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Freight Transport(HKTDC Enterprise, Vol 02,2008)

Fast Forward

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All signs point to strong growth in China's freight transport sector, according TO a leading international business monitoring organisation

Business Monitor Int'l predicts that China's freight measured in million tonne-km is expected to grow at an average of 15.6% per annum over the next five years.

This places China at the higher end of the Business Monitor Int'l (BMI) Asia-Pacific and world rankings, the organisation's China Freight Transport Report notes.

The report states that China scores relatively high on the freight sector competitive environment rankings, primarily because the market has begun to open to foreign companies in rail, road, sea, air and general logistics.

On the microeconomics side, manufacturing centres continue to boom and reinvent themselves with stricter environmental requirements - both government- and privately-driven - ethical production, more socially responsible labour relations and a greater understanding of the need for supply chains and logistics.

On an allied note, the shipping and transport of cargo to and from the manufacturing regions of China continues to rise as raw materials flow in and goods head out for the North American and EU markets.

There have been interesting trends in these flows in past months, with imports into US West Coast ports for the first quarter of 2007 totalling about 2.4 million TEUs compared to 982,238 TEUs for exports.

However, exports were growing faster at 4.9% than imports at 3.7%, providing an improved shipping trade balance even as some exporters from US West Coast ports started to feel the pinch of heightened trade with a lack of empty boxes or not enough capacity on carrier vessels.

In addition, the lower US dollar meant that trade was healthier on the transatlantic routes as well, as European markets hankered for more imported goods.

But it is the freight transport markets in the Asia-Pacific region that currently offer one of the most attractive business environments for the industry worldwide, according to the BMI report.

The region contains two of the four powerhouses of future global growth - Brazil, Russia, India and China - with the latter two combining vast geographical size, large populations, globally competitive labour costs and untapped infrastructure potential.

Though the Asia-Pacific region may not be free of tensions and flashpoints that can adversely affect the freight sector such as North Korea, China-Japan or India-Pakistan, strong freight transport growth rates combine with a very encouraging infrastructure investment picture across most of the region.

By mode, reports BMI, road haulage will grow as road infrastructure and vehicle density is extended and the shift to smaller/higher value loads continues.

Rail freight will benefit from long-distance economies of scale, whether from the opening of the Australian hinterland or big projects such as the new Silk Road route.

Shipping is being lifted by the surge in transpacific commodity and manufacturing trade routes, while airfreight is growing on the back of liberalisation and the budget airline boom.

China's economy continues to make all the "fastest growing" lists, and BMI names it as China's "strength" that its economy grew by 10.4% in 2005 and by 10.7% in 2006.

As for opportunities, the BMI report says that China's economic growth is becoming more broad-based, with consumption and net exports contributing more to growth as shown by fixed asset investments.

The development of ports in China, while challenging Hong Kong's supremacy as the world's busiest port and shipping hub for many years, is nevertheless good news for the shippers, traders and manufacturers contributing to China's fast economic growth.

The new Managing Director of the Da Chan Bay Terminal One operated by Modern Terminals Ltd of Hong Kong explains that there is a huge, pent-up demand in southern China that necessitates greenfield facilities.

"Huge volumes of cargo come out of the southern China, Guangdong, Shenzhen area and it is this pent-up demand for capacity that led us to open Terminal One in Da Chan Bay," says Andrew Milliken.

He says that Modern Terminals Ltd didn't look at the Pearl River Delta or Shenzhen in terms of a single port. "We look at the whole area - Hong Kong, Shenzhen, Chiwan, Shekou, Mawan and Nansha - as one collective region," Mr Milliken insists.

WRITTEN BY GINA GIRON-URQUIOLA