The sheer scale of the plan makes it one of the world’s most important strategic economic initiatives, says Hongkong and Shanghai Banking Corporation Chief Executive Peter Wong.
Once, it was a rural backwater. Then, it became the factory floor of the world. Now, the area around the mouth of the Pearl River is at the epicenter of China’s shift towards high-tech and innovative manufacturing and services, and ranks among the most economically vibrant areas in China – if not the world.
The Pearl River Delta’s transformation has been four decades in the making. Now, the Greater Bay Area development framework starts the next chapter of the story.
Announced by the Chinese government in February, the plan is ambitious and sweeping. It spans nine cities in the Pearl River Delta, plus neighboring Hong Kong and Macau, special administrative regions that have their own judicial, regulatory and financial systems. By proposing to boost economic links between these cities, it aims to shift what is already a regional economic dynamo up a gear.
The size of the region means the plan amounts to one of the most important economic integration initiatives in the world. Its economy, for one, is already similar in size to Canada’s. The Pearl River Delta alone generated US$1.1 trillion of GDP in 2017; the number rises to US$1.5 trillion when Hong Kong and Macau are included. The GBA’s population of almost 70 million is larger than the UK’s. Its relative affluence (per capita GDP is well above the national average) makes it an enormous consumer market in its own right.
So companies around the world should take note. Whether you are a German car-parts maker, an Australian retailer, or a Swiss company seeking to source from, sell to or manufacture in China, your operations – or those of your suppliers and business partners – are already likely to be directly or indirectly connected to this economic area.
Greater connectivity and improved harmonization of regulations – core tenets of the new GBA blueprint – will only make it easier to do business and seize new opportunities within the region.
The various jurisdictions involved will begin to smooth out labor-market and residency policies, environmental protection, regulatory standards, visa requirements, for example, and seek ways to coordinate infrastructure networks and smart-city development.
Progress is already being made in the area of taxation, with certain professionals from Hong Kong recently being offered tax subsidies to work in Guangdong cities. We are also starting to see targeted capital account liberalization that makes it easier for Hong Kong residents to set up bank accounts in Mainland China and make payments for household expenses. Such measures will allow for much more fluid movement throughout the GBA.
The Greater Bay Area is special. Perhaps nowhere else in the world can rapidly evolving high-tech manufacturing capabilities, a huge consumer base and talent pool, and an international financing and logistics hub be found in such close proximity.
In Shenzhen, Guangzhou and other Pearl River Delta cities, the made-for-export manufacturing of low-end garments or toys for which the region was once famous has rapidly given way to gleaming factories and design centers that can turn out anything from advanced electronics and clean energy systems to battery technologies and aerial drones.
Macau has grown into an international tourism and leisure center, and can act as a platform for trade with Portuguese-speaking countries such as Brazil.
Hong Kong’s contribution to the mix is providing the capital, education and research, entrepreneurial know-how and international connectivity that is crucial to companies in the neighboring Mainland. As a global financial center, the city can also help bring international standards of business, innovation, entrepreneurship and even quality of life to the rest of the region.
It is also a tried-and-trusted gateway for businesses and investors heading the other way – from overseas into the Mainland – including through a pair of schemes that link its stock exchange with those in Shenzhen and Shanghai. As China’s currency becomes more widely used overseas for trade and investment, Hong Kong and the GBA will be at the cutting edge of further measures to liberalize capital flows between Mainland China and the rest of the world.
True, the GBA vision is a long-term one, and changes won’t come overnight. The blueprint foresees substantial coordination across the region by 2022, paving the way for it to become an internationally competitive, efficient and innovative economic hub by 2035.
Still, the fact that the different cities’ complementary strengths have been building connections within the region for decades means that the new GBA blueprint builds on solid foundations.
Businesses in the region already see the potential. A survey conducted by HSBC, KPMG and the Hong Kong General Chamber of Commerce last year found that nearly 80 percent of executives operating in the region expect it to grow faster than the rest of China over the next three years.
Companies that are not already there might want to join them in taking a closer look.