Opportunities and challenges in the GBA
The Guangdong-Hong Kong-Macao Greater Bay Area (GBA), with its massive size and economic potential, will create unprecedented opportunities for a wide range for industries and sectors. However, despite the significant business opportunities, the GBA also faces challenges and uncertainties.
Composed of the two Special Administrative Regions (SARs) of Hong Kong and Macao and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing in Guangdong Province, the GBA covers an area of 56,500 km2, with a population of about 72 million people.
While the GBA is expected to create business opportunities across all sectors, experts believe that three main areas will benefit the most: technology and innovation, trade and logistics and financial services.
The GBA is a China policy initiative aimed at promoting closer cooperation and coordination between 11 cities of the Pearl River Delta among which, Hong Kong, Macao, Shenzhen, and Guangzhou would be their main centers.
The plan emerged in 2015, as part of the China Belt and Road Initiative. In 2016, it was isolated as a distinct project and included in China 13th Five-Year Plan for 2016-2020. On February 18th, 2019, the Chinese Government issued its Outline Development Plan for the GBA, which intends to guide current and future developments within an ecosystem integrated both physically and digitally.
With a total GDP of USD 1.56 trillion, the size of the GBA economy is close to Russia’s, larger than Australia’s, and just behind that of Korea.
Guangdong Province alone generates 14% of China national GDP; and the Pearl River Delta region is now the largest urban area in the world, overtaking Tokyo. The goal of the GBA initiative is to create a city cluster offering regional competitive advantages, rivaling with those of New York, San Francisco, or Tokyo.
The GBA brings unique opportunities for tech companies and aims to become a world-class center for innovation, science and technology, infrastructural connectivity, financial integration and social betterment with smart cities and an advanced manufacturing and IT powerhouse.
There are four important areas in which the Outline Development Plan intends to foster cooperation: Innovation & Technology, Infrastructural Connectivity, Financial Integration, and Social Betterment.
Regarding the first one, the idea is to develop the “Guangzhou-Shenzhen-Hong Kong-Macao” innovation and technology corridor and major carriers for innovation such as the Hong Kong-Shenzhen Innovation and Technology Park.
The second one would seek to connect the Mainland with Hong Kong and Macao, as well as connecting the east and west coasts of the Pearl River Delta and build a rapid inter-city transport network mainly focused on high-speed rails, inter-city railway and highways.
The financial integration would promote cross-boundary transactions of insurance products within the Greater Bay Area, establishing a mechanism for mutual access to capital and products, and support Mainland China, Hong Kong and Macao insurance institutions in developing cross-boundary RMB reinsurance business.
The area of social betterment is meant to support Hong Kong and Macao investors in setting up pension and other social services facilities through sole proprietorship, joint-venture, cooperation, etc. in the nine municipalities in accordance with regulations.
The GBA plan will offer Hong Kong the possibility of redefining its role as an international financial center. Thanks to its status as international connector, Hong Kong should naturally be able to promote the GBA initiative overseas and attract more capital and talents therein.
On the other hand, Hong Kong should take advantage of its financial leadership and of the opportunities offered by the 9 Mainland Chinese cities of the GBA in terms of market reach, industrial system, and technological developments.
The GBA has the potential to extend its reach beyond the Pearl River Delta region. In the longer term, it should be able to act as a catalyst for China’s broader Belt and Road Initiative, where Hong Kong should strengthen its role as a global offshore RMB center.
One of the challenges is cross-border payments and transfers of data, regional taxation, and regulations on foreign-direct investments. The example of data transfers illustrates the complexity of the issue: while Hong Kong regulations on data privacy try to draw a balance between the protection of individuals and the promotion of trade and economic developments, China Cybersecurity Law emphasizes the protection of national interest and security.
Thanks to the size and economic potential of the GBA, numerous sectors will see as well in increase of opportunities, such as infrastructure, construction, real estate, financial services, insurance, capital markets, and many others.
To fully take advantage of these opportunities, businesses should carefully evaluate the potential impacts of GBA integration and develop comprehensive business policies based on the connectivity of the area and flows of goods, talent, and resources within it.
The policy framework of the GBA is ambitious, dynamic, and subject to interpretation and negotiation by policy actors at different levels. Its progress is supported by a triple “I” strategy of integration, innovation, and internationalization.
The initiative aims to promote China’s two Special Administration Regions’ economic and cultural integration with the Chinese mainland under the “one country, two systems” framework. Deeper cooperation for Hong Kong, Macao, and the mainland will be mutually beneficial.
The GBA constitutes part of a nationwide regional development strategy framework to build an innovation economy. China will pursue a structural rebalancing from a labor intensive, low investment, export-oriented economy to a high-tech manufacturing, and service-based economy that relies more on domestic consumption.
Thanks to the GBA’s leading industries in manufacturing, financial services, and technological innovation, the region represents a new momentum for China’s economic growth, a new channel for it to be engaged with the global economy and thereby a new engine for China’s economic growth.
The GBA also serves as a catalyst for promoting China’s economic internationalization. The 19th National Congress of the Communist Party of China stressed that “Openness brings progress, while self-seclusion leaves one behind”.
As the most open region to the outside world, the Greater Bay Area has an advantage in global economic positioning and it will play a key role in the Belt and Road Initiative, as well as shoulder the responsibility of piloting more reforms to help China internationalize its economy.
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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.