The Impact and Spillover Effects of Chinese Ports on Urban Service Industry under De‐maritimization: A Perspective for Port Economic Geography Analysis

• Published date: 01 July 2022
• Author: Jiewei Li,Ruihua Zhu
• Date: 01 July 2022
• DOI: http://doi.org/10.1111/cwe.12427

©2022 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 31–59, Vol. 30, No. 4, 2022 31

*Jiewei Li, Associate Professor, School of Economics and Management, Shanghai Maritime University,

China. Email: ljwauten@163.com; Ruihua Zhu (corresponding author), Postgraduate Student, School of

Economics and Management, Shanghai Maritime University, China. Email: nicolaszrh@sina.com. This work

is supported by Shanghai Philosophy and Social Science Fund (No. 2018BJB008) and Liberal Arts and Social

Sciences Foundation of Ministry of Education in China (No. 21YJC790060).

The Impact and Spillover Effects of Chinese Ports on

Urban Service Industry under De-maritimization:

A Perspective for Port Economic Geography Analysis

Jiewei Li, Ruihua Zhu*

Abstract

Will ports become less important in a post-industrial period dominated by service

industries? This paper examines the impact and the spillover effects of ports on city

economies. The results show that ports contribute to city economies primarily through

producer and consumer services. To be specifi c, ports can drive the development of port-

related producer services, and port spillover effects from other cities have a broader

impact on producer services; the port contributes to the development of wholesale and

retail trades in the local city but the boost to consumer services comes mainly from

spillover effects from other ports. This paper concludes that ports are still shaping

economic geography by influencing the service sector, and inter-city coordination

mechanisms are suggested because of the spillover effects.

Keywords: economic geography, panel instrumental variables, ports, service industries,

spillover effects

JEL codes: O20, R40, R58

I. Introduction

Will ports become less important in a post-industrial period dominated by service

industries? Will the comparative advantage of coastal areas fade, especially under

China’s “dual-circulation” development pattern with an increasing share of tertiary

industry? Ports are usually regarded as the gateways to foreign trade and the engines

of national economies (Levinson, 2008; Bernhofen et al., 2016), but the impact of

ports on urban economies is controversial. The impact of ports on the urban economy

Jiewei Li, Ruihua Zhu / 31–59, Vol. 30, No. 4, 2022

©2022 Institute of World Economics and Politics, Chinese Academy of Social Sciences

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is diminishing (Ducruet and Lee, 2006), and there are even academic concerns about

“de-maritimization,” but research continues to find that ports are influencing urban

economies and shaping economic geography through a variety of channels (Ducruet and

Itoh, 2015). Using data from China, we fi nd that, except for Beijing, on average, cities

with larger ports have a higher concentration of service industries, especially producer

services. What is the reason for this? What are the mechanisms by which the ports affect

urban service industries?

The neglect of a port’s spillover effect on its hinterland has also given rise to

the contradiction between a port’s important function as a gateway and its observed

diminishing impact on the city. Most cargoes are transported to the hinterland, outside

the city, via ports, so investment in ports will benefit manufacturing industry in the

hinterland. Port-related services such as transportation, logistics, trade, and business

services in the hinterland, and other manufacturing-related services, will also benefit

from it. The infl uence of ports will therefore be underestimated if spillover effects are

not taken into account. Accordingly, if spillover effects of ports exist, it is necessary to

design cross-regional coordination mechanisms between port cities and the hinterland.

The research relevant to our investigation falls into three categories. The first

focuses on the impact of ports on urban economic growth and de-maritimization. There

are mainly three viewpoints about whether ports can contribute to the growth of regional

economies: First, ports are engines of economic growth, boosting trade and economic

growth, and the cities with ports gain a comparative advantage (Omiunu, 1989; Fujita

and Mori, 1996; Clark et al., 2004; Ferrari et al., 2006, 2010); Second, investment in

ports cannot contribute to regional economic growth, as it is only an induced demand

for the transportation of cargoes (Goss, 1990), especially when the port is far from

the core economic area (Stern and Hayuth, 1984); Third, port clusters and regional

economies develop separately but interact with each other (Langen and Visser, 2005;

Gao et al., 2010; Notteboom et al., 2013), and the mutual influence varies over time

(Ducruet, 2009). In recent years, however, economists have found that ports’ impact on

the corresponding port cities are on the decline. The impact of port logistics on urban

employment has begun to decline since 1990 (Ducruet and Lee, 2006). Port-related

employment has dropped dramatically in cities like Liverpool and Hamburg in recent

decades (Damesick, 1986; Gripaios, 1999; Ducruet, 2009). Academics attribute this

phenomenon of constant throughput but decreasing economic infl uence of a port on the

host city to “de-maritimization” (Bottasso et al., 2014). The main factors inducing de-

maritimization are as follows. First, containerization and the associated growth in the

average size of ships as well as port capitalization have increased port effi ciency but

reduced local labor requirements, and this process has been accelerated by the “hub-and-