Officials in China's new economic zones are hoping cheap warehousing and hassle-free customs procedures will encourage logistics and storage firms supplying Hong Kong's domestic market to relocate to the Pearl River Delta. But not many firms seem interested in moving.

Last year the central government announced plans to establish three development zones in Nansha, Hengqin and Qianhai along the Pearl River, part of a wider effort to develop and integrate southern mainland China, Hong Kong and Macau into a single economic hub.

Initiatives including preferential tax treatment and liberalised financial reforms were pitched as incentives to lure business. Another idea is to create a seamless customs zone connecting Hong Kong to bonded warehouses and free-trade port areas in the delta.

Oriental Logistics managing director Gilbert Lau said limited warehouse space had contributed to rents doubling in recent years, forcing up consumer prices and pushing logistics operators further into the New Territories. High-value items including branded products, chemicals, and raw materials are stored in more expensive godown centres like Kwai Chung or Kowloon East, while lower margin products are housed in Yuen Long or Tuen Mun. Oriental Logistics owns and rents warehouse space in Hong Kong, but there is not enough capacity to meet demand, Lau said.

 

* This article appeared in the South China Morning Post print edition as Logistics firms wary despite lures