IJPDLM
26,10
46
Received September 1995
Revised April 1996
International Journal of Physical
Distribution & Logistics
Management, Vol. 26 No. 10, 1996,
pp. 46-59. MCB University Press,
0960-0035
Transportation systems
in Hong Kong and
Southern China
A manufacturing industries perspective
Richard C.M. Yam
Department of Manufacturing Industries, City University of Hong
Kong, Kowloon, Hong Kong, and
Esther P.Y. Tang
Department of Business Studies, Hong Kong Polytechnic University,
Kowloon, Hong Kong
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 Chinas 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 Kongs 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.
 Guangzhou Transportation in
Hong Kong and
Southern China

47
Mouth Shenzhen
of the Kowloon
Pearl River New
Territories

Hong
Kong Island

Hong Kong
Figure 1.
Hong Kong and Pearl
River Delta

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 Chinas 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
IJPDLM in China recruited local Chinese operators and workers with a very small
26,10 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
48 and PRD will be further deepened and complementary to each other. With Hong
Kongs management know-how, financial strengths, international business
connections, extensive logistics network, coupled with Southern Chinas 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.

Hong Kong: an entrept for China

Hong Kong vs Shanghai
Hong Kong has been the major contact point for China (especially Southern
China) with the rest of the world for decades and this intermediate role has been
further enhanced in recent years. Hong Kong facilitates Southern Chinas trade
by acting as a catalyst to lower the transaction costs of the trade. In theory, with
the more comprehensive opening of China, in particular the Shanghai-Pudong
areas, the role of Hong Kong as intermediary would become less important.
However, Shanghai-Pudong areas have been designated by the Chinese
Government as the region for high technology and other industrial
development. Most of the heavy or high technology investments in China are
handled directly by the government and the huge multi-national firms with
operations mainly located in Shanghai-Pudong region or other northern
provinces[6,7]. Southern China, including PRD, is basically concentrated in light
industries with investment mainly from Hong Kong. The geographical location
of Shanghai and the inadequate inland transportation networks in China have
restrained Shanghai from competing with Hong Kong in Southern China.
Shanghai is important to lead the economic development of Central or Northern
China. Hong Kong is important to support Southern China to trade with the
outside world. With the domination of Hong Kong investment and the
inadequate infrastructure development in PRD for international business, the
other major cities/ports in PRD are complementary to, rather than in
competition with, Hong Kong.

Entrept
Since the 1980s, despite the advanced development in telecommunication
systems and the liberalization of trade in many countries, the entrept role of
Hong Kong and Singapore in world trade has increased dramatically. This
occurred due to the need to bring the ever increasing number of sellers, buyers Transportation in
and the range of complex products together. In todays global markets, almost Hong Kong and
all countries could be sellers or buyers of large varieties of products ranging Southern China
from raw materials to sophisticated technology. There are infinite permutations
of seller, product, buyer, mode of transport, insurance coverage and financial
terms. Very highly specialized skills and systems are required for effective
trading[8,9]. There are a large number of trading companies experienced in 49
handling and co-ordinating these activities effectively in Hong Kong. Table I
shows the percentage of Chinas re-exports to other countries via Hong Kong as
part of Chinas total exports. The percentage has increased from 45.9 per cent in
1989 to 66.2 per cent in 1993, highlighting that trade between Hong Kong and
Southern China continues to expand[11]. Hong Kong provides good trading
services, sources of supplies, finance and insurance support, good
transportation, warehousing and telecommunication facilities, etc.

