Business Investment opportunities in the GBA
Despite the global COVID-19 economic crisis and the ongoing trade tensions with the United States, China’s Greater Bay Area (GBA) continues to grow and offer interesting business investment opportunities for foreign companies and professionals.
With a combined population of over 70 million and GDP of USD 1.4 trillion, the GBA is well-positioned to play a leading role in advanced manufacturing, technology and innovation, shipping, trade and finance. The increased connectivity and integration of the GBA will also enhance the movement of goods and services, capital, people and information within the region.
These competitive advantages provide significant opportunities for businesses that are looking to enter or grow their existing presence in China.
The GBA represents a collaborative initiative to economically and socially integrate the nine cities in Guangdong’s Pearl River Delta, as well as Hong Kong and Macao, to create a unified, connected and competitive bay area, rivaling New York, San Francisco and Tokyo.
The cities within the GBA include Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen, Zhaoqing, Hong Kong and Macao.
A key focus of the GBA is the transformation of the region into an innovation and technology hub. This offers numerous opportunities for businesses, innovators and other key stakeholders to develop and test their ideas, nurture technology talent, forge strategic partnerships and drive innovative growth.
According to a survey by the Hong Kong General Chamber of Commerce (HKGCC) that included answers from 747 business executives in mainland China, Hong Kong and Macao, across a wide range of industries, over half of them indicated that they have plans to expand geographically into this region by 2022.
Gaining access to the GBA market of more than 70 million is a key motivation for companies to invest in the area. Other attractions include getting closer to business partners/customers, access to talent, lower costs and better transport infrastructure.
Four fifths of executives polled expect the GBA’s economy to grow faster than the rest of mainland China within the next three years, while almost six in 10 (56 percent) of respondents expect their revenue in the GBA to rise by at least 20 percent within the next three years.
The development of the GBA into an ideal place for living, working and travelling is also a key priority. This involves the creation and enhancement of new and existing lifestyle facilities around sports and recreation, arts and culture, tourism and hospitality, which is expected to attract high levels of private sector participation.
According to experts, technology and innovation may be the sectors that benefit the most but opportunities in other areas will increase as the region expands and disposable income grows. The clustering of talent, capital and industries will drive high value-added productions and business developments.
Financial services are considered the second major beneficiary. The trade and logistics sector completes the top three industries expected to benefit most from the initiative.
The cities in the GBA offer a diverse range of skills and services and leverage their comparative advantages to create significant and comprehensive business opportunities.
The region draws on a strong manufacturing base in Dongguan, Guangzhou and Foshan, Shenzhen’s advanced manufacturing, IT, technology and innovation strengths, and Macao’s status as a global tourism and leisure center.
This is supported by Hong Kong’s role as an international finance, transportation and trade center, as well as an asset management and global offshore RMB hub. In addition, Hong Kong’s professional and financial services community represents a diverse talent pool of resources with international experience.
The rapid wealth accumulation in Mainland China, especially in the GBA, and the fact that many residents in this area remain underserved by the wealth management industry pointed to vast cross-border investment opportunities not just for investors in the GBA but also for global investors.
The Wealth Management Connect pilot scheme for the GBA, announced in June this year, has allowed investors to make better sense of what the ‘Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area’ means after it was announced in February 2019, reported Bloomberg.
The Wealth Management Connect pilot scheme will be jointly implemented by the People’s Bank of China, and the monetary authorities of Hong Kong and Macau.
PBOC, HKMA and AMCM (Monetary Authority of Macau) are expected to introduce measures to enhance cooperation and facilitate coordination to ensure investor protection. Long-term financial risk management mechanisms would also need to be in place to address issues such as compliance, liquidity and cross-border risks.
Wealth Management Connect will start with pilot programs, a common practice for new financial infrastructure being rolled out in China.
According to the rules, outbound investors should be residents registered in the nine mainland cities comprising the GBA via the household registration system (the hukou system).
They should have more than two years of experience in investment before accessing the Hong Kong and Macao markets through Wealth Management Connect. The net financial assets of the family of a qualified investor should exceed 1 million yuan over the past three months, or financial assets with a monthly balance of more than 2 million yuan.
The qualifications of northbound investors will be verified by the qualified banks in Hong Kong and Macao, according to the draft rules.
Wealth Management Connect provides convenience for high-net-worth individuals in the GBA to invest in cross-border products, while Hong Kong investors will benefit from a more diversified spectrum of investment products, especially in terms of RMB asset allocation.
Freddy Wong, Head of Asia Pacific, Fixed Income, Invesco, said investors and solution providers with global footprints will be in a better position to take advantage of the GBA opportunities. Aside the financial services sector, the technology sector also offers immense opportunities.
With four out of the five wealthiest persons in China residing in the GBA, that highlighted the wealth creation effect within the area, Wong said. “That opens up a very good channel for asset managers to look into the opportunities,” he said.
Experts agree that despite the regulatory differences that still exist, companies should not delay entering the GBA market. Instead, they should proactively identify the key tax policies and incentives that impact their industry, as well as look at the key development priorities of each city within the GBA, so that they can select the one that best fits their profile.
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DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.