The Miracle of the Pearl River Delta

"The Cantonese eat anything that swims, flies or has four legs, but not submarines, planes or tables," as a Chinese saying has it. And, admittedly,
for a european it’s nice to know of an American fastfood restaurant in the vicinity when the talk turns to steamed frogs’ legs or one thousand year-old eggs. But Cantonese cooking can shrug off any critical barb. Not for nothing does it enjoy an excellent reputation far beyond the national borders as China’s haut cuisine.

Guangzhou or Canton, Capital of Guangdong province in South China. Along the estuary of Pearl River navigable to the South China Sea, the City evolved from densely populated communities which grew into a major metropolitan area, blurring the onetime city boundaries. A vast conurbation profiting from its vicinity to Hong Kong and Macau, it has become one of China’s major industrial regions.

The upswing on Pearl River was sparked by China’s economic reforms at the end of the Seventies. At the time, the Chinese government set up four special economic zones in Shenzhen, Zhuhai, Xiamen and Shantou to encourage exports and invigorate foreign trade. "Those reforms fuelled unprecedented economic development in the four regions, drawing millions of rural workers into the cities on Pearl River," observes Phoebe Chan, Lufthansa Cargo Regional Manager South China. Low production costs attracted any number of foreign investors.

Today, the Pearl River Delta is one of the biggest production and exporting regions of China but anything other than a homogeneous market: Watches, phones, radios, electronic goods, toys, footwear and clothing are produced here in quantity and shipped to destinations around the globe. The airfreight business is mostly interested in the region’s exports of special cargo such as perishable goods, live fish or hazardous goods. The manufacture of valuables and luxury articles is also assuming growing importance in the region and "that’s to the benefit of our industry, since high-value goods are usually transported by air," says the Regional Manager.

Lufthansa Cargo commenced freighter services to Guangzhou in October 2004. The Pearl River Delta commands excellent logistics communications on land, sea and in the air, says Phoebe Chan. Links to the major airports and seaports have a crucial bearing on the region’s success. Meantime, Lufthansa Cargo has three MD-11 freighters in operation every week on the Frankfurt-Guangzhou route. Additional capacity is available on Lufthansa A340-300 passenger aircraft, which fly thrice-weekly to Guangzhou.

The provincial capital has emerged as a major hub in South China. Lufthansa Cargo was the first foreign cargo carrier to serve Guangzhou. "As a pioneer on the route, we were able to set down deep roots here and expand our market share," enthuses the Regional Manager.

Another major city with huge potential for the airfreight business is Shenzhen, where Lufthansa Cargo opened a sales office in October 2008. Defying difficult market conditions, the teams from Guangzhou and Shenzhen have built up business successfully. Lufthansa Cargo now flies from Shenzhen to Frankfurt, Amsterdam, Brescia and Barcelona. This service is operated jointly with the German-Chinese cargo carrier, Jade Cargo International, in which Lufthansa Cargo has a 25 per-cent stake.

Developments in the exporting business on the Pearl River Delta took a dramatic turn in 2009. The effect was scarcely less dramatic in the airfreight industry. Exports slumped drastically: "Thousands of small companies were suddenly swept away and millions of migrant workers returned to the land," Phoebe Chan recalls. Green shoots may be tentatively evident but the once booming industry in South China is still awaiting a real upturn. The provincial government in Guangdong has set its sights more on boosting domestic demand. The world’s biggest export fair staged in Guangzhou in spring and autumn was opened, for example, last year to domestic buyers for the first time.

Phoebe Chan and her teams in Guangzhou and Shenzhen are sure that the market will recover. Rates have returned to a healthy level which must be maintained. Despite the crisis and tough competition, both stations have retained their capacities: Last year, they transported around 22,000 tonnes of freight and load factors, the year round, hovered in the region of 90 per cent. Other airlines have scaled back their capacities or discontinued their services: AirFrance-KLM has withdrawn from Guangzhou and China Southern from Shenzhen. The major competitors for Lufthansa Cargo in South CHina are Korean Airlines, Cathay Pacific, Singapore Airlines, Emirates, Cargolux, Air China, Unitop und UPS.

Signs of competition easing can also be observed in Xiamen. The special economic zone is evolving into an important hub in eastern China. "With huge exports of computers, audio, video and electronic products as well as clothing, the region offers new market opportunities and we’re hoping to steer transports in the direction of Guangzhou and Shenzhen", explains a confident Phoebe Chan.

Opening up new markets is not confined to Asia and Europe. Lucrative options have come on board, for example, in South America and Africa, which have not been hit so severely by the crisis. Following an advertising campaign, the team has lifted the South America business by 140 per cent. The Regional Manager is optimistic for 2010: "We are strongly poised in the South China market and will further expand our market share. The pivotal challenge lies in keeping rates at a healthy level and that’s what we’re fighting for.