Re-exports from Percentage of Chinas

China to other re-exports via Hong
countries through Chinas total Kongs to Chinas
Year Hong Kong (US$m) export (US$m) total exports

1989 24,137 52,538 45.9

1990 30,822 62,093 50.0
1991 40,473 71,842 56.3
1992 51,767 84,940 61.0 Table I.
1993 60,770 91,763 66.2 Re-export from China
to other countries
Sources: [10,11] through Hong Kong

Located at the mouth of the Pearl River with a deep water harbour, Hong Kong
is geographically and strategically important as an entrept for China and a
trans-shipment port for intra-Asian and world trade. Hong Kong is the eighth
largest trading entity in the world and the worlds busiest container port,
handling an estimated 11 million TEU(20-foot equivalent unit)[12]. Sea
transportation, which is estimated to account for 90 per cent of Hong Kongs
international cargo movement by weight and over 50 per cent by value, plays a
vital role in the territorys economy[13]. Cargo transferring directly to and from
China often faces numerous problems in delays, damages or delivery errors, as
they are often handled by the inefficient and bureaucratic Chinese inter-
mediaries. Hong Kong manufacturers prefer their cargo to go through Hong
Kong as they can inspect the goods before they are packaged for export.
Furthermore, freedom of cargo movement, money, information and the strong
link with China, also attract multinational firms to set up offices in Hong Kong
to explore the China market[14]. Both multinational and local firms are
IJPDLM benefiting from the entrept role of Hong Kong, however, they also face
26,10 problems caused by the inadequacies of the transportation system in the region.

Outward processing
With the extensive relocation of Hong Kong manufacturing activities to PRD,
outward processing has become the most popular means of operations in Hong
50 Kong/PRD. Through outward processing, raw materials, components and work-
in-progress are being sent to China from Hong Kong for further processing and
assembly before the finished products are re-exported to other countries via
Hong Kong. Table II shows the estimated proportions of the outward processing
trade for imports from and exports to China between 1989 and 1993. With this
significant increase in outward processing, the smooth cargo traffic between the
two places is vital for the future development of Hong Kong/China
manufacturing industries in the region. In terms of tonnage of physical cargo
movement, this outward processing arrangement has created very heavy traffic
flows on the transportation network between Hong Kong and PRD. Table III
shows the rapid growth in cargo traffic between Hong Kong and China from
about 85 million tonnes in 1989 to over 130 million tonnes in 1993.

Table II. Estimated percentage of outward processing trade

Estimated proportions Trade type 1989 1990 1991 1992 1993
of outward processing
trade between Hong Imports from China 58.1 61.8 67.6 72.1 73.8
Kong/China Total exports to China 58.4 60.4 64.6 68.7 71.8

Table III. 1989 1990 1991 1992 1993

Cargo movement
between Hong Kong Total cargo movement 85 87 102 117 130
and China (million
tonnes) Source: [15]

Transportation systems in China

The development of transportation systems in China has fallen behind the pace
of the rocketing economic development in the country. Inadequacies include
transport technologies that have not been updated, limited railway services,
and substandard road systems with serious congestion, especially in the fast
growing areas. Moving goods in China has become tougher[17]. During the first
decade of the economic reforms, i.e. from 1981 to 1990, state investment in trans-
portation was just 1.4 per cent of GNP, roughly half that of other developing
countries. Conservative estimates put the annual cost in loss of production from
the underinvestment in railways alone at tens of billions of renminbi[18]. Table
IV summarizes the length of transportation routes of different transport modes
in China[2]. The table shows a slow growth rate in Chinas transport
development and reflects how the Chinese Government put more effort in the Transportation in
development of roads and civil aviation routes instead of railway tracks and Hong Kong and
inland waterways. Southern China
Many problems in Chinas domestic distribution system are the results of
Chinas regional self-sufficiency economic policy in the past. Until the 1980s,
most products were manufactured locally for local markets. As a result, few
transportation or distribution channels existed to move products between 51
regions and provinces. With the setting up of SEZs mainly in the coastal areas,
manufacturing for export has been concentrated within 100km of the coast.
However with factories steadily migrating further inland, Chinese exporters are
facing mounting transport bills and long cargo delivery times[19].

