Flights of fantasy?

Guangdong province can rightly make some pretty bold claims. It accounts for one third of China's exports and it is top producer of all sorts of household appliances, including 70% of the world's electric kettles.

Move downriver from the heartland centers near Guangzhou, towards the fringes of the Pearl River delta – to Shenzhen, across the border from Hong Kong – and a visitor might reasonably surmise from all the signs and logos that the province also accounts for a rising portion of the world's packaged semiconductors: not the big, round wafers, but the rectangular chips sliced from the wafer and encased in connectors.

Getting a handle on the province's industrial geography provides a useful starting point for judging how well Guangzhou's just-opened new airport will fare as a transshipment hub – and figuring out whether it is tea kettles or semiconductors that travel by air.

With the opening of Baiyun International Airport in early August, Guangzhou joined Shanghai-Pudong and Beijing as an official member of China's exclusive hub club, immediately putting Hong Kong International Airport on notice that its standing as the world's biggest air cargo port could be numbered.

The US$2.4-billion Baiyun International, at six square miles China's largest airport in land area, can handle 25 million passengers and one million tonnes of cargo a year, effective immediately. But its potential for growth is the stuff of shock and awe: its huge land bank means that the airport can accommodate up to five runways, potentially making the Pearl River Delta one of the world's most crowded little air pockets – counting in airports at Macau, Zhuhai, Shenzhen and Hong Kong.

Built to the limit, Guangzhou could potentially handle an annual flow of 80 million passengers and three million tonnes of cargo.

Hong Kong for a fleeting moment entertained the idea of joining forces with Shenzhen when it was exploring new airport options, but decided instead on leveling a mountain and using the rubble to reclaim several hundred acres of sea to build its Chek Lap Kok (CLK) airport – an undertaking that, combined with rail, highway and bridge links, became at the time the world's largest infrastructure project.

Hong Kong may one day wish it had taken the Shenzhen option because further reclamation for even a third runway would be a forbidding proposition. On the other hand, the city's old airport hands never bothered themselves about space, having built the second busiest cargo port in the world (after New York Kennedy) at the old Kai Tak site in a tiny corner off one of the world's tiniest aprons. It is efficiency where Hong Kong tends to be without peer – a claim that is about to be tested.

Hong Kong's airport, 50 or so miles south of Baiyun International, already handles three million tonnes a year, more freight than any other airport in the world at the moment. But Hong Kong Airport Authority Chief Executive David Pang conceded both CLK and Baiyun International will end up going head to head for cargo – especially given that 80% of current CLK cargo originates in Guangdong.

The fact that Guangdong goods transiting Hong Kong now account for more than a quarter of its external trade (which is overwhelmingly re-exports from the Mainland) suggests that the pressure on Chek Lap Kok to be creative will be severe. The immediate worry for Hong Kong is what plans the UPS's, FedEx's and other big brand couriers have with regard to Baiyun and whether they build full-fledged hubs there. For his part, Leung Kwok-kee, UPS' general manager for Hong Kong and Macau, told Agence France- Presse that Hong Kong cannot handle cargo growth alone and that the new Guangzhou facilities are needed.

Logistics people who favor Hong Kong point to its traditional advantages and say the city's no-fuss low tax and tariff regime and easy global connections will ensure its preeminence. Chek Lap Kok has tended to charge top dollar for extending these privileges but has shown it can drop prices when the market demands it – most recently by lowering landing fees for some carriers.

Oddly enough, Shenzhen Airport, which recently opened a second huge passenger terminal, has so far rated not a mention in stories about how Baiyun could tip the competitive balance one way or another. In February, Shenzhen's municipal government was in talks with the Hong Kong Airport Authority in hopes it would come in as a strategic investor as the city moves ahead with plans to shed holdings in a range of transport- related assets.

Though nothing has been signed to date, Baiyun International's opening could conceivably sharpen Hong Kong's focus on the possibilities – an ironic twist in the Shenzhen- Hong Kong relationship, given the joint development plans both sides briefly kicked around.

But before setting the flag at half staff for Hong Kong, consider that, according to the Hong Kong Shippers' Council, China's 143 airports, in 2001, altogether handled 3.4 million tonnes of freight – hardly more than CLK alone handles now.

That said, China's aviation sector is in for big changes. By 2020, according to a study by MIT Aeronautics and Astronautics researchers, air cargo traffic in China will expand more than sevenfold. Mainland-based airlines, which in 2002 carried 39% of all international cargo, are projected to take a growing share of the overseas market. And foreign investors can now take a larger part in that bonanza: since the rules were changed in 2002, the allowable shareholding limit for foreigners was raised from 35% to 49%.