China’s rust belt aims to become pharma hub?

Could Shenyang’s Taoxian International Airport, situated near Liaoning province’s capital city in northeastern China become the country’s next major cargo hub? If a newly-formed “cooperative framework agreement” between HACTL subsidiary, HDHL (HACTL Development Holdings Ltd) and the airport’s owners (Hong Kong Liaoning Airport Management Group Co., Ltd) bears fruit, then the answer is yes. If history from other similar regions of the world are at all indicative of Shenyang’s future economic prosperity however, one might choose to be a bit more skeptical.

Currently Shenyang airport is a one-runway, single-cargo terminal operation, with near-anemic air cargo volume growth. In 2015, tonnage was up only 2.7% y-o-y, to 142,000 tonnes, according to a HACTL release (compared to 6.5% at PACTL in Shanghai’s Pudong Airport). Slow growth is the norm for a region whose prosperity is encased in a bygone era. Although China’s northeastern provinces were bustling with activity prior to the 1980s, before the economy opened up, bloated state-owned enterprises and the remnants of heavy industries in the region have  largely missed out on the effects of China’s economic miracle. Figures in The Economist ranked Liaoning in the bottom five of China’s 31 provinces for GDP growth in 2014, with annual growth of just 6%, and industrial output a mere fraction of the national average.

However, with a heavy dose of state funding, China’s rustbelt could undergo a revitalization – unlike similar areas in other countries. In the United States, for example, when private enterprises no longer found it profitable to maintain the scale of heavy industry in the American rust-belt, factories idled, permanently. But in Liaoning, nearly half of the region’s economic activity stems from state-owned enterprises, so some of those old automobile parts factories could one day retool to manufacture pharmaceuticals. Especially with a highly-educated workforce from the city’s three major universities. That is, if Shenyang can prevent its talented people from migrating to more innovative and prosperous cities.

Returning to the future of Shenyang cargo, no concrete plans are in place between the airport’s owners and HDHL, but such plans could stem out of optimism for the region’s future. Officials from Shenyang Airport visited Hong Kong’s “SuperTerminal 1” facility and saw parallels with the cool chain traffic it hopes will one day move through Shenyang. For now, Shenyang Airport will continue analyzing the market to see if it warrants a new facility. In the future it could look to HDHL to fulfill “a consultancy role, providing guidance on design, construction and operation of new facilities.”

Presently Shenyang’s single terminal is operated as a joint-venture between the Airport, China Southern Airlines and freight-forwarder, Sinotrans). China Postal Airlines and SF Express Airlines are currently the only carriers running freighters into the airport.

If you are interested in learning more about the future of the airfreight business, and where new hubs are likely to emerge,  join us at the Cargo Facts Symposium in Miami 10 – 12 October. Go to CargoFactsSymposium.com to register or get more information.