Greater Bay Area takes center stage as global companies make a beeline for a stake in the region’s vibrant growth engine. Zhang Tianyuan and Wang Yuke report from Hong Kong.
The mega Guangdong-Hong Kong-Macao Greater Bay Area is in pole position to become one of the world’s most promising economic growth engines with a business environment that has been a magnet for international enterprises in the past three years.
Technology and innovation have been at the forefront since a strategy was unveiled for the 11-city cluster to take on the world’s most renowned bay areas.
Industry pundits say economic opportunities have sprung up across the Greater Bay Area, augmenting a list of startups and global businesses betting on the region’s immeasurable growth potential, backed by supportive government policies.
The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, released in 2019, cements the region’s standing as an international financial and innovative powerhouse by linking up nine cities in Guangdong province with the Hong Kong and Macao special administrative regions.
The plan dictates a blueprint that by 2022, “cooperation among Guangdong, Hong Kong and Macao should be deepened and broadened”; and the area by 2035 should form an “economic system and mode of development” empowered by innovation, as well as an international “first-class bay area for living, working and travel”.
The Greater Bay Area’s gross domestic product reached 12.6 trillion yuan ($1.87 trillion) last year — an increase of 2.4 trillion yuan from 2017 — according to the Guangdong provincial government.
The number of high-tech enterprises operating in the Chinese mainland cities of the Greater Bay Area stood at 56,100 last year — a nearly 16 percent increase from 48,400 firms in 2019.
Francis Belin, president at auction house Christie’s Asia-Pacific, said that: “The Greater Bay Area is exciting, ambitious and necessary. It’s just incredible to see what has been achieved in such a short period of time in that region.”
“I think it’s just beginning of the journey. There’s a very strong agenda (to) actually make it happen. And I have no doubt that will happen,” he added.
Belin said that there are “very successful entrepreneurs across many cities (in the Greater Bay Area) and an incredible talent pool. It’s a region that is going to continue to have very strong activity for mainland talent. Therefore, I think the boom and the growth that we see in the region will continue to support what we do when it comes to art, culture and auction business”.
To speed up incubating innovative startups, governments in the 11-city cluster have drawn up various regional development frameworks within the past year, leveraging each city’s unique advantages and strengths.
The State Council presented the Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and the Plan for the Development of the Guangdong-Macao Intensive Cooperation Zone in Hengqin in September last year, followed by Hong Kong’s Northern Metropolis Development Strategy announced a month later.
These policies and initiatives speak volumes about what’s in store for the Greater Bay Area, said Freddie Chui Ying-wai, markets and global network leader at Deloitte China. The road map provides details, guidelines and incentives of the region’s development outline, and helps global firms formulate their strategies and investments to build the right business capabilities in the regional market, he said.
For instance, the Shenzhen Qianhai International Financial City envisioned in the Qianhai plan will be a boon for financial institutions and financial technology startups that can benefit from the program as it offers financial incentives to Hong Kong companies to tap the much bigger mainland market, said Chui.
The 2022 Hong Kong Business Sentiment Survey, conducted by the American Chamber of Commerce among its members, showed that 60 percent of them are already operating in the Greater Bay Area, with Shenzhen and Guangzhou being the most popular cities, while at least 40 percent of the companies want to expand in the next few years.
Hong Kong has played a significant role in accelerating the integration of the Greater Bay Area. The SAR, as the “superconnector” between the mainland and the world, has been the staging ground for mainland companies “going out”, with foreign capital flowing into the city in the past three years, aided by its sophisticated financial infrastructure.
“Hong Kong is always changing and we’re excited over the vast opportunities that are constantly emerging,” said Ben Simpfendorfer, chair of the Greater Bay Area Council at the American Chamber of Commerce and a partner at management consultancy Oliver Wyman.
In his view, the Greater Bay Area is an “aspiration to introduce international standard practices across all industries”. In essence, the region mirrors its forward-thinking and international mindset for bringing its domestic companies into the global arena.
“Let’s not forget that we (Hong Kong) are an international business hub, and we’re here to help mainland companies in the Greater Bay Area to go global and internationalize their businesses,” Simpfendorfer said.
Chui said that Hong Kong, as a world aviation hub, has a significant edge in high-end logistics and supply chain management. “Such an advantage enables Hong Kong to propel the continuous development of the world-class logistics system supporting China’s international trades.”
Hong Kong should harness the vast opportunities from the gradually and organically-deepened regional integration in the Greater Bay Area, and strengthen its role as a gateway to connect the region with the rest of the world, said Chui.
Foreign direct investment in the Greater Bay Area shot up to $103.74 billion in 2020. Hong Kong topped the list with $74.46 billion, followed by Shenzhen with $8.68 billion, according to the data from online statistics provider Statista.
