Cooperation or competition? Factors and conditions affecting regional port governance in South China

Hong Kong is an international port heavily influenced by the active non-interventionist policy and, until very recently, segregated from China's national/regional planning due to its special political and economic status. However, the port is now facing considerable challenges, notably increased trade between China and overseas markets, challenges from neighbouring ports, notably Shenzhen and Guangzhou, the increasing importance of intra-Asian trade and the economic turmoil in 2008, which accelerated the industrial transformation of the Pearl River Delta (PRD) in South China. Hence, Hong Kong is compelled to undergo strategic changes, notably its gradual integration into China's national and regional planning, and to integrate itself within the PRD so as to establish a system with different PRD ports that is functionally complementary to each other. How such a newly developed regional port cluster should develop, notably the division of responsibilities of cargo flows between Hong Kong and other PRD ports, however, is still rather ambiguous. By developing a game theory model and calibrated on the basis of the PRD context, this article investigates the factors and conditions affecting regional port governance in South China, notably alliance formation for ports serving partially overlapping hinterlands. This article serves as an important step in developing an effective, fully integrated regional transportation system within the PRD, and to help it to become an efficient logistics hub in the Asia-Pacific region.