Beijing's help sought for Hong Kong trade deal with Asean

Exclusion from Southeast Asian bloc's pact with China leaves the city's ports business vulnerable

PUBLISHED : Wednesday, 30 October, 2013, 3:31am
UPDATED : Wednesday, 30 October, 2013, 3:31am

Hong Kong should seek help from Beijing to join the Asean-China free-trade agreement, amid warnings that exclusion from the region's biggest free-trade network would harm the city's port terminals.

Tung Chee-chen, the chairman of Hong Kong's biggest container line Orient Overseas (International) Ltd (OOIL) and a member of the Hong Kong Port Development Council, said the 10-nation Asean bloc was increasingly shipping cargo directly to mainland ports instead of through Hong Kong since the start of the 10+1 trade pact in 2010.

"Since the setting up of the free-trade area, cargo from Asean countries entering China through Hong Kong must present a certificate to prove its origin before it can enjoy tax exemption," Tung said.

"Shippers who found that cumbersome have stopped coming to Hong Kong."

Secretary for Commerce and Economic Development Greg So Kam-leung said earlier this year that the Association of Southeast Asian Nations had agreed to pursue free-trade talks with Hong Kong. But instead of making Hong Kong a member of the established China-Asean network, the 10 nations - including Singapore and the Philippines - it agreed only to explore co-operation on a bilateral basis.

Hong Kong's position as the world's third-busiest port is set to be taken over by Shenzhen this year as a dock workers' strike contributed to a drop in throughput at the Kwai Chung terminals of 6.6 per cent year on year to 16.34 million 20-foot equivalent units over the first nine months. That compares with 17.27 million teu handled by Shenzhen over the same period.

Sunny Ho, the executive director of the Hong Kong Shippers Council, said the 10+1 trade pact not only drew cargo within the network away from Hong Kong but also those shipments from outside the pact zone.

"Earlier this year, when there was a lot of trade tension between the US and China, we heard some US frozen meat exporters shipped their products to Vietnam and faked them as Asean products to avoid being detained by China customs. Hong Kong lost quite a lot of refrigerated-box business."

While Tung said OOIL's orders had improved in the fourth quarter, other operators were feeling the strain. Shanghai-based container line China Shipping Development, which lost 1.2 billion yuan (HK$1.5 billion) in the first three quarters, said in an exchange filing yesterday that it was set to record a full-year loss. China Shipping Container reported a deficit of 1.67 billion yuan for the January-September period.

Major shippers like Walmart Asia are expected to shed light on the demand outlook at a logistics conference next Thursday.