4 June 2018
Greater Bay Area – Three Hubs Growing in Parallel for Full Integration
By CGCC Vision
The Guangdong-Hong Kong-Macao Bay Area (“Greater Bay Area”) is perceived to be Hong Kong’s major opportunity to push forward future development. How should all the component cities coordinate one another’s positioning? And what should Hong Kong do to give full play to its strengthens to optimize benefits realization?
Depicting the economic picture of the Greater Bay Area, Zhao Guangbin, PwC China’s Senior Economist, says the financial strength of this regional community matches that of a nation. The “9+2” cities of Guangdong province alone have a total population of 120 million. The Greater Bay Area’s aggregate economy, on the other hand, accounts for 10% of the national total, making it the 10th biggest economy in the world. Although Hong Kong has no particular advantage in size and its population ranks only fifth, its gross economic output is a significant edge.
Greater Bay Area cities proving their worth with different industrial structures
Cities within the Greater Bay Area are currently at different stages of economic development. Using GDP per capita as an indicator, Macao ranks third globally; Hong Kong as one of the wealthiest world regions ranks amongst the best; and Shenzhen performs in line with Spain at the mid-stream level. There are also cities like Zhaoqing which are at third-world level. Zhao says this shows there are still abundant opportunities to be explored.
Commenting on the overall development of the Greater Bay Area, Zhao notes that developed industries of individual cities must be taken into account. Hong Kong and Macao are mainly geared to service sectors, while cities in Guangdong are more reliant on manufacturing. Computer and electronic communication products currently account for the biggest share of the manufacturing industry. According to Euro standards, service industries’ weightings in national economies increase with the level of development. As such, there is still huge space for service industries to grow in the Greater Bay Area.
The Hong Kong, Shenzhen and Guangzhou troika
Zhao points out that the Greater Bay Area is now driven by a troika. The three horses - Hong Kong, Shenzhen and Guangzhou - are racing forward bridle to bridle. These cities have very similar gross economic outputs. This is in marked contrast with other bay area cities which are centered around a single core. The San Francisco Bay Area and Tokyo Bay Area, for example, are pivoted around San Francisco and Tokyo respectively. The Greater Bay Area is more stable because it has three hubs. He thinks the key to future growth is to sustain parallel development of three hubs at the same pace without making any particular hub the crux.
He also mentions that the Greater Bay Area is home to some of China’s biggest ports, including Guangzhou, Hong Kong and Shenzhen. When regional links are further enhanced, they will become the biggest port network in the world. Likewise, there are great potentials for airports in the region. Hong Kong, Guangzhou and Shenzhen all have their own well-developed airports which can be optimally linked to form an airport network to maximize competitive edge.
Hong Kong’s century-old groundwork is irreplaceable
Many people are skeptical about Hong Kong’s role in the Greater Bay Area. Catherine Tsang, Tax Partner in China Tax and Business Advisory Division of PwC, points out that although Shenzhen is gradually surpassing Hong Kong in gross economic output, some of the Hong Kong’s competitive edges remain unchallenged. These include a sound legal system, international GAAP, relatively open financing platforms and capital markets, and a huge service industry market. Specifically, Hong Kong’s professional services are highly acclaimed by the international community.
She says that given its limited size Hong Kong is hard to compare with other major Mainland cities in gross economic output, yet its efficiency ranks first in the world. By setting up branch offices in Hong Kong, business corporations can enjoy 300% or 400% higher economic effectiveness than branches in other Mainland or Southeast Asian locations.
Tsang believes that when the Hong Kong-Zhuhai-Macao Bridge and Express Rail Link commence service, the whole Greater Bay Area will be fully integrated. Supported by good infrastructure, manufacturers can base different parts of their production lines in different cities to maximize effectiveness. Tsang cites the example that Hong Kong is a potential intellectual property hub because there is a sound legal system that offers adequate protection to intellectual properties. Under this premise, trademarks and products can be designed and developed in Hong Kong and then produced in Mainland China.
Collaborating in tourism, innovation and technology
On the tourism front, visitors tend to spend only limited time in Hong Kong at present. Tsang believes overseas visitors could stay longer before continuing their journeys to other destinations in the Greater Bay Area. Hong Kong can be a tourism pivot point and tourists’ spending will drive the retail, catering and transport sectors. It will bring broad-based benefits.
Tsang said, “Looking ahead, industries related to innovation and technology will be the clear winners.” Hong Kong is not short of creative talent but we do not have the adequate training ground. This is exactly why Hong Kong must transform itself into a creative hub where innovative projects are developed. The question here is land supply. She thinks the answer lies in the Shenzhen Loop where Hong Kong’s legal and tax systems are operative. This engenders integration and engagement of creative talent from both Hong Kong and Shenzhen in innovative projects. As long as Hong Kong continues to work inclusively with Guangdong and Macao together with strengthening collaboration, it will capture the opportunities provided by Greater Bay Area to bring its development to new heights.
This article was firstly published in the magazine CGCC Vision January 2018 issue. Please click to read the full article.