HONG Kong could lose out on the transshipment of 2.4 million TEU annually in the non-Pearl River Delta region if the mainland goes ahead with a full relaxation in its laws prohibiting foreign-flagged vessels from moving cargo from one mainland coastal port to another. 

The move could deal a serious blow to Hong Kong's container freight industry, according to the highly influential Hang Seng Management College (HSMC), the South China Morning Post reported.

It claims in a new report that in the worst-case scenario, Hong Kong could lose all transshipment rights in the non-Pearl River Delta region, which could translate into a loss of 2.4 million TEU, or a 14 per cent loss of the city's annual total container throughput.

China's rules were waived for Hong Kong as it was considered a foreign port for these purposes.

The relaxation of the transportation rules, commonly called cabotage in the industry, started in 2013. Up until then Hong Kong was seen as the most convenient place for foreign ships to transit goods into Asia, but the new rules now provides them a lot more choice.

China launched the Shanghai Pilot Free Trade Zone in 2013, and has gradually relaxed the cabotage restrictions within the zone since, meaning foreign-flagged but Chinese-owned ships can now engage in domestic shipping.

Meanwhile, coastal ports such as Qingdao, Ningbo and Guangzhou have been lobbying hard for a relaxation of their own cabotage rules on foreign vessels.

At the same time, the Nansha Free Trade Zone in Guangdong province, is progressively introducing measures to promote transshipment trade.

"Mainland China's cabotage relaxation is weakening Hong Kong's status of being a key transshipment hub in the region, and creating uncertainty for the local jobs market and economy," warned Lawrence Leung, dean of HSMC's school of decision sciences.

"Any further relaxation will very likely lead to vicious competition among coastal ports such as Shenzhen, Ningbo and Shanghai and the business of Chinese-owned shipping companies will unavoidably suffer."

Before 2013, only vessels hoisting Chinese flags were allowed to conduct coastal shipping of cargo between Chinese mainland ports, according to Chinese Maritime law.

However, China's relaxation of the rules means Hong Kong's status of being a transit hub is shrinking.

Hong Kong's container port ranked number fifth globally, according to 2015 throughput, but Mr Leung now fears it will drop to ninth place in the foreseeabe future.