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Hong Kong Enterprise - Pearl River Delta Update

Vol 3, 2003

Pearl River Delta Update

Boundary Crossing Changes Bolster Business

Boundary Crossing Changes Bolster Business

David O'Rear, chief economist at the Hong Kong General Chamber of Commerce

With the Chinese mainland's foreign trade continuing to increase at double-digit rates, the around-the-clock opening of the Lok Ma Chau land boundary crossing into the mainland (commenced January 27) is expected to lead to increased efficiencies in the transport of inbound and outbound cargoes and to bolster export-oriented business in general.

Economists estimate that 60% of Hong Kong's exports originate from the Pearl River Delta (PRD), the biggest manufacturing base of the world's sixth-largest economy.

Furthermore, rapid growth in foreign trade by the mainland (Hong Kong's biggest trading partner) is also fuelling the logistics business in the Special Administrative Region (SAR).

In this context, 24-hour operations at Lok Ma Chau, the busiest boundary control point in terms of goods vehicles, provides a great stimulus and incentive for freight forwarders, trucking companies, warehouse operators and many other service providers - most of whom are small- and medium-sized enterprises (SMEs).

Greater ease of movement for people between Hong Kong and the mainland will have a ripple effect on business

The enhancements at Lok Ma Chau are expected to bolster SME business. "It has to help. Most of the Hong Kong investment into the Chinese mainland is less than US$1m. These are the SMEs. The whole industry should benefit," says David O'Rear, chief economist at the Hong Kong General Chamber of Commerce.

"Anytime you increase access through improved infrastructure, you are going to get a big boost in the efficiency of business," he says.

The sheer number of vehicles moving across this land border indicates the importance of accessibility to importers and exporters at all hours. On average, 25,000 goods vehicles cross into the mainland every day, and Customs data records a total of 12.4 million cross-boundary vehicles last year. At Lok Ma Chau in 2002, the daily average throughput was 18,447 goods vehicles - an increase of 8.6% compared with 2001.

The flow of people is also rising rapidly. Compared with 4,633 people moving across on January 27, the first day of the 24-hour opening, an average of 6,900 people now use the crossing from midnight to dawn, according to Hong Kong Immigration Department estimates.

Greater ease of movement for people has a ripple effect on business. "If the non-commercial traffic is moving faster it should help commercial traffic as well. If buses and other passenger vehicles are able to move through the boundary in less time, it will undoubtedly speed up the processing of trucks," O'Rear says.

Efficient 24-hour cargo clearance at land boundary control points is seen to boost Hong Kong's role as a logistics hub

The SAR government's Central Policy Unit commissioned the One Country Two Systems Institute to carry out a survey that found the "efficient 24-hour cargo clearance at land boundary control points" to be a must for the "development of Hong Kong's logistics industry and to reinforce [its] role as a logistics centre".

The impact of economic benefits gained through a smooth cargo flow across the border could be further enhanced by a land link to the western part of the delta. In a recent study, Hong Kong Trade Development Council chief economist Edward Leung noted, "Enhancing Hong Kong's logistics reach to [the] western PRD may bring additional 30% and 35% increases respectively in the total volume of Hong Kong's sea and air cargo throughput."

To further exploit the advantages of cities in the western delta, the SAR government has proposed a bridge linking Hong Kong-Macau-Zhuhai. In his policy address in January, SAR chief executive Tung Chee-hwa, observed that "a bridge linking Hong Kong to Macau and the western part of the Pearl River Delta will be of strategic importance to the development of the whole region."

In the not-too-distant future, the wider objective is to greatly enhance physical connectivity with the PRD. According to the Hong Kong Logistics Development Council, direct road links will enable "most freight vehicles to complete a cross boundary journey within one hour''.


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