Transportation systems in Hong Kong and Southern China: a manufacturing industries perspective.(Current Logistics Practices in the Asia-Pacific Region)

Introduction

Hong Kong started with light manufacturing industries in the 1950s, and by the 1970s it had become renowned as a manufacturing centre for light industries. In the 1980s, Hong Kong light industries faced many unfavourable political, social and economic problems; i.e. global trade restrictions, rising protectionism, shortage of labour and increasing land/labour costs. Many other developing countries had definite cost advantages over Hong Kong, especially in the high-volume-low-value-added items. It was about the same time that China adopted its open door policy. Since its economic reform, China had completely reoriented its development policy to growth through export-oriented light manufacturing industries financed by foreign direct investment. Special Economic Zones (SEZ) were developed in Southern China adjacent to Hong Kong to attract Hong Kong investment. With China's limited capital and technical know-how, and the heavy investment and technology transfer from Hong Kong, light industries in Pearl River Delta (PRD) of Southern China were established and prospered in the late 1980s. Most of Hong Kong's labour-intensive activities have now been relocated to PRD, as the reform of China has provided good opportunities for Hong Kong manufacturers not only to survive but even to grow and expand[1].

With this extensive relocation of manufacturing activities, the transportation of raw materials, components and finished products between Hong Kong and PRD has created tremendous heavy traffic within the region. This paper analyses the current transportation systems in China with special reference to Hong Kong/PRD region through literature review, questionnaire survey and structured interviews. The paper focuses on the impact of the transportation systems on the manufacturing industries and specifically on the manufacturing industries in PRD region which has received major investments from Hong Kong. Figure 1 shows the geographical location of Hong Kong/PRD.

Hong Kong investment in Southern China

Hong Kong has become one of the most important sources of foreign investment for China. In 1993, about 70 per cent of China's total foreign direct investment came from Hong Kong[2]. The Federation of Hong Kong Industries (FHKI)[3], which is the statutory body representing the interests of Hong Kong manufacturers, conducted a survey in 1993 to determine the extent of industrial relocation to China among its members. They sent out 1,609 questionnaires to all its members and received 709 valid responses out of which 690 responses were collected through telephone interviews. The survey showed over 70 per cent of its respondents' investment in China was concentrated in the light industries in PRD. The PRD has emerged as the most favoured investment destination for Hong Kong manufacturers due to its geographical proximity, availability of low-cost labour/land and the preferential treatment offered by the Chinese government. It is estimated that at present Hong Kong manufacturers operate 25,000 factories and employ as many as four million workers in Guangdong and most of them are working in the PRD[4]. The proximity of PRD facilitates management control, technical support and other backup services from Hong Kong with minimum transportation time. The easy access to the port facilities in Hong Kong is also the major attractive factor.

The number of Hong Kong plants in PRD decreases with the distance from Hong Kong. Shenzhen, adjacent to Hong Kong, is the most popular place with the largest number of Hong Kong plants (40.2 per cent). Dongguan (further from Hong Kong, 16.7 per cent) and Guangzhou (the capital of Guangdong province, 9.6 per cent) are the second and third most popular places for Hong Kong manufacturers, respectively. These three major cities in PRD covered about 67 per cent of all respondents' investment in China in 1993. Most Hong Kong plants in China recruited local Chinese operators and workers with a very small percentage of senior managerial or supporting staff from Hong Kong. The majority (90 per cent) of respondents considered their operations in China profitable, and had plans to expand their manufacturing operations in China.

In mid-1997, the sovereignty of Hong Kong will be returned from Britain to China. The interdependent economic and political relationship of Hong Kong and PRD will be further deepened and complementary to each other. With Hong Kong's management know-how, financial strengths, international business connections, extensive logistics network, coupled with Southern China's cheap labour, plentiful supply of land and determination to modernize, the Hong Kong/PRD region could be developed as a world-class manufacturing zone for light industries to rival Korea in size[5]. The development of Hong Kong manufacturing industries in the last decade has been linked closely with the industrial development in China and vice versa. Each side has benefited greatly by fostering their mutual strengths and this interdependence is likely to continue into the next century.

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