China’s easing of cabotage rules deals serious blow to Hong Kong ports industry, say experts

PUBLISHED : Thursday, 24 November, 2016, 8:57pm
UPDATED : Thursday, 24 November, 2016, 10:36pm

The relaxation of China’s port transportation rules is causing major concern in Hong Kong’s maritime industry but has failed to draw much public attention, according to speakers at a maritime industry conference on Thursday.

Industry professionals warn that Hong Kong could lose all its transshipment rights in the worse case scenario of a full relaxation in mainland China’s laws prohibiting foreign-flagged vessels from moving cargo from one mainland coastal port to another.

Jessie Chung, chairman of Hong Kong Container Terminal Operators Association, said China’s relaxation of so-called cabotage rules will see a deterioration of the already weak situation facing Hong Kong’s maritime industry.

China launched the pilot Shanghai Free Trade Zone in 2013 and has since then has gradually relaxed the cabotage restrictions within the zone, meaning foreign-flagged but Chinese-owned ships can now engage in domestic shipping. Up until then Hong Kong was seen as the most convenient place for foreign ships to transit goods into Asia, but the new rules now provide them with a lot more choices.

“Without cabotage restrictions, most of the transshipment business will disappear from Hong Kong,” said Chung. “Further relaxation will certainly weaken Hong Kong’s status of being an international maritime hub, or even hurt its economic growth.”

To make matters worse, the potential risks from the rule changes have not gained serious public attention, said Chung, who argues that the city’s government should clearly press the case with mainland authorities about the potential impact of cabotage relaxation not only on Hong Kong, but for China itself.

Joey Lam, Hong Kong’s commissioner for maritime and port development, echoed that view, appealing to industry experts to help Chinese authorities understand that the relaxation of cabotage also brings potential risks for China’s national defence and security.

Without cabotage restrictions, most of the transshipment business will disappear from Hong Kong
Jessie Chung, Hong Kong Container Terminal Operators Association

Gerry Yim, manager director of Hong Kong International Terminals, said he was concerned that more mainland cities and free trade zones will follow Shanghai’s lead and lobby for relaxed rules as a “follow the leader” mentality is popular in mainland China.

China’s coastal ports such as Qingdao, Ningbo and Guangzhou have been lobbying for a relaxation of their own cabotage rules on foreign vessels. At the same time the Nansha Free Trade Zone in Guangdong province is progressively introducing measures to promote transshipment trade that could increase competition for Hong Kong.

Besides the pressure from cabotage relaxation and fierce competition from mainland ports, the conference speakers said Hong Kong also suffers from a serious shortage of land and manpower in its maritime industry.

There will be 30 per cent shortage of port industry manpower in the coming five years and such a shortage will disrupt regular operations by then, said Chung.

To deal with such challenges, taking advantage of opportunities in the “One Belt, One Road” scheme is important for Hong Kong’s maritime industry, said Yim, who added that the city should seek cooperation not competition with mainland ports, especially those in the Pearl River Delta region.