By 2035, The Greater Bay Area, or GBA, will transform into a globally competitive, connected, and innovative mega-region, representing China’s next wave of innovation, economic development, and market reform.
As this progress becomes a reality, there are numerous opportunities for foreign investors in key areas, especially manufacturing, sourcing, and financial services.
Technology has been key to the region’s rapid growth, evolving from ‘factory to the world’ in the first phase to becoming the epicenter of technology in the past ten years.
This was recognized as far back as in 2006 when IBM moved their global procurement HQ to Shenzhen and JD.com group built the RMB 2 billion (US$288.3 million) service industrial park in Dongguan.
What makes the GBA so different from any other large metro area is that it combines most of the factors that have individually proven successful elsewhere into one gigantic innovation, manufacturing, and logistics hub.
One example is Hong Kong airfreight terminal, the world’s largest, which will see increased throughput when the airport’s third runaway is completed by 2023.
Since its creation, the GBA has become one of the largest economies among global bay areas, accelerated by the Hong Kong-Zhuhai-Macao Bridge and Guangzhou-Shenzhen-Hong Kong express rail link that opened in late 2018.
Located on China’s southern coast, the GBA includes eleven cities -with a population of over 72 million-: Hong Kong, Macao, Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou, and Zhaoqing. Previously known as the Pearl River Delta, this megacity concept was officially announced in 2016 in China’s 13th Five Year Plan to include Hong Kong and Macao.
The inclusion of the Special Administrative Regions of Hong Kong and Macao sets the region apart from other megacity clusters in China, as they provide a gateway for global investment and increased internationalization.
The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area is the official name of this master plan, announced in 2019. Its goal is to transform the GBA into a world-class bay area economy rivalling New York, San Francisco, and Tokyo by 2035 with an emphasis on sustainable innovation.
Faced with an increased international competition, slowing global economic growth, rising production costs and labor shortages, the industrial sector in the GBA is transforming and upgrading itself.
Many companies in Guangdong, Hong Kong and Macao, are not only developing higher valueadded businesses relying on their own resources, but also capitalizing on the regional advantages and economic resources of the area to enhance their competitiveness.
They are putting great effort into planning their GBA and international business strategies to achieve sustainable development in the medium to long term. Firms have joined forces to explore opportunities in both the mainland and overseas markets.
Thanks to the development plan, companies can use the improved transport networks in the GBA and the simplified customs clearance to raise the efficiency of crossborder logistics and take advantage of the connections between the GBA and foreign business partners to strengthen cooperation on hightech projects.
They can also leverage on the production capacity of the Pearl River Delta (PRD) to coordinate with other mainland regions and other Asian supply chains to lower operating costs and take advantage of the complementarity in the GBA to expand the mainland and overseas markets further.
As the central government continues to open the market access for foreign investment, deepen preentry national treatment and the "negative list" management system, and lower import tariffs, it can be expected that enterprises in the GBA will have more opportunities to do business with foreign partners.
Following years of development, mainland cities in the GBA and surrounding regions have gradually established modern industrial systems to become one of the most important production bases in the world.
Nevertheless, rapid advances in technology around the globe, intense competition from mainland and foreign rivals, and external factors such as foreign trade barriers, all constrain the growth of GBA enterprises.
In response, many manufacturers in the GBA are investing in factory automation to save labor costs, revamping supply chains to lower financial, logistics and other operating costs, or strengthening technology research and development (R&D).
Meanwhile, a number of startups have emerged targeting advanced technology sectors, such as IoT (internet of things) applications, big data analytics, newgeneration communications, artificial intelligence and robotic applications, in the hope of developing higher valueadded business.
At the same time, they seek international partners and professional services through places like Hong Kong to enhance their competitiveness and meet the external challenges.
As more and more companies are using higher precision automated equipment to produce better quality products and develop higher value added business, both their business revenue and competitive edge are on the rise.
The growth of innovation and technology in the GBA is further propelled by increasing presence of Fortune 500 companies, development of smart infrastructure, and the Chinese government’s supportive policies to promote the use of new technology such as fintech, blockchain, big data, and artificial intelligence (AI) to facilitate the growth of emerging industries.
21 companies from the GBA were listed on the 2020 Fortune Global 500 List, including technology companies such as Huawei Investment & Holding, Lenovo Group and Tencent Holdings.
Guangdong province aims to invest in new infrastructure projects including 5G networks and has installed roughly 41,000 5G base stations.
Furthermore, rising investments in the innovation and technology sector in cities of GBA are expected to boost the growth of the sector.
