Hong Kong, Shenzhen face lose-lose situation, say analysts The honeymoon may be over just weeks after Hong Kong and Shenzhen exchanged co-operation vows, with both sides digging in over a plan for dredging a shipping channel to the special economic zone. A source close to the project says Shenzhen plans to go ahead with dredging the Tonggu channel if Hong Kong's environment chief refuses to endorse the project, which falls partly within Hong Kong waters. It is understood that Shenzhen officials have been grumbling privately that Hong Kong is stalling the project, which is perceived as a potential threat to the city's status as a sea logistics hub. Analysts say both sides are on the verge of a 'lose-lose' situation because Shenzhen will be forced to change its channel alignment to bypass Hong Kong, causing more environmental damage to the Pearl River Delta estuary in the process. Shenzhen will also drop its previous pledge to adhere to the more stringent environmental requirements set by Hong Kong in carrying out the whole project, meaning the city will lose control of it. But Shenzhen will have to pay an extra $400 million to dredge an additional 20 million cubic metres of mud along the alternative channel route, as well as pay higher maintenance costs. It is expected work could start as early as this year. The $1.5 billion project is crucial for the expansion of Shenzhen's western port as it needs a deeper navigation channel, stretching from southwest Lantau to Shekou, to allow for newer ships. The expansion, 17 berths in the initial stage, is likely to increase Shenzhen's share of the region's container cargo business at the expense of Hong Kong. A contingency plan for the dredging was prepared after the visit of Shenzhen Mayor Li Hongzhong to Hong Kong last month, sources said. During the visit, both sides signed agreements on mutual co-operation but no concrete projects were agreed upon. It also comes after Chief Executive Tung Chee-hwa last month called for a higher level of regional port development co-ordination. The Tonggu channel project was formally proposed in the mid-1990s and was one of the top priorities of the high-level cross-border infrastructure co-ordination committee. The proposed channel will be 20km long, 200 metres wide and 16 metres deep. About 2.7km falls within Hong Kong waters. Last year, Shenzhen's Municipal Port Authority sought project approval from the Environmental Protection Department and an environmental impact assessment was nearly completed, the source said. But it is not known when the assessment report will be released. Under the law, a completed report will only be released for public consultation if the department's director is satisfied with it. But the source said the environment officials were highly critical of the project and hinted that it faced major obstacles. The officials had also repeatedly asked whether the channel alignment could shift further west or bypass Hong Kong. The current dredging proposal will generate 50 million cubic metres of mud. But if Shenzhen shifts the channel westward to avoid Hong Kong, at least 20 million cubic metres more mud will be generated.