Total trade decreased by 2.6% to over HK$1,958bn in April 2008-March 2009, from HK$2,010bn in April 2007-March 2008.

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1 Industry Summaries Airfreight For the period under review, April 2008-March 2009, Hong Kong's air cargo total throughput was 3.4mn tonnes, a decrease of 10% over the April 2007-March 2008 total of 3.8mn tonnes. Total export cargo volume for April 2008-March 2009 decreased by 10.8%, to 2.2mn tonnes, while imports were down 8.6% to 1.3mn tonnes over the same period the previous year. In real value terms, domestic exports decreased by 21.5% to HK$26bn while imports decreased by 3.9% to HK$1,095bn in April 2008-March 2009 over April 2007-March Re-exports also decreased by 0.2% to HK$836bn in April 2007-March 2008 over the same period the previous year. down 0.3% compared to the same period in the previous year. Total exports decreased by 1.7% to HK$800bn in April 2008-March Imports by sea decreased by 4.4% to nearly HK$677bn in April 2008-March Hong Kong's total trade value for cargo transported by sea (1,477bn) in April 2008-March 2009 was 3.0% lower than cargo transported in April 2007-March Land haulage The value of goods transported by land in April 2008-March 2009 totalled HK1,859bn, a decrease of 2.2% over the total of HK$1,900bn recorded in April 2007-March Total exports decreased by 3.5% to HK$897bn from HK$930bn the previous year, while imports down 0.9% to HK$962bn from HK$970bn in April 2007-March Total trade decreased by 2.6% to over HK$1,958bn in April 2008-March 2009, from HK$2,010bn in April 2007-March Seafreight In 2008, the Hong Kong port's total container throughput continued its rise, recording a total of close to 24mn TEU handled, with 12mn TEU loaded and 12mn TEU discharged. In real value terms, Hong Kong's domestic sea exports decreased by 28.1%, from nearly HK$42bn in April 2007-March 2008, to nearly HK$30bn in April 2008-March Re-exports totalled HK$770bn, Hong Kong airport Hong Kong International Airport (HKIA) is located less than five flying hours from half of the world's population. It is the fourth busiest international passenger airport and operates the busiest international cargo facilities in the world, ranked no. 1 for international air cargo since Hong Kong s aviation industry faced challenges in 2009, just like the rest of the world. There were contractions in all three air traffic categories, which were due in large part to the global financial crisis that began in the latter part of The outbreak of H1N1 and the gradual increase 58

2 between China and Western economies, as well as the need to replenish inventories in the US and European markets, quickly led to surge in demand for air cargo transportation. Meanwhile, in December 2009, passenger traffic increased 3.4% to 4.18 million, which was mainly attributed to the 16% year-on-year growth in travel made by Hong Kong residents. Visitor numbers grew 4% while transfer/transit passengers declined 6%. The number of air traffic movements reached 24,225, representing a year-on-year drop of 2.1%. in the number of cross-strait direct flights also had negative effects on HKIA, according to the Airport Authority Hong Kong (AA). In addition, volatile fuel prices, yield erosion from significantly reduced demand in front-end business traffic, and low cargo yields for most of 2009 caused airlines to reduce frequencies and suspend services to destinations, which continued to result in financial losses. Improved performance in the fourth quarter of 2009 indicated that recovery was underway despite full-year contractions in passenger traffic, cargo volume and aircraft movements. In 2009, passenger traffic of 46.1 million was down 5.0% from the previous year; cargo volume stood at 3.35 million tonnes which was down 7.7% from 2008; while aircraft movement, at 279,505 was a decrease of 7.2% for the number of movements in In December 2009, cargo throughput saw a hefty increase of 35.5% from a year earlier, to 330,000 tonnes. Recovery in foreign trade Across-the-board improvements in air traffic figures for the last quarter, according to the AA, especially in comparison with the first three quarters, indicate that business is gradually flowing back to HKIA. Airlines have also been increasing or restoring flight frequencies that had been previously suspended. Year-on-year percentage changes in air traffic figures are as follows: 2009 Passenger traffic Cargo tonnage Air traffic movements Q1-7.1% -22.9% -6.7% Q2-9.2% -17.1% -8.8% Q3-3.5% -5.9% -8.2% Q4-0.2% +16.2% -5.1% Air Traffic Performance for 2009: Full-year figure Y-O-Y percentage change Passenger traffic 46.1 million -5.0% Cargo tonnage 3.35 million tonnes -7.7% Air traffic movements 279, % 59

