Hong Kong has become one of Asia’s strongest economies, expanding by more than 7 percent annually in the past two years with help from robust exports, including re-exports of Chinese goods.

Air cargo through the city is expanding as a result. But growth in sea trade has diminished because the cost of shipping a 40-foot container through expanding ports in southern China, including trucking, is US$ 200 less than through Hong Kong.

The city’s share of southern Chinese ports’ trade with Europe and countries across the Pacific slumped to 40 percent last year from 75 percent in 2000, according to consultants Mc-Kinsey & Co, and Hong Kong lost its place as the world’s busiest container port to Singapore.

"The withering away of our seaport trade is weakening Hong Kong’s position as a supply chain management center," said Robin Chiu, director-general of the Federation of Hong Kong Industries.

Chief Secretary Rafael Hui warned last month that Hong Kong risked being marginalized by the development of ports and other infrastructure in southern China’s Pearl River Delta, a view underscored by tycoon Li Ka-shing, head of Hong Kong conglomerate Hutchison Whampoa .

The loss of sea trade highlights a broader dilemma: port operators like Hutchison Whampoa have little incentive to cut fees and draw business to Hong Kong because they are also major investors in rival ports like Yantian across the border.

McKinsey & Co estimates that a continued shift in trade to south China ports will put 183,000 jobs at risk and shave HK$ 97 billion (US$ 12 billion), or about 6 percent, off Hong Kong’s gross domestic product.

"The loss of 60,000 jobs adds 2 percent to unemployment," said Chiu. "That’s not easily replaceable."

To be sure, China’s rise has also helped create employment in some sectors until now.

Thousands of jobs have been generated by a flood of tourists from the mainland in the past two years as well as the city’s position as a global financial center at a time of massive fund-raising by mainland companies on the Hong Kong bourse.

But destinations worldwide are now opening up to the Chinese traveller and China’s capital markets will eventually develop.

Joseph Yam, chief executive of the Hong Kong Monetary Authority, the central bank, called last month for mainlanders to be allowed to invest in Chinese companies listed in Hong Kong to mobilise Chinese savings and keep business flowing to the city.

Tse Kwok Leung, an economist at BOC (Hong Kong), doesn’t think the city’s role as a financial centre is at risk for now.

"China needs a market that has corporate governance and can help Chinese companies to develop like multinationals," he said.

"But Hong Kong needs to change its business model. It needs to more aggressively attract mainland companies to set up value-added operations here."

Chinese Premier Wen Jiabao was quoted this week as saying Hong Kong would not be marginalised by China’s development, but the signs of growing rivalry are many and varied.

Analysts said officials in southern China with their own interests at heart were delaying talks with Hong Kong on speeding up clearance for truckers at the border. And they have been slow to move on plans for a bridge to link Hong Kong with Zhuhai in south China, which would bring business to the city.

Competition is even impinging on cultural matters. Chinese officials criticised the Hong Kong Philharmonic Orchestra recently for poaching mainland musicians. Higher salaries in the territory disrupted the mainland market for musicians, they said.

Even the air that Hong Kongers breathe is suffering from China’s rise and tarnishing the city’s appeal to the expatriates that help keep the financial and other sectors running.

Industrial development in southern China has created severe pollution in the city and that played a big part in pushing Hong Kong down to 32nd place in a recent ranking of desirable postings by consultancy ECA International. Last year it was 20th.

Eden Woon, chief executive of the Hong Kong General Chamber of Commerce, said Hong Kong could stay ahead of Chinese cities if it improved the level of English spoken, internationalised its education system and attracted more foreign talent.

"The Chinese are getting better every day in terms of global connections so we need to improve ourselves," he said.