1979 1981 1983 1985 1987 1989 1991 1993

Roads 875.8 897.5 915.1 942.4 982.2 1,014 1,041 1,083

Railway 49.8 50.2 51.6 52.1 52.5 53.2 53.4 53.8 Table IV.
Inland water 107.8 108.7 108.9 109.1 109.8 109 109.7 109.7 Length of transport
Civil aviation 106 218.2 229.1 277.2 389.1 471.9 559.1 960.8 routes of different
transport modes in
Source: [4] China (1,000km)

Rail
In 1993, China had only 53,000 kilometres of railway for its 1.1 billion popula-
tion but transportation of cargo in China is still heavily dependent on rail. The
rail network has become the bottleneck for the nations economic growth. In
1992, there was only a 3 per cent increase in rail transport, which could hardly
match the 12.8 per cent growth in GNP and the 23 per cent rise in industrial
production. Compared with the Western countries, the spread of the railway
network in China is very thin[20]. Companies sometimes have to make one to
two months advanced freight reservations for their cargo[19]. In order to rectify
the situation and to cope with the fast expanding economies, China is under-
taking a huge railway development plan: the rail network will increase to
70,000km by the year 2000 and to exceed 90,000km by 2010. An additional
10,000km rail will be added to the countrys original eighth five-year economic
plan to include an extra 6,600 km of new lines double-tracking of 4,100km and
electrification of 5,400km of existing lines. The 2,370km long Beijing-Kowloon
(Hong Kong) line was completed recently, and is one of the countrys major rail
corridors running north and south through seven provinces[20].

Road
Because of its high flexibility the road system is being used to handle low-
volume, lightweight cargo. The road system, except in the PRD, is primitive and
its quality is unsatisfactory for heavy cargo transportation. Roads have
IJPDLM unsatisfactory surface conditions, width and alignment. In 1993, only 20 per
26,10 cent of the countrys 1.08 million kilometres of roads were paved[20]. The
already unsatisfactory pavements of the substandard roads are further
deteriorated by the heavy trucks introduced in the fast growing areas. The road
upgrading and maintenance works are behind the rapid increase in the demand
of road transport. The proportion of concrete or cement road is low in the
52 country, compared to the many broken-stone roads. The length of roads
increased 18 per cent in the last decade[17].

Air
Air freight is little better. A three- to four-day wait is not unusual. In emer-
gencies, companies need to send an employee with urgent cargo as passenger
baggage[19]. Basically, some of the airports in China are still suffering from
routeing problems, poor ground services, long cargo shipment schedules, poor
cargo handling facilities, management processes not conforming with
international practice, and insufficient transport infrastructure linking the
airport to the nearby industrial areas.

Ports
Cargo movements through most of Chinas seaports have kept pace with the
growth in foreign trade, however, backlogs and delays are still commonly
encountered in some ports. Many port operations remain inadequate and
inefficient, and goods are often tied up in docks for days or sometimes even
weeks. Container handling capacity is still small as a percentage of total
shipping freight volume. In 1993, around 1.3 million 20-foot equivalent units
(TEUs) were handled, which is small compared with Hong Kongs annual
throughput of 11 million TEUs in the same year.

Current transportation practices in Hong Kong/PRD

Dongguan and Shenzhen, the major cities in PRD, are located on the east bank
of the Pearl River with heavy investment from Hong Kong. The development of
their transportation network has grown faster than other areas.

Road
Road transport, unlike in other regions in China, is currently the major mode of
transport for moving cargo between Hong Kong and PRD. Road transport is
particularly suited to the export-oriented light industries and the agricultural
products which often require fast door-to-door delivery with frequent loading
and unloading. The cross-border road freight traffic (now exceeding 12 million
tonnes annually) has surpassed rail systems (which has stagnated at about 2
million tonnes per year) for more than a decade. Before the opening of the
Guangzhou-Shenzhen express highway and the 24-hour border crossing, there
were a large number of complaints about road congestion in the PRD. Blockages
were reported coming out of Guangzhou, at the China-Shenzhen border and at
the Shenzhen/Hong Kong border. The normal two-hour trip between
Guangzhou to Shenzhen took from three to five hours. The situation has been Transportation in
significantly improved. Table V shows the cargo movement by different Hong Kong and
transport modes in Hong Kong in the years 1988-1993. The joint venture status Southern China
of transportation companies means they can secure double licenses for their
vehicles to avoid cargo switching at the border[21].

53
Year
1988 1989 1990 1991 1992 1993

River 10.1 9.0 9.3 11.1 17.4 N.A.

