¡¡¡¡Direct shipping across the Taiwan Straits will finally become reality in July 2008. That encourages more to expect the charming day of ¡°three direct links¡±. For a long time, goods traded between Taiwan and Mainland China had to be transhipped at a third place such as Hong Kong. Now some fear that the achievement of ¡°three direct links¡± may gradually weaken HK¡¯s function as a transhipment centre for the Mainland and Taiwan, thence affecting its economic development and prosperity.

¡¡¡¡HK¡¯s economic dependence on transhipment

¡¡¡¡HK¡¯s economy is, to a considerable extent, dependent on transhipment service, which usually accounts for above 80% of its annual foreign trade volume and rose to the new high of 84.9% in 2007. Of that, according to data from the government of the Special Administrative Area of Hong Kong, exports reached HKD 109.1 billion in value and imports HKD 727.9 billion in value for HK itself, leaving an unfavourable trade balance of HKD 618.9 billion, which was eventually reduced to HKD 180.5 billion as the added value of transit transport achieved HKD 438.3 billion. From this it can be seen that transit transport consistently assumes a vitally important position in HK¡¯s economy.
¡¡¡¡Mainland China is the principal customer of HK¡¯s transit trade, which grew to HKD 525.42 billion in 2007, representing more than one third of its total transhipment for the Mainland.
¡¡¡¡As to whether the ¡°three direct links¡± program will affect HK¡¯s position as a trade conduit for Taiwan and the Mainland, Ma Yingjiu, the new leader of Taiwan said, there is certainly some impact to be felt, but it won¡¯t much affect the island¡¯s transport business as a whole and threaten its development and prosperity in the future. Instead, HK will remain an important transhipment base for Taiwan and Mainland China.

¡¡¡¡HK as a transhipment centre has been on the wan

¡¡¡¡Surging economic development on Mainland China has led to an increasing flow-in and -out of foreign trade products through HK at an annual rate of 14%, rendering thus transhipment a critical area of economic growth for HK. Meanwhile, it has also accelerated the development of ports and airports on the Mainland, which are playing more and more an important part in its import and export operations. So, relative to Mainland¡¯s cargo generation, HK¡¯s function as a transhipment centre has been on the wan. In 2001, for instance, goods transhipped through HK to and from ports in Guangdong accounted for about 90% of HK¡¯s total transhipment volume. But by 2007, that figure had plummeted to about 50%. Therefore, with or without ¡°three direct links¡±, HK¡¯s transhipment business is not much affected.

¡¡¡¡Transhipment through HK  has been quite limited

¡¡¡¡Targeting mainly the Pearl River delta on the Mainland, only goods from this region are transhipped to Taiwan, and those from the other areas of the Mainland, including marine containers for example, are mostly transhipped at other places.
¡¡¡¡According to the statistics, goods transhipped through HK for Taiwan and Mainland China totalled USD 24.13 billion in value (equivalent to HKD 188.2 billion) in 2007. And the net amount dropped from 2001 to 2007 to take just 7.2% of the total. Even that percentage may become smaller given current trends. Besides, the HK transhipments for Taiwan and the Mainland are generally air-borne and not carried by sea. Containered or not, such transhipments have been decreasing in recent years, arriving at only 5.512 million tons in 2007, or 2.25% of HK¡¯s total output. The same year, 300,000 heavy boxes from Taiwan were transhipped to the Mainland and 87,000 TEUs from the Mainland to Taiwan, totalling 388,000 TEUs, as against the 19.907 million TEUs transhipped through HK for the whole world. That is, transit containers across the Taiwan straits reached only 1.62% of HK¡¯s total container throughput annually.
¡¡¡¡Retained or not, it is not much and cannot much affect HK¡¯s development and prosperity.

¡¡¡¡Share of cargo

¡¡¡¡With formal adoption of the ¡°three direct links¡± program, the part of HK transhipment for Taiwan and the Mainland will, by plan, be shared by HK, Shenzhen and Guangzhou, thence causing a drain of about HKD 65 billion from the island, a figure that¡¯s really insignificant for the SAR. This is without mentioning HK¡¯s advantages in infrastructure construction, the number of shipping routes, the density of voyages and the quality of service, which makes it generally more competitive than the other two.
¡¡¡¡Besides, the new program will definitely generate more goods as Guangdong is the largest foreign trade province in China, and appropriate measures will surely help the island to a larger share of the three-party market.
¡¡¡¡What¡¯s more, air-borne goods are usually light in weight, small in volume and high in added value, promising therefore a far smaller value added in transhipment than sea-borne cargo, which provides still more reason why the slide of air-borne goods won¡¯t produce any serious impact upon HK¡¯s future development and prosperity.

¡¡¡¡HK¡¯s transhipment business ¡¡¡¡(in 100 million HKD)

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Foreign trade volume in HK from 2005 to 2007  ¡¡¡¡(in 100 million HKD)