Zhou Ba­jun

Notes that Cosco’s pur­chase of OOIL brings the era of HK ship­ping giants to a close — and high­lights the dearth of re­place­ments de­spite Shen­zhen’s suc­cesses

China Daily (Hong Kong) - - COMMENT -

Ori­ent Over­seas Con­tainer Line (OOCL) and Cosco Ship­ping an­nounced on July 9 that the two ship­ping giants had reached an agree­ment for Cosco and Shang­hai In­ter­na­tional Port Group (SIPG) to wholly ac­quire OOCL’s ship­ping arm Ori­ent Over­seas In­ter­na­tional Line (OOIL) for $6.3 bil­lion. Some com­men­ta­tors say the deal has drawn an era in Hong Kong’s ship­ping in­dus­try to a close.

Com­pe­ti­tion in the global ship­ping mar­ket in­ten­si­fies ev­ery day. Be­fore the OOIL buy­out deal was an­nounced a con­tainer ship­ping al­liance be­tween Maersk Line of Den­mark and Mediter­ranean Ship­ping Com­pany (MSC) of Switzer­land was No 1 in the world. To se­cure its place in the global ship­ping mar­ket Cosco’s con­tainer ship­ping arm has also forged an al­liance with OOIL and CMA CGM China Ship­ping. After ac­quir­ing OOIL with SIPG, Cosco Ship­ping Lines is now the third-largest of its kind in the world. That is why this buy­out deal serves the long-term de­vel­op­ment in­ter­ests of all par­ties con­cerned.

But the deal does end an era in Hong Kong’s ship­ping in­dus­try. In the 1970s Hong Kong’s ship­ping mar­ket was dom­i­nated by four big com­pa­nies — Sir Pao Yue-kong’s World-Wide Ship­ping Group, Tung Chao-yung’s OOCL, Tsao Wen-king’s IMC Group and Chao Tsong-yea’s Wah Kwong Mar­itime Trans­port Hold­ings. Be­fore the sale of OOIL to Cosco and SIPG, OOCL was the only ship­ping giant left stand­ing — the other three had all lost steam and faded away. Now the era of Hong Kong’s ship­ping “big four” is fi­nally his­tory.

Mean­while, among all the cor­po­rate giants that have risen to promi­nence in Hong Kong since the 1970s only Li Ka-shing has suc­cess­fully trans­formed his busi­ness em­pire from a real-es­tate de­vel­oper into a di­ver­si­fied cross­na­tional con­glom­er­ate. For decades Hong Kong has not seen an­other one like Li’s Hutchi­son Wham­poa. In con­trast, Hong Kong’s main­land neigh­bor Shen­zhen has be­come home to a num­ber of big high-tech com­pa­nies with The au­thor is a se­nior re­search fel­low of China Ever­bright Hold­ings.

in­ter­na­tional reach in the past two or three decades, in­clud­ing tele­com sys­tem so­lu­tion provider Huawei Tech­nolo­gies and in­ter­net startup Ten­cent. There are even more else­where on the main­land, with Alibaba be­ing the most suc­cess­ful and well-known to­day. As a re­sult many Chi­nese main­land busi­ness peo­ple have joined the ranks of the rich­est in Asia in re­cent years.

The rea­sons why the main­land could cre­ate so many big en­ter­prises in just a decade or two, while Hong Kong made none, no doubt vary from in­dus­try to in­dus­try but, gen­er­ally speak­ing, what held Hong Kong back has been its in­abil­ity to ad­vance eco­nomic trans­for­ma­tion in re­sponse to glob­al­iza­tion.

In the mid-1980s through mid-1990s much of Hong Kong’s la­bor-in­ten­sive man­u­fac­tur­ing com­pa­nies packed up and moved to the Pearl River Delta re­gion in Guang­dong but lit­tle was done to re­place them with knowl­edge­based en­ter­prises in high-tech and in­no­va­tive in­dus­tries. In the past 20 years or so tra­di­tional in­dus­tries and sec­tors have been dom­i­nated by a num­ber of big com­pa­nies, such as in real es­tate and bank­ing, but no fresh in­dus­try has grown big enough to give Hong Kong a new cor­po­rate giant or two.

Fi­nance is still one of Hong Kong’s pil­lar in­dus­tries but the lack of fresh de­mands for fi­nan­cial ser­vices left the bank­ing in­dus­try with more sav­ings in lo­cal and US cur­ren­cies than loans. Be­sides HSBC, which has be­come a bona fide in­ter­na­tional cor­po­rate giant by build­ing a global pres­ence, none of the other big banks is even close in terms of busi­ness scale or mar­ket share. The small and medium-sized ones can barely keep them­selves afloat.

Yuan trade is a new growth point in Hong Kong’s bank­ing in­dus­try but ren­minbi use is still very lim­ited in the city, partly be­cause it is not freely con­vert­ible, un­like the HK dol­lar, and the ren­minbi cir­cu­lat­ing in Hong Kong are not al­lowed to flow back to the main­land at will. That is why none of the lo­cal banks has been able to rely mainly on yuan trade for busi­ness growth.

All said, Hong Kong must speed up its trans­for­ma­tion into a knowl­edgein­ten­sive econ­omy if it wants to cre­ate new cor­po­rate giants. And it must not limit its sights to within its own bound­aries. In this re­spect Li’s Hutchi­son has set a wor­thy ex­am­ple in go­ing in­ter­na­tional. How­ever, amid the pro­found ground shift hap­pen­ing to the global eco­nomic, fi­nan­cial and po­lit­i­cal sta­tus quo, Hong Kong must be mind­ful of the tim­ing and direction of ev­ery step it takes.

Pres­i­dent Xi Jin­ping said in his speech at the cer­e­mony mark­ing the 20th an­niver­sary of the es­tab­lish­ment of the Hong Kong Spe­cial Ad­min­is­tra­tive Re­gion on July 1: “The na­tion’s sus­tained fast de­vel­op­ment in re­cent years has of­fered Hong Kong numerous op­por­tu­ni­ties, in­ex­haustible power and im­mense space for its own de­vel­op­ment.” The central gov­ern­ment sup­ports Hong Kong in par­tic­i­pat­ing in the Belt and Road Ini­tia­tive and de­vel­op­ment of the Guang­dong-Hong Kong-Ma­cao Greater Bay Area city clus­ter. Hong Kong has no ex­cuse not to take ad­van­tage of those op­por­tu­ni­ties to ad­vance its eco­nomic trans­for­ma­tion and nur­ture new in­ter­na­tional cor­po­rate giants.

Hong Kong’s ex­ist­ing big real-es­tate de­vel­op­ers should take this op­por­tu­nity to di­ver­sify their busi­ness scope sooner rather than later, or Hong Kong’s in­evitable trans­for­ma­tion into a knowl­edge-driven econ­omy will force them to choose be­tween rein­vent­ing them­selves and fall­ing by the way­side.

In the fore­see­able fu­ture, new means of growth such as ar­ti­fi­cial in­tel­li­gence, fin­tech and In­ter­net Plus will rev­o­lu­tion­ize busi­ness op­er­a­tions as well as peo­ple’s daily lives, re­sult­ing in the emer­gence of new jobs at the ex­pense of tra­di­tional ones and even en­ter­prises not big enough to sur­vive. Ei­ther through merg­ers and ac­qui­si­tions or clo­sures, Hong Kong’s cor­po­rate land­scape will change in the years to come.

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