Impact of cabotage relaxation in mainland China on the transshipment hub of Hong Kong

Hong Kong has benefited from China’s cabotage rule, as foreign ships loading at a Chinese port can transit to Hong Kong and then call at another Chinese port. However, in 2013, China’s cabotage policy was relaxed in Shanghai—whereby China-owned, foreign-flagged vessels are allowed to operate out of Shanghai to other coastal ports of China. In this paper, we examine the potential loss of transshipment traffic in Hong Kong due to cabotage relaxation. Via a transshipment model and based on secondary data, we are able to derive a potential loss to Hong Kong’s throughput, on the order of 14%. This effect is not unique to Hong Kong: in general, in other parts of the world, there are also maritime hubs located near the coastal ports of other countries, and the effects of cabotage relaxation are similar. From a regional collaboration perspective, such as that of the Belt and Road Initiative, it is essential for different governments to review their cabotage policies together.