3 Hong Kong Air cargo hub Hong Kong International Airport serves as a hub for the Chinese Mainland s manufacturing centres. Hong Kong has the following advantages as an air cargo hub: Free port policy Strategic geographic location Excellent connectivity and accessibility Extensive IT application High safety and security Sufficient cargo capacity Efficient cargo operation Competitive costs As a gateway to China, the HKIA is complemented with an integrated, multi-modal transport network with the Mainland, especially the PRD. Some 400 coach trips a day link HKIA with 95 PRD cities and towns. Passengers looking for point-to-point transport services can use the cross-boundary limousine to get to your PRD destinations directly. The SkyPier cross-boundary ferry service connects passengers between the PRD and international destinations via HKIA, without going through immigration and customs formalities in Hong Kong. Eight PRD ports Shenzhen, Shekou and Fuyong, Guangzhou Nansha, Dongguan, Zhongshan, Zhuhai and Macau's Maritime Ferry Terminal and Taipa currently offer these speedy cross-boundary arrangements. Passengers can even pre-check their baggage and obtain their boarding pass at Shekou, Macau, Fuyong and Dongguan Humen, and Macau's Maritime Ferry Terminal. One of Hong Kong s advantages as a hub is its Free Port status, and a fast and efficient Customs process. The Hong Kong airport expedites clearance by providing integrated Electronic Data Interchange (EDI) linkage between the seven major air cargo operators and the Customs & Excise Department (C&ED). Benefits include: Allowing pre-arrival Customs clearance, covering all types of cargo down to house airway bill level; Providing a priority consignments facility and automatic assignment of default constraint codes; and Enabling authorized service providers to provide cross boundary bonded truck services to Mainland China. Meanwhile, the five Pearl River Delta airports have formed the A5 Forum with cooperations such as flight diversions and emergency support. The A5 are the Guangzhou Baiyun International Airport, Shenzhen Baoan International Airport, Macau International Airport, Zhuhai Airport and Hong Kong International Airport. HKIA Opened in July 1998, the Hong Kong International Airport links to over 150 destinations through some 90 airlines operating flights to 150 destinations worldwide, including about 40 Mainland Chinese cities. The airport is spread over 1,255 hectares. There are two terminals, 1 and 2, and two runways, the South and North, with 3,800m length. Some 90 international airlines operating 5,700 scheduled passenger and all-cargo flights weekly between Hong Kong and 150 destinations worldwide. About 70% of these flights are with wide-bodied jets. There are also an average of about 84 non-scheduled passenger and cargo flights weekly. 60

4 The airport is 24 hours operational. On the passenger apron, there are 49 frontal stands, and 33 remote stands aircraft parking bays and 24 stands on the cargo apron. In January, the HKIA launched two new facilities: the SkyPier, a new cross-boundary ferry terminal; and the North Satellite Concourse, which is equipped with 10 bridge-served parking stands for narrow-bodied aircraft. The SkyPier conveys passengers travelling between the Pearl River Delta and the world via HKIA, while the North Satellite Concourse enables about 98% of the passengers to embark and disembark airplanes in an indoor, weatherproof environment. Since its opening in 1998, the airport has continued to support growth through infrastructure expansion and the addition of logistics facilities. To ensure optimization of land-use efficiency and enable economy of scale for airport support and related cargo services, the air cargo facilities at HKIA are franchised to third party service providers. throughput cycle time has been further reduced from 12 minutes to just 7 minutes. Asia Airfreight Terminal (AAT) has a design capacity of 1.51 million tonnes of cargo per year (T1+T2). Total investment in the facility is in excess of HK$2.5 billion, and it is equipped with state-of-the-art fully automated cargo handling system. AAT occupies a total land area of about 8 hectares and a gross floor area of approximately 170,000 m2. The terminal is equipped with special cargo handling facilities strong / cold rooms, freezers, dangerous goods room, radioactive room. Among its products, AAT offers CHINALINK, a one-stop cargo service to/from the PRD. It has been awarded with Technology Asset Protection Association Certification (TAPA). DHL express company s Central Asia SuperHub at the HKIA opened for operation in 2000 with a US$110 million investment. Two years ago, DHl decided to advance the scheduled expansion of the CAH by five years it was originally scheduled for In September 2008, DHL announced the completion of its US$110 million CAH expansion. With a total investment of US$210 million, the facility is the first largescale automated Express hub in Asia Pacific and significantly boosts DHL s operational capability in Asia. The Central Asia Hub has doubled in size to 35,000 sqm and is expected to handle 40 million shipments this year. With the expansion, the highly sophisticated and automated facility has a throughput of 75,000 pieces per hour (pph) of flyers and conveyable shipments, an increase of 114% compared to the 35,000 pph throughput capacity before the expansion. With the automation, the 61

