Economic forces shaping the evolution of integrated port systems - The case of the container port system of China's Pearl River Delta

We investigate the evolution of the container port system of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), better known as Pearl River Delta (PRD). We analyze the economic drivers that over the years have shaped port development in one of the world's most dynamic regions, embracing three of the world's busiest container ports: Shenzhen, Hong Kong and Guangzhou. Three industry concentration methodologies are employed, each with its own distinct advantages: Concentration Ratios; the Herfindahl-Hirschman Index; and Dynamic Shift-Share Analysis (DSSA). Especially through the latter methodology, DSSA, -used here for the first time in the analysis of the evolution of ‘port systems’- we explain not only the shifts in market shares among the three ‘giants’, but also the underlying economic forces responsible for these shifts and for the relocation of economic activity in the hinterlands of those ports. We analyze the foreland and hinterland strategies of the ports, pursued as a result of rising inter-port competition and fuzzy, intertwined, hinterlands. The paper argues for the need of a more system-wide coordination and collaboration among ports, aiming to avoid overcapacity; duplication of scarce resources; low return on investment and, in general, wasteful competition. It is hoped that our analysis and ensuing recommendations will help other countries, port policymakers and stakeholders, to better understand, and thus exploit, the economic levers which shape the evolution of ports in proximity.