The development of the Greater Bay Area (GBA) into a world-class city cluster by means of deepening reform, prioritising innovation and accelerating connectivity gained considerable momentum in 2019.
Since the second annual GBA survey was published in October 2018, businesses and government have invested significant resources to promote and realise opportunities in the cross-border area, which comprises nine mainland cities in Guangdong Province and the two SARs of Hong Kong and Macao.
The cornerstone of efforts to ensure the ambitious vision becomes a reality is the Outline Development Plan, which was released in February 2019 by the Central Government. The document commences a new phase of economic and social integration for the Pearl River Delta as focus on the GBA intensifies. A host of other measures have also been unveiled over the year, including the introduction of tax measures and the facilitating of electronic payments and the remote opening of bank accounts.
The region is also being more physically connected, with the opening of two huge infrastructure projects — the Hong Kong-Zhuhai-Macao Bridge and the Guangzhou- Shenzhen-Hong Kong Express Rail Link — further enabling cross-border commuting, working and living.
To gauge the latest business opinions regarding the opportunities and challenges in the region, KPMG China, HSBC and the Hong Kong General Chamber of Commerce commissioned a survey of 747 senior executives based in the GBA and from a range of sectors. The results indicate firms are bullish about both their own and the region’s prospects as a whole, and most are planning to expand outside of their home city to other areas within the GBA.
The past 12 months have seen a number of significant developments for the GBA initiative. In February 2019, the Outline Development Plan set out the Central Government’s vision for the project.
The main focus of development between now and 2022 will be increasing cooperation between the GBA cities through improving infrastructure and having each city adopt a complementary role. The upgrading of traditional industries into high-end manufacturers will also begin, alongside continued economic opening up and increased financial connectivity between Hong Kong and the other GBA cities. The central government has set the goal for the GBA to be an international first-class bay area with an integrated economy and strong focus on technology by 2035.
Companies across a range of sectors are bullish about the GBA’s economic prospects, as increased connectivity and government incentives will help drive growth in the region. Realising the GBA’s potential will not be without its challenges, however the goal of a dynamic economy — powered by innovation and acting as a gateway both internationally and to the rest of China — is now clearer than ever.
Four-fifths of companies we surveyed expect the GBA’s economy to grow faster than that of the rest of Mainland China in the three years ahead, slightly higher than the 2018 survey results. Businesses that have their primary base of operation in one of the nine GBA cities in Mainland China are particularly optimistic: 89% expect economic growth in the GBA to be faster than that of the rest of the country, while 48% predict it will be significantly faster. Firms based in Hong Kong are relatively more cautious, with 78% expecting the GBA to have higher growth than that of the rest of China and 24% expecting significantly higher growth. Sentiment among firms based in Macao is more mixed; while 85% anticipate higher growth in the region than in Mainland China as a whole, just 8% think it will be significantly higher.
The survey highlights three key sector beneficiaries of the development of the GBA: technology and innovation, financial services, and trade and logistics, reflecting the findings of the 2018 survey. The technology and innovation sector is seen as the top beneficiary of the region’s development, cited by 56% of survey respondents.
With companies anticipating significant revenue growth in the GBA in the years ahead, they are looking at how best to position themselves to take advantage of the opportunities the region offers. For some this means investing in brand building and marketing as they grow their customer base in the region, while others are focused on talent recruitment or setting up new physical sites, such as factories or offices.
Overall, more than half (52%) of companies plan to expand geographically into the GBA before 2022, rising to 61% among businesses based in the nine GBA cities in Mainland China.
Companies in the education sector are the most likely to be planning an expansion, at 82%, while retail companies are least likely to be planning to expand in the GBA, at 34%. The Outline Development Plan sets the goal of creating clusters for advanced equipment manufacturing in Zhuhai and Foshan, and high-end manufacturing industries in Shenzhen and Dongguan; many manufacturers are already based in these cities.
In order to capitalise on the opportunities the GBA offers, more than half (54%) of companies polled either already have a strategic plan in place or are in the process of formulating one, broadly unchanged from 2018’s survey.
Real estate companies are meanwhile most likely to have formulated a strategy for the GBA, at 70% — up from 63% in 2018’s survey — as businesses in the sector look to position themselves to take advantage of increased development in the region. A high level of healthcare and life sciences companies also have a strategic plan (69%), followed by conglomerates (68%). Retail companies are least likely to be looking at how they can capitalise on the GBA initiative, with 66% of those surveyed saying they did not have a strategic plan.
