HK's advantage

A report published by Business Monitor International, a London-based consultancy, said: "Over the medium term, BMI projects further moderate growth at the port of Hong Kong. It has managed to weather the competition from the development of Shenzhen.

"Despite the close proximity of the two facilities, Hong Kong has still managed to retain its lead and is forecast to continue to do so in the medium term."

In the meantime, Shanghai is trying to learn from Hong Kong.

Jian Danian, deputy director of the Shanghai Free Trade Zones Administration, said Shanghai will make little difference to Hong Kong's position as a leading global trade zone as Shanghai focuses more on the trading industry between global and domestic companies, instead of the financial market.

With paid-in foreign direct investment of nearly $59.5 billion and outbound investment exceeding $10 billion, Shanghai is preparing to open up to international investors.

As the first free bonded zone approved by the central government in 1990, the Shanghai Waigaoqiao Free Trade Zone, which includes the Shanghai Waigaoqiao Bonded Logistics Zone, is recognized as being the starting point for the city's free-trade zone ambitions.

In 2009, a comprehensive bonded zone was launched in Shanghai to oversee coordination of the Yangshan Free Trade Port Area, Shanghai Waigaoqiao Free Trade Zone and Shanghai Pudong Airport Free Trade Zone.

Jian said:"We cover five types of areas under the supervision of China's customs - a bonded zone, a bonded port area, a comprehensive bonded area, a bonded logistics zone and an export processing zone - offering the most complete, convenient and transparent import and export-related services ranging from customs clearance and supervision, to foreign currency management and quarantine inspection."

Jian said the administration has been working to combine the policy, resources, industrial and functional advantages of the three zones to provide comprehensive service to companies seeking to develop their businesses in Shanghai.

Around 280,000 people currently work in more than 200 operational centers for multinational companies, 50 international trading settlement centers and nearly 40 regional head offices of companies in Shanghai.

Jian said the focus is on offering more convenience and efficiency for local trading companies, with improved policies on foreign investment, international trading settlements and cross-border transactions.

Container throughput at the Port of Shanghai led the world for three years from 2010. The total value of imports handled by Shanghai Customs in the past five years was $801.3 billion, while exports were valued at $436.8 billion.

Zhang Ye, president of the Shanghai Shipping Exchange, the only national shipping exchange authority in China, said: "Over 90 percent of the global trade coming in and out of Shanghai uses shipping, which is low-carbon and cheap, but the city still saw a loss of about 40 percent for 2011."

Zhang said for Shanghai to maintain its leadership in the trading industry it must combine shipping with finance to create certain derivatives available for investments.

"The booming trading center of Shanghai won't cause problems for Hong Kong, which already has a mature operating system and globally recognized policies."

For emerging logistics companies in Shanghai, it will take some time to regulate the industry and provide a better platform for them to set up complete supply chain and resource control centers.

Han Jun, Party chief of COSCO Logistics (Shanghai) Heavy Haulage Co Ltd, said: "Shanghai is ready to be qualified as a free-trade zone after attracting so many global companies to set up their regional and China head offices in the city, but the policies and operating system still need to be improved."

Han said the logistics industry in Shanghai is relatively disorganized by not being regulated under certain management rules and sector standards. This urgently needs to be improved to catch up with demand from multinational companies.

Cargo and mail throughput at Pudong International Airport in Shanghai was the third largest in the world for four consecutive years from 2009.

Li Derun, president of Shanghai Airport Authority, said the volume of larger cargoes through airports in Shanghai started declining in 2011, and it is time to transform the city's airports to act as a transfer center for international cargo and mail.

"The transportation of goods by air will be an additional operation for Shanghai to assist Hong Kong with," said Li.

The majority of developing small- and medium-sized trading companies that will benefit from the approval of a Shanghai free-trade zone realize that applying innovative technologies to the output of high-quality and branded products is the direct route to getting closer to global standards.

Li Yiming, chairman of Shanghai Zhengzhang Import and Export Co Ltd, which owns design and sales departments in Shanghai and production lines in inland areas, said: "We're looking forward to having more direct cooperation and more convenient trading procedures with overseas business partners in the near future to design and manufacture high-end products."

Li said the concept of a free- trade zone in Shanghai is great news for SMEs struggling in the trading industry.

Contact the writers at yuran@chinadaily.com.cn and gaochangxin@chinadaily.com.cn