delta. Concerted efforts have been taken to promote and position Hong Kong as Asia world city. The Brand Hong Kong programme, launched in May 2001, is a long-term undertaking to focus greater international attention on Hong Kong strengths and advantages as the most free, open and cosmopolitan city in Asia. Container Terminal 9 (CT9), now being completed on Tsing Yi Island by the private sector, will consolidate Hong Kong position as the worlds busiest and most efficient container port. The 68-hectare project will have six berths and a design capacity to handle more than 2. 6 million twenty-foot equivalent units (TEUs) a year. CT9 in a following years will bring annual total capacity at the Kwai Chung Container Terminal Basin to more than 15 million TEUs. The new marine basin will be able to handle the largest container ships. Threats Since 1997 when Hong Kong was returned to PRC the HIT has served as the gateway to China because of its strategical location in the Pearl River Delta region of southern China, the most advanced trading region in China. The Pearl River Delta Economic Zone, has been the most economically dynamic region of the Chinese Mainland since the beginning of China reform programme in 1979. The Chinese government establishment of a special economic zone in Shenzhen in 1979 gave an oportunity for Hong Kong and its container port to benefit from access to China, however development of mainland container ports in recent years has challenged HIT. Mainland ports invested in upgraded facilities with the help of foreign capital and a rapid move to privatization of ports. „Since 1985, mainland China has invested more in its port development than the rest of the world combined?. Kevin Cullinane, Wang Teng Fei and Sharon Cullinane, „Container Terminal Development in Mainland China and Its Impact on the Competitiveness of the Port of Hong Kong? Recent reports suggest that Chinese factories are moving further inland and in some cases, closer to Shanghai and the Yangtze River Delta, seeking to lower evergrowing costs. The forecast annual growth rate for cargo in the region is 8. 6 per cent to 2020. The forecasts imply that Shenzhen market share of cargo in the region will increase to 55 per cent (from 16 per cent in 1999). Furthermore and contrary to the implications suggested by the report outlined above, the United Nations Economic and Social Commission for Asia and the Pacific pointed out that „by 2020 Shanghai is expected to be overtaken by Shenzhen to become the world? s largest container port.? Kevin Cullinane, Wang Teng Fei and Sharon Cullinane, „Container Terminal Development in Mainland China and Its Impact on the Competitiveness of the Port of Hong Kong? It is, of course, impossible to forecast which outcome will prevail. In the meantime most ports in China are concentrating on expanding capacity and upgrading and modernizing port facilities and operations. It is possible that many of Shenzhen business-friendly policies have been inspired by Hong Kong well-established and competitive customs and trade regimes, low tax and industry incentives. Nevertheless Hong Kong retains a number of competitive advantages such as well-integrated finance, legal and other service sectors, including a healthy body of industry groups. Hong Kong is clearly establishing itself as a hub for maritime services. Its traditional role as a transshipment hub will continue to face pressure from mainland China where the vast majority of export goods historically shipped from Hong Kong are manufactured. The implementation of FTZ and associated financial incentives for the maritime sector establishes the Mainland ports as a sustainable option for marine businesses, especially those seeking to move closer to manufacturing sources. Mainland ports traditionally competed at the lower end offering the lowest port charges in the region but with limited destinations and low service frequency. Yantian Port had the highest charges on the Mainland but offered a more competitive turnaround time and better global network integration. Various incentives and a rapidly developing economy in the Pearl River Delta region have shifted the balance.