One of the key aims of the GBA is to increase the mobility of people within the region to facilitate business connectivity. The recent opening of the Hong Kong-Zhuhai-Macao Bridge and Guangzhou-Shenzhen-Hong Kong Express Rail Link has reduced travel times from Hong Kong to Shenzhen to just 18 minutes and to Guangzhou to only 46 minutes. This is expected to boost journeys between the region’s cities; last year, more than 640,000 people a day on average made overland trips into Hong Kong from Guangdong or Macao.
In addition, improved infrastructure is cited by four out of 10 businesses as a key factor in their staff being more mobile. Additional initiatives have also been introduced to make it easier for talent to work across the region, including changes to taxation and work permit requirements.
These developments are driving increased labour mobility, with more than one in 10 businesses (13%) in the survey now expecting at least half of their senior staff to regularly work in more than one GBA city within the next three years, while 23% expect between a quarter and a half to do so. Companies that have begun implementing their strategic plan for the GBA since the publication of the Outline Development Plan are most likely to expect high levels of labour mobility; nearly one third (31%) expect more than half of their senior staff to regularly work across different cities in the GBA as they look to capitalise on the opportunities the region offers.
Businesses based in the nine GBA cities in Mainland China anticipate greater mobility of talent than those in Hong Kong and Macao, with 34% of surveyed companies expecting more than half of their senior staff to regularly work across the region. By contrast, just 8% of companies based in Hong Kong anticipate the same level of mobility, although one in four (24%) expects between one quarter and half of their senior staff to be mobile within the region. Companies in Macao do not anticipate a high level of talent mobility, according to the survey.
The lower level of mobility among Hong Kong and Macao-based companies reflects the fact that it is still easier for staff to move within the nine GBA cities in Mainland China than it is for them to move between Hong Kong or Macao and the Mainland.
Time to Act on Opportunities
PC Yu, Convenor, GBA Working Group, HKGCC
The strong support the GBA initiative has received from both the central and local governments makes it potentially the most significant development for the Hong Kong business environment for decades to come.
The region is comparable to Australia or South Korea in terms of the size of its economy, while its population of more than 70 million means it represents a huge market for companies in Hong Kong. It also offers a larger pool of resources, such as land and labour, two areas where Hong Kong is facing bottlenecks. In fact, the region may be one of the few places where businesses can expand and seek higher returns over the next few years.
We expect financial services, professional services, and R&D related to innovation and technology to be particular beneficiaries of the initiative, due to their cumulative knowledge and experience in dealing with both domestic and international businesses. Our stock, bond and insurance experts can serve the needs of local, Mainland and overseas companies in the GBA and beyond.
Despite the numerous opportunities presented by the GBA initiative, Hong Kong businesses still have some concerns because of the different tax and legal regimes, exchange and capital controls among the jurisdictions within the GBA, and whether there will be a level playing field for them.
The Chamber would like the governments in the GBA to do more to support SMEs, as they lack the information and resources to deal with the different jurisdictions within the region. The GBA governments can provide SMEs with more information on areas such as regulations, taxation and other policy measures, talent availability and business opportunities.
The Chamber would also like to see more being done to help increase the mobility of talent within the GBA. While the recent announcement to enable non-Chinese Hong Kong permanent residents to travel to and from the nine GBA cities in Guangdong Province is welcome, foreign talent still cannot travel freely within the GBA. The Chamber proposes the introduction of a GBA Card to enable all business to travel among GBA cities more easily.
Despite the regulatory differences that still exist, we urge companies not to delay entering the GBA market. To capture the opportunities, businesses should act now, as procrastination may lead to missed opportunities.
Exploring the Opportunities
HKGCC’s popular missions to GBA cities give members crucial on-the-ground insights
Since the GBA initiative was first announced, the Chamber has organized a wide range of seminars and missions to update members on the latest developments. These are particularly welcomed by SMEs, which have fewer resources at their disposal than larger companies and may not be as well informed about the GBA.
We have visited all of the nine Mainland GBA cities, several of them more than once. In 2019 alone, we visited cities including Shenzhen, Guangzhou, Foshan, Jiangmen, Zhongshan and Zhaoqing. These missions are popular with our members as they provide on-the-ground insight into the opportunities emerging in the region and the opportunity to meet with government officials and local businesspeople.
This is an edited version of ‘Keys to Success in the Greater Bay Area.’ You can read the full survey on the Chamber’s website or app.