Raila 2.2 2.2 2.2 2.1 1.9 1.6 Table V.
Road 6.7 8.0 9.1 11.0 12.2 13.0 Cargo movement by
Air 0.7 0.73 0.8 0.85 0.96 1.14 different transport
modes between
Note:a Livestock excluded Hong Kong/China
Source: Hong Kong Government, annual reports (million tonnes)

River
Midstream operations provide flexibility and competition. Containers can be
unloaded from ships at anchor and buoys in Hong Kong harbour to river barges
for discharging to a number of feeder stations along the Pearl River and vice
versa. This approach provides a much cheaper alternative than container
terminals and handles about 20-30 per cent of Hong Kongs total container
throughput. Midstream operations provide a safety-valve to relieve congestion
both in container terminals, on the roads and at the border. In addition to
containers, small feeder vessels also carry low value breakbulk cargo, such as
agricultural commodities, food or bulk items. Barge traffic between Hong Kong
and Pearl River also utilizes midstream handling, as their ports do not have the
depth of water to accommodate large vessels. However, as the prime site for
midstream buoys is restricted, its operation is expected to be saturated in
1996[22]. The Hong Kong Government has recently signed a contract to
construct a river terminal in the Tuen Mun area to handle river cargo. The
terminal will be able to handle 2.1 million tonnes of cargo a year, within 36
months from the date of the land grant, and to increase capacity to 8.5 million
tonnes a year within 18 months. The first berth is expected to be operating in
1997[23].

Air
The Kai Tak airport in Hong Kong is the third busiest passenger airport in the
world in terms of the number of international passengers and the second
busiest in terms of international cargo throughput. The frequency of air
services between Hong Kong and many other major cities in China has
increased from five services a week in the 1980s to 280 services per week in
IJPDLM 1995[13]. However, cargo movement between Hong Kong and PRD still relies
26,10 heavily on road and river rather than air.

The survey
In order to find out the current transportation problems facing Hong Kong
manufacturers in their China operations, a questionnaire survey was conducted
54 in 1995. The use of the outward processing operation in Hong Kong/PRD was
reviewed. The study analysed the importance of Hong Kong to support the
export activities in PRD. It also investigated the constraints for Hong Kong
manufacturers to expand beyond the PRD region.

Questionnaire design
The impacts of outward processing on the transportation system in Hong
Kong/PRD were investigated by measuring the frequency of travel, the kind of
items involved, the routes and modes of transport employed, an evaluation of
the current transportation system and the problems encountered so far.

Sample design
The sample for the survey were drawn by first selecting all firms in the
manufacturing category within the most updated Hong Kong business
directory. Then systematic sampling was used to arrive at a sample of 1,000
firms. Structured questionnaires were mailed which resulted in a response rate
of approximately 10 per cent. This response rate is considered satisfactory in
the context of Hong Kong where executives are working long hours and under
high pressure. A comparison of the respondent profile with the Hong Kong
industry profile, as well as the results of the similar survey conducted by the
FHKI in 1993[3], suggests that no particular group is under- or over-represented
and the analyses are thus representative. Selected respondents were also
interviewed for further clarification and more detailed discussion.

Survey findings
Of the respondents, 72.4 per cent reported that they have production plants in
China. Over 95 per cent of these reported that their plants are located in PRD.
Shenzhen (49 per cent), Dongguan (19.5 per cent) and Guangzhou (7.4 per cent)
are the most popular areas for Hong Kong manufacturers. This finding is
consistent with the FHKI survey in 1993[3].

Modes of cargo shipped between Hong Kong/China

The survey findings reconfirm that the majority of Hong Kong manufacturers
in China are manufacturing for export. As shown in Figure 2, 85 per cent of the
respondents manufactured only for export purposes.
The survey findings also show that there is a rapidly growing demand in
cargo traffic between Hong Kong and PRD under the outward processing
arrangement. Table VI shows the types of cargo shipped between Hong Kong
and China. From the survey almost all items transported from Hong Kong to
China for outward processing are raw materials (72.3 per cent) and semi- Transportation in
finished products (25.6 per cent). Of the items shipped back to Hong Kong for Hong Kong and
further processing (packaging, testing or inspection before re-exporting to Southern China
other countries), 28.6 per cent were semifinished and 71.4 per cent were finished.

