Shanghai Rivalry

Mutually stimulating competition

How do Hong Kong and Shanghai fit together in China’s maritime jigsaw. Splash attended a recent, high profile conference to find out

There has been a lot of talk in the past about Hong Kong’s long-held role as an international finance and shipping centre being replaced by Shanghai with debate on which one will eventually come up as the lead in China as well as in the region.

Shanghai’s growth has been striking, and China’s biggest city and home to the largest boxport in China and the world has been very ambitious to regain its past glory.

Whether the rise of Shanghai will continue to be a cause of concern for Hong Kong or their relationship will evolve into a more complementary instead of rivalry in nature, remains to be seen. Panellists at the recent TradeWinds Greater China Shipowners Forum believe the two major shipping hubs can work together to build on their own comparative advantages but also to improve weaknesses to better serve the maritime industry.

Wah Kwong’s executive chairman, Hing Chao, said he reckons there’s always going to be a level of competition, which he thinks is healthy and mutually stimulating, but also sees the role of Hong Kong and Shanghai as complimentary on so many different levels.

“I believe they are very much synergetic,” he told delegates attending the conference. “If Shanghai can be identified as the capital of shipping within China for domestic shipping and a hub, I do not see the role of Hong Kong diminishing particularly as economic growth in the Asia Pacific region, particularly China, has been driving global economic development for the last two decades and may well remain that way for the foreseeable future,” Chao said.

Chao also noted that while Shanghai is at the moment consolidating, whereas before we could see resources in China in shipping being a bit more scattered between Shanghai and Beijing, Hong Kong has also stepped up its game, passing a very important law to make it “hopefully” a much more attractive place for leasing companies with a much more favourable and friendly tax regime and overall business environment.

“If you compare the two I’d say there’s mutual strengths, while they overlap, they do complement each other very well,” Chao maintained.

In terms of strengths and weaknesses between both hubs, Mark Young, chief executive of bulker player Asia Maritime Pacific (AMP), said that more and more shipping operators and technical management companies have been relocating to Shanghai, while Hong Kong in terms of actual activity has just been stable. Nevertheless, he pointed out that there might be more for Asia than just these two great hubs.

“I know Hong Kong is traditionally strong in finance, arbitration, insurance, and all these things will probably stay in Hong Kong for quite a long time. But I can see the competition is not just between Shanghai and Hong Kong, I think we will probably mention Singapore in the future, so in some way shipping has been decentralised in Asia. Trying to talk about just Hong Kong and Shanghai is a little bit of a simplified situation,” Young suggested.

Rosita Lau, a partner of the international law firm Ince, said she’s been answering the question about Hong Kong and Shanghai maritime dominance for years.

“We are already above that,” said the Hong Konger, “because we are an international maritime centre and because of our all-rounded maritime services rather than counting the number of containers coming in or going out.”

She stressed that in order to really prosper the two hubs depend on three things: international approach, free trade and currency, and “the brain” (people).

“It’s the people who really are the most important,” Lau said, “because you can have all the hardware there, you can have all the ports but where are you, people?” When it comes to financing, AMP’s Young said he believes that Hong Kong is clearly facing competition from places like Shanghai. He noted that most Chinese leasing companies are based in Beijing or Shanghai and that in some way the physical operation of ship financing of assets has been gradually moving away from Hong Kong. While Hong Kong still remains one of the top stock markets, Shanghai has been picking up very fast when it comes to asset lending.

Wah Kwong’s Chao on the other hand wouldn’t say that Hong Kong has shrunk in importance as a result of Shanghai.

“Behind the front of a lot of leasing companies, they’re also collaborating very closely with EU banks and around the world. Now, who do they speak to? Often times to regional HQ seated in Hong Kong, so even though a lot of times the direct financing deals between shipping companies and banks are intermediated through a leasing company a lot of the deals are still done or involve Hong Kong,” Chao pointed out.

As for moving forward, Lau believes that there are a lot of interflows between Hong Kong and Shanghai and that both have a lot of competitive edges, but have to catch up on many things and work together.”Why do we have to confront each other?” she questioned.

“For Shanghai, I think is the software they have to improve and catch up a bit, software meaning the system and the mission of the people operating there. For Hong Kong basically is to be more competitive to other nearby ports, because we have been under great competition due to throatcutting price competition.”

Chao, who led a recent Hong Kong shipowners delegation to Shanghai, the first since the pandemic, added that his impression from Shanghai is that it very much welcomes further and closer ties and cooperation between the two major centres.

“Shanghai recommends Hong Kong to look more closely into the favourable policies existing in Shanghai to see how it can help Hong Kong shipping companies further develop. So I don’t see us competing but work more closely together to create a better environment not only for China but for Asia and the rest of the world,” Chao said.

Shanghai’s limitations

Whether Shanghai will develop internationally, Chao believes that it will be quite hard for Shanghai in terms of becoming a major arbitration and dispute resolution centre for international stakeholders, because the basis for Hong Kong law is fundamentally different from Shanghai or anywhere else in China.

For Ince’s Lau, in order to enhance its status as shipping centre, Hong Kong needs a proper maritime authority to have greater power to coordinate all resources under one roof.

“We need a statutory board really leading us to be as strong as other equivalent international maritime centres to attract other shipowners coming to Hong Kong,” Lau said. She also called for more tax relief for shipmanagers, brokers, agents and more manpower.

Wah Kwong’s Chao agreed with Lau that Hong Kong needs strategic planing and that it’s been lacking leadership from the top.

“We need the government not just to receive our suggestions but to digest it, to take it to another level, to see how best to promote Hong Kong interests by coordinating with other government departments to come up with short and long term solutions,” Chao said.

AMP’s Young said that in terms of operations Shanghai is and will remain the choice for many, including his own company, however, legal, compliance, insurance as well as finance departments are in Hong Kong.

“In an ideal world we’d like to have these under the same roof but in reality we have to go where it’s the most efficient - unfortunately that’s the real world,” Young said.

“Hong Kong needs a proper maritime authority to have greater power to coordinate all resources under one roof”