Restructuring of the Chinese economy will force transportation companies and many manufacturers in southern China and Hong Kong to rethink their long-term strategies, according to shipper representatives.
A number of analysts have downgraded economic forecasts for China this year as the export outlook has deteriorated. But the latest port statistics illustrate that trade to and from northern and central regions is still growing at relatively brisk rates even though export growth has been running in single figures for most of the year.
Of China’s top 10 container ports, the southern ports of Shenzhen and Guangzhou saw the slowest growth in the first five months of 2013.
Hong Kong, which is likely to be supplanted by Shenzhen this year as the world’s third-largest container port by throughput, has fared even worse. Box volumes were 9.1% lower in January-May 2013 than a year earlier. And, although throughput was skewed by a 40-day strike by port workers that started on March 28, the port suffered double-digit year-over-year declines in February and March.
With economic growth slowing after 20 years of rapid expansion, and with the government increasingly focusing on its domestic market, shipping interests see danger signs for logistics demand in Hong Kong and southern China.
“The period of high growth in China many believe has now gone,” Sunny Ho, chief executive of the Hong Kong Shippers’ Council. told The Journal of Commerce. “The government already knows it cannot rely on exports for economic growth as much as before so it doesn’t come as a surprise.”
Rising wages in southern coastal China, meanwhile, has forced shippers to make adjustments, according to John Lu, chairman of the Asian Shippers’ Council. “From the nation’s point of view, wage increases are good, but for shippers, costs are now higher in the traditional manufacturing centers so they are less competitive,” he said. “They have to make major decisions about whether to move factories closer to markets or to the interior of China to bring costs down, or face the cost of high worker turnover.”
“China is looking to reduce its dependency on exports, by growing domestic consumption and that will take a lot of adjustment by manufacturers,” Lu added.
Ho believes shippers and the transportation sector in Hong Kong should plan for a further slowdown in export growth from the Pearl River Delta even though exports via ports in the north such as Tianjin on the Bohai Rim have been performing strongly.
“We are the most hard-hit region because this is where the largest concentration of labor-intensive and low-value production with a strong outward trade concentration is,” he said. “These are the products most seriously impacted by cost increases and the policy changes of central government.”
Hong Kong manufacturers need to upgrade to more premium products, find new markets or explore domestic markets, Ho said. “This is the only way out,” he said. “I think the trend has been continuing for the past seven years, and now it’s having a substantial impact.”