Greater Bay Area, a gateway to BRI
The ambitious Greater Bay Area (GBA) project that physically and economically linking Hong Kong, Macau and nine cities in Guangdong is expected to become one of the leading megacities in China.
The goal is to develop a world-class urban cluster that could turn the region into a financial and innovation hub to rival bays such as San Francisco, New York or Tokyo.
A micro-version of China’s multi-continent Belt and Road Initiative (BRI), the GBA project will transform the coastal region to high-tech megalopolis. President Xi Jingping aims to build a rich economic ecosystem that integrates financial services, shipping and innovation.
With a population of 71.16 million people, the area generated a GDP of $1.6 trillion in 2018, according to data published by the Hong Kong Trade Development Council. The annual economic output of the GBA is forecast to reach $3.6 trillion by 2030, said a research by global real estate services company Colliers International.
Hong Kong, Macau, Shenzhen and Guangzhou will be the four key Bay Area cities and core centres in the technology and innovation corridor. This closer integration could mean opening up of a vast market for Hong Kong to the north of its border. It will strengthen Hong Kong’s role as an international centre of finance and turn the area into a leading innovation hub.
The GBA could emerge as a platform for Hong Kong start-ups as they can build on scale and size required to go global.
Technology and innovation hub
Meanwhile, in southern China, the hi-tech hub of Shenzhen invested more than $14.9 billion in research and development in 2018, according to a work report published by the Shenzhen government in January 2019. Home to more than three million businesses, Shenzhen will remain a capital of innovation, as per the Greater Bay Area Outline Development Plan.
Shenzhen’s technology sector will receive an additional boost from Hong Kong as part of the GBA. The Hong Kong government last year allocated HK$20 billion ($2.55 billion) to build HK side’s first phase of Hong Kong Science and Technology Parks Corporation. The budget aims to support information and technology development with special focus in the areas of biotechnology, artificial intelligence and financial technologies.
At the Hong Kong-ASEAN Summit 2019, experts emphasized that Hong Kong must utilise the human resources in the GBA to serve the ASEAN markets.
“Hong Kong is suffering from shortage of IT professionals and should attract more Chinese talents who studied abroad and have global visions,” Alex Cheung Kin-sang, managing director, DBS Bank (Hong Kong) Ltd, said at the forum.
The GBA has announced a preferential individual tax rate of 15 per cent to attract overseas talents from Hong Kong, Macau, and Taiwan. Whether this tax exemption attracts talent from HK, which enjoys a lower income tax rate, is to be seen.
The plan is to go beyond the boundary of Shenzhen to make GBA a technology hub. The Hong Kong-Shenzhen Innovation and Technology Park (HSITP) will facilitate Shenzhen companies to reach across the borders and give access to tech companies in Hong Kong to venture into the mainland. However, it is viewed that the plan could work only if restrictions are eased further.
The GBA’s transformation into an IT hub would benefit businesses including new market, R&D projects, according to a joint study by ACCA Hong Kong and EY.
The study listed four recommendations to empower Hong Kong to leverage its position in the GBA. Supportive regulations such as tax incentives and IP protection topped the list. Having a legal framework to facilitate financial options, relaxing border controls and extending exemption of work permit to HK and Macau residents were the other recommendations.
It will require a greater degree of regional cooperation to achieve the objectives of the Outline Development Project as the GBA consists of ‘one country, two political systems and three customs territories’.
The blueprint for the GBA, unveiled in February 2019, is short of details and lists general objectives for cities to achieve. Individual cities will need to drill down, seal bilateral deals and fill the gaps.
Under the model of ‘one country, two systems’, the idea is to gradually eliminate the various legal and social obstacles that make doing business difficult. But no one has a clear idea of how the integration will shape up. Residents of Hong Kong are concerned that the idea of ‘one country, two systems’ will be eroded over time.
Hong Kong is essentially known to be a financial capital globally than a tech hub. As it integrates itself with the GBA, the business sector is worried that HK will lose its judicial integrity as the two jurisdictions align their regulations.
GBA’s initial three-year timeline with fewer details is finding it difficult to inspire investments in the region, according to research consultancy Eurasia Group. “Follow-up plans from Hong Kong, Macau, and Guangdong will shed more light on GBA’s prospects.” For now, investors will continue to be wary and adapt the “wait and see” approach before buying into GBA’s expansive ambitions for regional integration.
While a few might be sceptic about a lack of real action, others stay optimistic that the GBA is a grand scheme that needs time to manifest.
Source: Reuters (Writing by Anita Iyer; Editing by Anoop Menon and Bhaskar Raj)