5 Hong Kong Air Cargo Terminals (HACTL) is the largest air cargo handling facility at the airport, handling about 85% of the entire cargo throughput. It has a design capacity of 2.6 million tonnes per year. Total investment in the facility is in excess of HK$8 billion. It is equipped with a state-of-theart automated cargo handling system and other special cargo handling facilities- perishable/ livestock/ horse/ valuable cargo handling centres, refrigerated and dangerous goods cargo centres, express centre. HACTL is spread over a total land area of about 17 hectares and a gross floor area of about 330,000m2. SuperTerminal 1 is the world s largest stand-alone air cargo handling facility. Its products include SuperLink China Direct, a one-stop cargo service to/from PRD. It has been awarded Technology Asset Protection Association Certification (TAPA). In March 2008, the Board of AAHK awarded a non-exclusive, 20-year franchise to Cathay Pacific Services Ltd, a wholly owned subsidiary of Cathay Pacific Airways Ltd, to operate a new cargo terminal at the airport. The facility was originally scheduled for opening in the second half of In January 2009, the Board accepted a proposal from Cathay Pacific Services to defer the completion of the new cargo terminal by a maximum of 24 months to mid The two parties signed a supplemental agreement under which Cathay Pacific Services will compensate the Airport Authority for the deferral. The amount of compensation is deemed to be fair and reasonable, having duly considered the contractual terms and conditions of the franchise. The new terminal will have a design capacity of 2.6 million tonnes per annum, with an investment of around HK$4.8 billion. It will be over a land area of about 10 hectares, and be equipped with state-of-the-art handling system. Other facilities at the airport include the Air Mail Centre operated by Hongkong Post. It occupies a total land area of about 2 hectares and handles about 700,000 items of mail per day. Second tier cargo handling facilities include the Marine Cargo Terminal (MCT) operated by Chu Kong Air-Sea Union Transportation Co. Ltd, which provides one-stop multimodal service links with 17 PRD ports. The round-the clock facility has a capacity of handling 150,000 tonnes of cargo per year. It offers a 450m quay for berthing vessels. The Airport Freight Forwarding Centre (AFFC) is a cargo warehousing and logistics facility, enabling freight forwarders to undertake consolidation and distribution at the airport. It occupies a total land area of approximately 6 hectares (including landing platforms and truck parking bays) and a gross floor area of about 139,000 m 2. Tradeport Logistic Centre is another franchise that is operated by Tradeport Hong Kong Ltd. It provides customised logistics services such as inventory management, order processing and postponement assembly. It occupies a total land area of approximately 1.4 hectares and a gross floor area of about 31,000 m 2. The Airport Authority launched an airfield and terminal enhancement programme of HK$4.5 billion in The authority also plans to complete upgrading its baggage-handling system and consolidate the two arrival immigration halls into one single, spacious area in the near 62

6 future. The entire near term programme will be concluded by Hong Kong port Preliminary figures show that million TEUs were handled at the Hong Kong port in 2009, 14.6% less than in From 2000 to 2008, the Hong Kong port s container throughput had been in growth mode, with the number of ocean vessel arrivals in 2008 reaching nearly 36,000. These vessels call at the nine container terminals with 24 berths located in Kwai Chung and Tsing Yi that have a total terminal area of about 279 hectares which includes container yards and container freight stations. The nine container terminals have a total handling capacity of over 19 million TEUs. The main function of Hong Kong s excellent waterways has been to ensure the smooth flow of cargo between Hong Kong and the manufacturing centers in the PRD. The connections between Hong Kong and the Mainland, particularly the southern province of Guangdong are used by thousands of people daily, not to mention the millions of tonnes of goods that cross through the borders. The value of goods transported by land in totaled US$245 million, of which exports totalled US$120bn and imports US$125 bn. The construction of the Hong Kong-Zhuhai-Macao Bridge is called the mega bridge or mega bridge project. The US$4 billion structure will be 30 kilometres long and will be operational by 2015/16. This mega project is of strategic importance to the economic development of Hong Kong and the western Pearl River Delta. It will not only significantly reduce transportation costs and time for travelling on the road, but also stimulate economic integration between Hong Kong and the PRD as well as strengthen Hong Kong's position as the logistics, distribution and financial centre in the region. Shenzhen ports In the past decade, Shenzhen has seen the emergence of its own important ports that are seen not as competition to Hong Kong, but as complementary facilities. These container terminals are run by the same companies that own the container terminals in Hong Kong, or in joint venture with them. In 2009, preliminary figures show that the Shenzhen ports saw a total cargo throughput of 18.3 million TEUs, 14.8% less than in Shippers welcome the additional world class facilities in Shenzhen which are closer to the manufacturing areas, but the Hong Kong port s advantages are unparalleled. It is a free port with no import or export tax, sales tax or value-added tax. Only liquor, tobacco and automobiles are subject to tax. Shippers are required to complete export and import declarations 14 days after import or export. Cargo is never delayed due to Customs inspections. If you ensure delivery of your cargo on time for the shipping schedules, your container gets onboard. In Hong Kong, financial and insurance institutions abound, that provide protection for marine, air cargo and other supply chain risks. The Export Credit Insurance Corporation provides protection of non-payment risks to exporters arising from political and commercial events for exports of goods and services. And Hong Kong s legal system is very well defined and international legal practitioners provide extensive maritime insurance products Global financial institutions have supported trade in Hong Kong for centuries, and the territory is never wanting in products and services available to the smallest SME or the largest multinational corporation to ship goods, including marine insurance or trade financing. 63