Ties That Bind - Bay Area Council Economic Institute

Bay Area-China Trade: Behind the Numbers
agreement that will strengthen its role as a national and international service base, United will
also perform maintenance on Chinese carrier Air China’s Boeing 747 and 777 engines at it’s SFO
maintenance facility. Cathay Pacific and Singapore Airlines also provide non-stop service from
SFO to Hong Kong, and Taiwan carriers China Airlines and EVA airlines both provide direct
service to Taipei.
While shipments through Bay Area ports generally involve heavier, lower value products, air
shipments are generally lighter weight, higher value products. In 2005, SFO handled close to
227,000 metric tons of air freight and mail moving to and from Asia. More than 671,000 total
metric tons of air cargo moved through OAK, most of it via integrators, with no breakdown by
country available.
FedEx has made Oakland International Airport one of its six U.S. hubs since 1987, and currently
employs 1,700 workers at a 350,000-square foot facility that handles 250,000 packages
daily. With international shipment volume growing faster than domestic business, Oakland will
play a key role in the company’s growth in Asia. FedEx took an early lead in the fast-growing
international shipping business between Asia and the U.S., first with its purchase of Asian cargo
airline Flying Tigers in 1989, followed in 1995 by the acquisition of China air routes from Evergreen
International. FedEx expanded its China service from 23 to 26 weekly flights in early 2006
and has been awarded four more flights starting in March 2007. In December 2008 it will shift its
Asia hub from Subic Bay in the Philippines to a $150 million facility in Guangzhou, around the
time it completes a major Oakland expansion. FedEx currently has 3000 employees in China, a
number that will double upon the completion of its acquisition of FedEx joint venture partner
DTW Group.
Competitor UPS, which also serves Oakland, plans to open a Shanghai hub to serve China in
2007. Its Asia hub is slated to remain in the Philippines. Air cargo growth from China to the U.S.
is forecast to grow by an average 9.6% annually through 2025, as tech and other high-value business
shipments increase and as online and catalogue sales grow. U.S.-China traffic will also expand
as per capita incomes rise, China’s consumer markets develop and logistical infrastructure
extends inland.
Infrastructure—roads in particular—has historically been a major problem for logistics companies
like FedEx, which rely at the end of their service chains on ground delivery. The quality of
China’s road system is improving rapidly, however, with a 60% expansion in its highway network
in the last five years. Falling tariff barriers as China implements its WTO obligations can also be
expected to stimulate trade growth.
U.S. Census Bureau data offer a breakdown of airfreight imports and exports between the San
Francisco Customs District and greater China. Census reports that 2005 air cargo imports from
greater China totaled 59,026 metric tons with a value of $8.78 billion. Air exports to greater
China via Northern California gateways during 2005 amounted to 36,103 metric tons of air
freight, valued at $6.84 billion. Leading commodities by volume in both directions are
shown below:
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