Transport routes for Chinas exports

Table VII shows the transport routes for Chinas export via Hong Kong. Over 95 55
per cent of the respondents transported their products from China to Hong
Kong either as the final destination or en route to overseas countries. Road
transport is dominant over the other transport modes. Of the respondents 83
per cent used road transport to export their products via Hong Kong because of
its flexibility in cargo handling, time scheduling, adaptability and promptness
in medium- and short-haul traffic to achieve door-to-door delivery. Most
respondents considered the road transport route good and reliable with
adequate and efficient facilities. Cargo damage and loss warranty rates are
acceptable. However, there are problems in traffic congestion and blockage at
border crossings. As mentioned earlier, with the opening of Guangzhou-
Shenzhen expressway and the 24-hour vehicle border crossing at Lok Ma Chau

50 per cent for exports 50

per cent for domestic
consumption
(5 per cent)

90 per cent for exports 10 All output for domestic

per cent for domestic consumption
consumption (2.5 per cent)
(7.5 per cent) Figure 2.
Production output
of Hong Kong
manufacturers in
All output for exports China for exports
(85 per cent) (% of response)

Direction Item Percentage

Into China Raw material 72.3

Semi-finished 25.6
Finished product 2.1
Out of China Raw material 0
Semi-finished 28.6 Table VI.
Finished product 71.4 Types of cargo (%)
shipped between
Source: Survey, 1995 Hong Kong/China
IJPDLM Transport Transport route
26,10 mode (China Hong Kong) overseas, China Hong Kong China overseas

Road 83.0 N.A.

Sea 5.8 4.4
River 2.8 N.A.
56 Air 1.6 0.4
Rail 2.0 N.A.
Notes:
(China Hong Kong) overseas China to overseas and vice versa with Hong Kong as an
Table VII. entrept
Transport routes for China Hong Kong China to Hong Kong and vice versa
Chinas export via
China Overseas China to overseas and vice versa
Hong Kong
(by percentage) Source: Survey, 1995

