Hong Kong v. Shanghai

HONG KONG – For hundreds of years now, Hong Kong has been China’s trade gateway to the world. But when it comes to air cargo, will this China satellite city continue to enjoy that role?

On the surface, this question might seem preposterous. More air cargo flows in and out of Hong Kong than any other location in the world. Indeed, despite some slips in FTKs in March and April, Hong Kong as air cargo capital appears to be as dynamic as ever. A new cargo terminal for Cathay Pacific is in the works at Hong Kong International Airport, while the airport itself is working on adding a third runway. And more than one local airline is adding or will add freighters in the coming years, and that list includes Cathay, Hong Kong Express, and Air Hongkong.

So what’s the issue? Where’s the threat to Hong Kong’s cargo traffic volumes?

As in so many aspects of Hong Kong’s existence, much depends on China. To put it another way, Hong Kong is Mercury to China’s sun. As China burns; so too does Hong Kong. This is unlike some other nations in Asia, which are less intertwined with China. Presumably spooked by recent labor unrest, logistical challenges and just plain wage inflation in the Pearl River Delta, China has made it a priority to build up manufacturing in other parts of the Mainland, most notably in the West and North. The Pearl River Delta has been Hong Kong’s umbilical cord to cargo for the last 20 years. But with manufacturing moving to the Yangtze River Delta, that umbilical cord will likely deliver less cargo to Hong Kong. The expected beneficiary of the greater traffic: Shanghai.

The question: how much less cargo? When I sat with officials from the Hong Kong International Airport, they downplayed this shift away from Hong Kong. To wit, the plans to add a third runway. While the runway would not only benefit cargo, cargo amounts to about a third of HKIA’s aircraft movements, so cargo remains an important factor in any HKIA decision. But when scratching the surface, you see signs among the air cargo companies toward Shanghai. DHL, for example, is building an express hub there. A major rationale behind the recent Cathay-Air China joint venture to create Air China Cargo is to give Cathay more capacity out of Shanghai. Others are expected to follow. It simply doesn’t make sense to fly overseas goods made in the Yangtze delta – think iPads and the like – via Hong Kong.

To be fair, this will be a slow process over several years, albeit buoyed by the rapid expansion in air cargo capacity expected at China shippers, such as Yangtze River Express and China Postal, and to a lesser degree SF Express, all of which appear to approach air cargo with a buy-capacity-now/fill-the-capacity-later approach to aircraft acquisitions. Arguably, the shift to Shanghai might have taken place quicker had Hong Kong remained a British colony. But the fact that Hong Kong remains China’s special administrative region (SAR) in some way guarantees Hong Kong’s relevance. For Hong Kong goes as China chooses, and while China has effectively chosen to move some shipping volume to Shanghai from Hong Kong, Hong Kong remains China’s crucial trade link to the world. And that means soaring towers of glass and steel will continue to be built in Hong Kong as the China economic story remains on track as one of history’s greatest financial achievements.

4 thoughts on “Hong Kong v. Shanghai

  1. JJ – This is a great subject to discuss. There are certainly similarities and differences between the two, and it’s probably important to the airport operators. But to anyone who has been to Hong Kong and Shanghai recently, and watched the air cargo industry development there, is the comparison really important? It seems that there is so much tonnage coming from that region that there is more than enough to support both. Hong Kong is talking about developing a third runway, and Shanghai has tremendous construction projects already underway. You make a good point – “this will be a slow process over several years”. I was at Boeing when we delivered the first 707s to Air China in the mid-1970s. Look how far it’s come since then, and how much further it may still have to go.

  2. JJ Hornblass

    Thanks for your comments. I’m so glad you liked the blog.


    I certainly concur that it will take a long time for this shift to play out, I equally agree that Hong Kong is not going to roll over easily, as evidenced by the plan for an additional runway (which is still somewhat in a holding pattern). But we at ACMG tend to think of things in 20-year increments, and I see this shift as having import to freighter allocation/purchases in the years to come. The presumption is that international traffic may shift to Shanghai, which makes interesting, for example, Cathay’s decision to bolster its regional freighter fleet — with Hong Kong as its hub. (We reported on that in the most recent issue of Cargo Facts Update.) There will no doubt be additional decisions to be based on the Hong Kong-Shanghai dynamic in the years to come. Clearly, healthy discussion of the dynamic is in order. Again, thanks for your kind comments.

  3. Hi All,

    I agree with JJ and Mike. There is no doubt about the major changes going on in Hong Kong and Shanghai Airports as well as in China. However, it seems too early to mourn Hong Kong International Airport. Hong Kong has been subject, quite a few times, to gloomy forecasts, specifically the one before the transition from the UK to China. It is clear that Hong Kong overcame most of its difficulties and is blooming. In my point of view Shanghai Airports is going to grow dramatically and take up a large part of the air cargo business in China, due to the fast industrial development of the Yangtze River Delta. It is important to remember that recently Hong Kong airport replaced Memphis (after 18 years) as Number One in the world in Cargo Tonnage. On the other hand, it would be unwise to ignore the role of the two other regional airports: Guangzhou Baiyun Airport and Shenzhen airport, which aggressively compete on the same Pearl River Delta segment and probably will seize some of the Hong Kong airport share.

    Finally, the industrial growth in China will probably provide sufficient Tonnage for both of these airports (Hong Kong and Shanghai) as well as for many others.

    Jacob Netz

  4. Yes, Shanghai will becoming important in China and International cargo center, Cathay & Air china found their JV in shanghai and also Shanghai cargo , China cargo and Great wall combine together for share their resources and route.YZ river is doing their fleet enlarge for the cargo increase. So, Shanghai will increase faster than Hongkong airport in Cargo.

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