Can Hong Kong continue to flourish as not just the leading air cargo hub of the world, but perhaps more importantly, the air cargo gateway to China to which it owes its pre-eminent position? Donald Urquhart asks where next for Hong Kong.

Hong Kong is the undisputed air cargo king of the world. But a number of developments promise both good and bad for the world’s largest cargo hub with the only unifying theme amongst these being a grab-bag of change – some potentially good news and some, clearly bad news.

A new bridge to China’s Pearl River Delta; changes in global consumption; an emergent China; skyrocketing land and labour costs; a desperately needed new runway at Hong Kong International Airport (HKIA); and the list goes on and on.

For air carriers, the joy of Hong Kong is indisputable. Efficiency, connectivity, ease of doing business, a vibrant forwarding community and an abundance of cargo makes Hong Kong a no-brainer in route planning.

Take for instance AirBridgeCargo (ABC) for which Hong Kong has become one of its most important gateways – so important in fact, that in 2014, the Group management team relocated to Hong Kong to oversee the carrier’s overall development in the region.

From two weekly frequencies, Hong Kong is now served by 18 ABC flights weekly.

It is not hard to see why as Hong Kong-based managing director Middle East & Asia Pacific, for Air Logistics Group, Vikram Singh points out, Hong Kong benefits from its position next to mainland China.

“It continues to enjoy a special preference as an export hub for the mainland,” Singh says.

Volga-Dnepr vice president, SCO and CCO for Asia & Pacific, Joanna Li agrees on Hong Kong’s geographic benefit, adding that its successful cargo hub operation also benefits from the territory’s “free port policy, supported by streamlined Customs, trade regulations and business-friendly environment that are the backbone of the airport’s development and the main growth drivers.”

As Air Logistics Group’s business development manager for Asia Pacific, Sander Bras highlights, Hong Kong has leveraged its location with policies that have created huge capacity and connectivity and this has created substantial efficiencies throughout the logistics chain, he says.

Li says: “The airport’s management has followed the path of effective investment management with the focus on automation of handling and warehouse cargo processes, implementation of special cargo facilities and wide application of IT technologies.”

The number of carriers, frequencies and destinations served is unbeatable as Hong Kong Air Cargo Terminals Ltd (Hactl) chief executive, Mark Whitehead points out.

“No other airport in this region comes close, and this acts as a magnet for new carriers as they are entering a ready-made market which is close to the mainland. In addition, Hong Kong enjoys sophisticated Customs processes, and first class infrastructure.”

The potential threat of ascendant mainland hubs has long been a worry in Hong Kong, something that, so far, has not had a dramatic impact.

Bras underscores this long-discussed threat saying: “The main risk of increasing decline of volumes is linked to the economic trade development of China.”

Singh also points to the shift of manufacturing north and westward; part of the Chinese government’s strategy to diversify production into the hinterland.

He says: “As capacity grows towards more and more secondary cities, their closer proximity, more liberalisation of these airports, a more unified customs standard operating procedure, as well as attractive pricing, will divert volumes away from Hong Kong.”

This is already well under way, what with Chengdu and Zhengzhou’s growth as key inland hubs. But perhaps more worrisome is the view from Hong Kong freight forwarders.

The chairman of the Hong Kong Association of Freight Forwarding and Logistics (HAFFA), Brian Wu says the long-talked about threat from Chinese airports is likely to finally materialise within the coming decade.

While Wu is staunch supporter of Hong Kong’s cargo sector and an active participant in discussions and planning with the Hong Kong government as the chief representative of his forwarding members, Wu is also a realist.

“I have tried to diversify my own business from Hong Kong and China to Vietnam and other places in Southeast Asia,” he says.

“HAFFA has 321 members and most of the members have offices in mainland China and some have offices elsewhere in Asia, but we are still a Hong Kong-based association.

We discuss the issues with the government, but at the same time we still have to plan for own businesses, we have to put our eggs in different baskets.”