at the end of 1994, the situation has been significantly improved. The order of
preference for different transport modes ranked by the respondents was road,
river, sea, railway and air. Rail shares only a very small portion in the total
cargo shipment between Hong Kong and China. Air cargo is insignificant. The
majority of respondents replied that the transportation systems in China had
difficulty coping with the rapid expansion of their operations. Also, over 65 per
cent of the respondents agreed that their companies operations relied heavily
on the transportation development in China.
Suggestions for improving the transportation systems between Hong Kong
and PRD were consolidated from the survey, a number of subsequent
interviews, and the seminar on Transportation Development in Guangdon[24]
were held in 1995. They are summarized as follows:
(1) Highways should be developed as the main means of short and medium
haul transport to achieve prompt door-to-door delivery in Hong
Kong/PRD.
(2) Rail should remain the backbone of Chinas comprehensive transport
system for linking up other modes of transport into an organic whole.
The development of the rail system should focus on long haul bulky
cargo traffic, high-speed passenger traffic, the conversion to double
tracks, and phasing out of internal combustion by electric engines which
should be extended to all lines in PRD.
(3) Sea transport in PRD should be developed to carry long haul bulky
containerized cargo. The port facilities and the back-up services of the
existing seaports should be upgraded and more seaports developed.
(4) Inland river transport is preferable for long-haul, bulky, non-
containerized cargo traffic. The routes of the rivers and the inland river
ports should be improved to accommodate larger ocean vessels.
 (5) Civil aviation should focus on international exchange and long distance Transportation in
travel over the other modes of transport. Existing supporting facilities Hong Kong and
should be enhanced and new facilities constructed. Southern China
Future development
China has embarked on the largest rail-building programme in its history[25].
Some 6,600km of new lines will be laid by the end of 1995, bringing route 57
kilometres to 60,000. The next five-year rail-plan envisages an addition of a
further 10,000km. Before the year 2000, major road construction projects will be
concentrated on the development of the three-vertical (north to south) and two-
horizontal (east to west) lines and the two major side highway routes
development to cover most major cities in the country[24].
In the PRD region, ambitious networks of rail, road and port projects are
planned to cope with the rapid expansion. Since the late 1980s, 1,700km of roads
have been completed of which 370km are expressways. The Guangzhou/
Shenzhen expressway was completed in late 1994. Additional rail and road
connections have been constructed to relieve the pressure of the cross-border
traffic. In the next 20 years, Guangdong province plans to build 16 expressways
with a combined length of 3,300km[20].
China has a huge port development plan in the southern coast. However,
competing ports in Shenzhen immediately north of Hong Kong and elsewhere
on the Southern China coast, like Macau, Guangzhou, Shenzhen, Gaolan and
Zhuhai, do not have the depth of water and the rail/road support system that
Hong Kong can offer. In the short to medium term, these fast developing ports
will attract mainly break bulk cargo and provide feeder services to support the
Hong Kong ocean container business. In the longer term, they will take a more
active role in competing with Hong Kong[17,26].
The Hong Kong Kai Tak Airport handled 25 million passengers a year in
1995. The passenger traffic is estimated to increase to 28.5 million per year in
1998 and to approximately 44 million passengers a year in 2010[13]. Hong Kong
has launched a massive multi-billion-dollar port and airport project scheduled
to be completed in 1997/8. The new airport will initially be capable of handling
35 million passengers and 1.5 million tonnes of cargo a year, expandable to 44
million passengers a year. A series of highways and railways will be
constructed along the new airport to cope with the territorys traffic demand,
and also to facilitate a direct across-border link. More container terminals,
multipurpose berths, port-backup facilities and a river terminal, as mentioned
earlier, will be constructed in the next few years[26].
In Hong Kong/PRD, there will be five new international airports (Shenzhen,
Macau, Zhuhai, Guangzhou and Chek Lap Kok (Hong Kong)), completed within
the next two to three years. Having airports in close proximity will result in
excessive air route overlapping and difficulties in air traffic control and,
therefore, a co-ordinated system will be required to regulate flight time,
routeing and air traffic control. In view of the inadequacies in the local
transportation network, cargo handling facilities and warehouses, air traffic
IJPDLM control systems and the lengthy time required to finalize international aviation
26,10 agreements, the new airports in PRD would most likely compete with Hong
Kong for direct international cargo flights only in the medium to long term[27].

Summary
The study reconfirms that almost all Hong Kong manufacturers in China
58 export their outputs to overseas markets via Hong Kong port facilities. The
outward processing arrangement and the entrept role of Hong Kong have
indeed added a heavy load to the existing cross-border cargo traffic. Road is the
major mode of cargo shipment. There are massive multi-billion-dollar port,
airport, road, railway and river infrastructure projects to be completed in the
region by the end of the century. On completion of these projects, the strategic
position of Hong Kong, as an entrept for Southern China, would be further
strengthened. However, competition from the neighbouring ports and airports
in PRD is expected in the medium to long term.
Most of the infrastructure development plans focus mainly on the
improvement of the transportation systems within Hong Kong, PRD and
between Hong Kong/PRD and other major cities in China. The linkages
between PRD and other inland provinces are largely neglected. The survey and
the subsequent interview findings show that most Hong Kong manufacturers in
the major cities of PRD do not plan to move beyond PRD region to the inland
provinces, even though they have been faced with ever increasing wages and
other operating costs in recent years. This is because of the inadequate
transportation support and poor infrastructure development in the other
regions. Every year millions of peasants flow from the inland provinces to PRD
looking for jobs. Supply of cheap labour is plentiful. Shifting to inland province
for cheaper labour is not justified. However, some Hong Kong manufacturers do
have plans to expand or transfer their plants beyond the three major cities in
PRD (e.g. Shenzhen, Dongguan and Guangzhou) to other newly-developed PRD
areas where the transportation support has been improved.

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