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Hong Kong air cargo must find its way in the world of 'frenemies' in the Greater Bay Area

Long the king of global air freight, Hong Kong today faces serious challenges from long-standing external rivals and the more recent addition of "frenemies" in the Greater Bay Area.

Add to that, there are factors over which Hong Kong's massive aviation industry has no influence much less control. That is the ambient geopolitical climate that can devastate any port's future prospects going forward.

While Mumbai's Stat Trade Times offers a positive view of Hong Kong's future in global aviation, it is a judgment that may not win universal concurrence.

Yet the article does strike a balance. "While its strategic location, world-class infrastructure, and efficient logistics network remain valuable assets, the question remains: Can it hold onto its crown in the face of this growing challenge? In today's interconnected world, air cargo has emerged as the backbone of global trade, driven by the relentless demand for swift delivery in the surge of e-commerce activity."

Yes, yes, of course - if all goes well. But is that likely? One might have assumed so when the spirit of Deng Xiaoping ruled the hearts and minds of Chinese authorities.

Today, the world faces an assertive China bent on having its own way in an ever more intrusive manner. While the results are not catastrophic, they have led to a decoupling, a quiet exodus.

This trend comes with great regret because the global customers of China's Workshop to the World think the Chinese service is first rate. But they are slow to embrace the surveillance and mandates that go with it. So they tend to minimise rather than maximise involvement in a process known as home shoring or re-shoring, or more frankly, decoupling.

Such trends detract from China's role as Workshop to the World, and naturally enough detract from the value any seaport and airport that plays a key supporting role in the fortunes of a nation.

Beijing now sees Hong Kong's air cargo industry as more integrated in the "Greater Bay Area" with Shenzhen, Guangzhou, Hong Kong, Macau, and nine Guangdong cities. Hong Kong, Shenzhen and Guangzhou all to be welded into an economic powerhouse by 2035, say Beijing's central planners.

This sees Hong Kong as a leading international aviation hub, facilitating seamless cargo movement within the vast 56,000 square kilometre region.

However, this vision faces a challenge as the mainland Chinese cities namely Shenzhen and Guangzhou are aggressively developing their own air cargo infrastructure, aiming to capture a significant share of the air cargo market.

Shenzhen's Bao'an International Airport is undergoing a massive expansion, including the construction of a new terminal specifically dedicated to cargo with an aim to increase the annual cargo volume to 2.1 million tonnes and move towards a future annual handling capacity goal of 4.5 million tonnes.

Similarly, Guangzhou is investing heavily in its Baiyun International Airport, including the construction of its fourth and fifth runway by 2025 with an expected cargo throughput capacity of 3.8 million tonnes. These investments, coupled with their proximity to mainland China's vast manufacturing base, pose a significant challenge to Hong Kong's leadership.

But there is reason for Hong Kong to look on the  bright side. Valued at US$200 billion in 2022, the global air cargo market size is poised for significant growth projected to achieve a compound annual growth rate (CAGR) of five per cent by 2032, according to Global Market Insights. Hong Kong has long been a key player in global trade. Its strategic location at the crossroads of east and west, coupled with its business-friendly environment has fostered a unique cultural blend.

This, combined with world-class infrastructure and an efficient logistics network, has cemented the city's position as a leading cargo hub in Asia.

Since 1996, Hong Kong International Airport (HKIA), managed by Airport Authority Hong Kong (AAHK), has maintained its status as the world's busiest airport for cargo, underscoring the city's rich legacy in the air cargo industry.

AAHK's figures reveal that HKIA handled 4.3 million tonnes of cargo throughput in 2023, marking a 3.2 per cent annual growth. January 2024 continued this positive trajectory with a 31.1 per cent year-on-year increase in cargo throughput, reaching 377,000 tonnes, alongside a substantial 44.5 per cent surge in exports. Notably, traffic to and from key trading regions such as North America, Europe, and the Middle East saw significant boosts during the month.

Its strategic location at the heart of Asia offers unparalleled air connectivity, acting as a vital bridge between North America, Europe and Asia. This translates to direct flights to key business centres worldwide, facilitating smooth cargo movement.

Additionally, HKIA boasts state-of-the-art infrastructure with dedicated cargo terminals and efficient customs clearance. Moreover, Hong Kong possesses a highly skilled workforce with extensive experience in air cargo logistics, ensuring seamless operations. The city's well-established legal framework and pro-business government contribute to a business-friendly environment that attracts foreign investment and fosters trade, further solidifying its position as the air cargo hub of Asia.

"Although geopolitical issues can produce headwinds, they can also spell opportunity – as we are already seeing from current ocean services disruption in the Red Sea, leading to a modal switch to air cargo for speed and security," said Wilson Kwong, CEO of Hong Kong Air Cargo Terminals Limited (HACTL) the airport's big ground handler.

HKIA, a global leader in cargo volume handled, boasts a network of advanced cargo terminals handling diverse goods like perishables and pharmaceuticals. Major cargo handling companies operating at HKIA include HACTL, Asia Airfreight Terminal (AAT), Cathay Cargo Terminal (CCT), DHL Central Hub, and the Air Mail Centre.

This efficiency is bolstered by HKIA's existing two runways, with a third under construction for a projected 30 per cent capacity increase upon completion this year. Additionally, HKIA's air traffic management system minimises delays for time-sensitive cargo shipments.

But will Hong Kong's quality prevail over what looks like fierce competition from Greater Bay Area rivals such as Guangzhou and Shenzhen that may leverage price and proximity to surpass the former British colony? Time will tell.

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Beijing sees a leading role for Hong Kong, as it has long dominated the air cargo world. But for how long will Shenzhen and Guangzhou be willing to play second fiddle?

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U.S. Trade Specialists

Nippon Express (HK) Co., Ltd.
Visible & Strategic Logistics
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