Chui said the Greater Bay Area’s development will spur demand for financial services, further boosting Hong Kong’s international financial center status.
Eric Lin Pui-kwan, head of China research at global financial services firm UBS, believes the expansion potential of cross-border wealth investment will deepen the financial links among the Greater Bay Area’s 11 cities.
A UBS report showed that southbound assets under management would range between 700 billion yuan and 1.5 trillion yuan by 2030, involving 2 to 5 percent of the financial assets of households in the Greater Bay Area.
Ivan Li, head of financial services of Southern China at KPMG China, said the Cross-boundary Wealth Management Connect Scheme in the Greater Bay Area serves as the bridge for mainland investors to step into the international market and provides a huge opportunity for the banks in the region, especially banks in Hong Kong.
Hong Kong and the mainland rolled out the Wealth Management Connect in October last year, allowing banks to sell cross-border investment products to the region’s eligible residents.
“We expect the program to increase the types and quotas for investment products when the pandemic eases further,” Li said.
Jimmy Chiang Hok-lai, associate director-general of InvestHK — the Hong Kong government department tasked with attracting and retaining foreign direct investment — said all companies, regardless of whether they’re inside or outside Hong Kong, should recognize the Greater Bay Area’s huge market potential and adopt a “GBA mindset”. This is probably the zeitgeist of the region.
“Many foreign investors and companies need to overcome a steep learning curve before they can find their comfort zone and foothold in the Greater Bay Area. This could sap their resources, energy and confidence,” said Chiang.
To solve the problem, InvestHK conducts market feasibility studies, creates a dedicated business development team to promote the region’s advantages and opportunities for global investors, and forges connections between prospective global investors and strategic partners or relevant government bodies in the region.
“For example, introducing foreign investors to professional advisory firms will give them an insight into the business environment in Shenzhen, Guangzhou or Zhongshan,” Chiang said. “Prospective investors could not only draw lessons from the first-hand experience of successful investors, but also discuss partnership opportunities with them.”
Chui foresees obstacles in securing talents, as well as a lack of understanding of how to apply for business licenses, for international firms in the Greater Bay Area.
“Some multinational companies based abroad are worried about the lack of mid-level executives with both international and local experience, and the challenges in aligning the technologies that are applicable to both the Chinese mainland and overseas markets,” he said, “More support and advice in making major investment decisions are needed.”
AmCham’s recent survey also delved into what sort of problems its members might encounter in trying to set up shop on the mainland. Their three biggest worries concern policy uncertainties, free flow of talents and the mobility of senior executives on both sides of the border, as well as the lack of policy coordination among cities in the region.
However, compared with other mainland cities, it is more convenient for foreign companies to relocate mid-level executives to the Greater Bay Area due to the sophisticated infrastructures already in place for domestic and international travel, said Chui.
Key infrastructure projects, such as the Hong Kong-Zhuhai-Macao Bridge and the high-speed rail linking Hong Kong and the mainland, have strengthened transportation links among cities in the Greater Bay Area, while Hong Kong’s Northern Metropolis plan envisions five new railway projects that would connect various nodes in future, including the Qianhai cooperation zone.
Simpfendorfer said nuances in practice standards and unresolved mutual recognition of professional qualifications between Hong Kong and the mainland cities in the Greater Bay Area have been an impediment to some foreign enterprises. “While our members are able to capture the opportunities in the Greater Bay Area by building businesses in Hong Kong and on the mainland, sometimes, they feel they’re running two separate businesses and that creates friction.”
“The reality is there’re 11 cities in the Greater Bay Area cluster and each has its own policies concerning things like taxation when it comes to attracting talents from Hong Kong,” he said.Such policies, if left unattended or not reconciled, would create complexities for international enterprises, especially those that are keen to set up businesses in more than one city in the Greater Bay Area, Simpfendorfer added.
But he said all international companies should be serious about setting up offices in the Greater Bay Area, where there’s a wealth of world-class opportunities afforded by “the sheer number of companies, startups and customers”.
“That’s why we always encourage our members to join our delegations on visits to the mainland and get engaged commercially,” Simpfendorfer said, referring to tours of mainland cities in the Greater Bay Area, organized regularly by AmCham.
While Shenzhen and Guangzhou have a strong track record in fostering a vigorous entrepreneurial culture, they will never threaten Hong Kong’s position as an international business hub. “Rather, we see a more collaborative and complementary relationship (between Hong Kong and the mainland GBA cities) going forward,” said Simpfendorfer.
Chiang remains upbeat. “We’ve been talking to many prospective investors. They’re quite excited about the opportunities in Hong Kong and other cities in the Greater Bay Area. They’re just waiting for quarantine-free travel to resume and go to the mainland to kick-start their plans.”
Zeng Xinlan contributed to this story.
Contact the writers at firstname.lastname@example.org