The value of Guangzhou’s tech contract deals amounted to approximately US$14.9 billion in 2019, compared to US$10.7 billion in 2018, representing 39.3 percent year on year increase.
In 2019, Guangzhou spent US$2.2 billion on development of science and technology infrastructure, such as a deep-sea ecosystem, a dynamic wide-range velocity vehicle test unit, and others.
As of July 2020, Huizhou signed agreements worth US$714.0 million with Shenzhen Sinlikon Supply Chain Management and Hit Robot Group (China based robotics firm) to develop an industrial estate focusing on 5G telecommunication technology and an R&D center respectively.
Situated between Shenzhen and Guangzhou, Dongguan has positioned itself as a hub for smart manufacturing as well as R&D.
Home to the 4th National Comprehensive Science Center, two science parks: Dongguan Songshan Lake Science City and Shenzhen Guangming Science City, as well as the innovation and production base for telecom giant Huawei, the city is home to more than 5,700 high-tech enterprises.
The Neutron Science Center of Dongguan, in operation since 2018, boasts mainland China’s only spallation neutron source and the fourth such center worldwide, and is expected to generate a research and industrial cluster for new materials, microparticles and biomedicine.
The GBA Outline Development Plan plays a crucial role in how China will achieve its next stage of economic development, as it not only increases the value adding capabilities of the economy but boosts internationalization within the region.
This integration will further prop China’s infrastructure and connectivity programs like the Belt and Road Initiative as well as strengthen the supply chain industry in higher-tech manufacturing and services.
There are three new areas of the Guangdong Pilot Free Trade Zone (FTZ), which was formally approved by the State Council and established on December 31, 2014. After five years of development, it has become a regional economic powerhouse with a high standard legal environment and efficient regulations that promote and facilitate trade and investment.
The major New Areas are in Guangzhou, Shenzhen, and Zhuhai under the Guangdong FTZ, and have become hot destinations for foreign investors to incorporate their businesses.
Guangzhou Nansha New Area
Nansha New Area has seven functional zones and covers a total area of 60 square kilometers, including the 7.06 square-kilometer Nansha Bonded Port. Residing in the heart of the GBA, Nansha New Area prioritizes strategic emerging industries, including shipping and logistics, advanced manufacturing, financial service, tourism, and healthcare.
A series of landmark reforms have been put in place here, including the Business Registration Confirmation System, the Global Traceability system, and the Global Declaration Service System.
Shenzhen Qianhai-Shekou Area
Qianhai, the only Shenzhen-Hong Kong modern service industry cooperation zone, is near two major international airports and seaports – Hong Kong and Shenzhen. In 2019, the economy of Qianhai Cooperation Zone grew rapidly. The added value of the four leading industries (finance, modern logistics, information services, and sci-tech services) accounted for 84 percent of the total GDP.
Being a cooperation zone, pilot free trade zone and bonded port area all rolled into one, it follows policies shared by all pilot free trade zones across the country, but also has its own unique policies which include 22 pilot policies in finance, fiscal taxation, law, human resources, education, medical care, and telecommunications.
Zhuhai Hengqin New Area Hengqin is a 106.46 square-kilometer coastal island tucked into the southern corner of the city of Zhuhai in Guangdong province. Because it is adjacent to Macao, which is no more than 200 meters away, the island has been selected as a New Area to enhance economic ties with Hong Kong and Macao.
Hengqin puts priority on sci-tech innovation, modern financing, health care, tourism and exhibition, cross-border trade, and professional services. Preferential policies apply to areas such as customs clearance, tax, personnel, talent recruiting, finance, and informatization.
Each of the GBA’s eleven cities brings a different strength to the table:
– Hong Kong connects the GBA to the rest of the world through its common law jurisdiction and business-friendly policies. It is a world financial center, ranked sixth globally according to the Global Financial Centres Index 2020.
– Macau is a prime international destination for leisure and tourism, boasting the largest casino and gambling industry in the world. As a former Portuguese colony, Macau serves as a connection to Lusophone economies such as Brazil and Portugal.
– Guangzhou serves as the manufacturing and logistics hub of not only the GBA but all of China.
– Shenzhen is the home of China’s leading tech companies such as Tencent and Huawei. It has one of the world’s highest investment in R&D at 4% of its GDP in 2018 (Source: SCMP).
– Zhuhai provides the GBA with another destination for tourists, is known for its golf courses and theme parks. It is also a strong manufacturing hub in its own right.
– Jiangmen serves as a river port for the GBA.
– Dongguan and Foshan serve as production hubs for the GBA.
– Zhongshan, Huizhou, and Zhaoqing serve as reservoirs of surplus labour for the GBA, with low rent and cost of living.