Greater Bay Area: Xi Jinping’s other grand plan
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The 36km bridge connecting Hong Kong and Macau with the city of Zhuhai in mainland China is one of the most ambitious engineering projects ever undertaken, at least 15 years in the making, and coming in at a cost of nearly $20bn.
The megaproject, scheduled to open to road traffic in the next few months, was designed by the Chinese government to bind the former European colonies of Hong Kong and Macau much closer to the motherland, physically, economically and spiritually.
“This is a vital strategic project to further deepen China’s reform programme and improve the country’s economic growth,” says Yu Lie, the deputy director of the bridge authority, as he explains the many technical hurdles that his engineering team have faced.
Alongside a new $11bn rail link that will plug Hong Kong into China’s vast high-speed rail network, it is a crucial element in Beijing’s plan to integrate the semi-autonomous regions of Hong Kong and Macau with nine neighbouring urban areas — including the mega-cities of Shenzhen and Guangzhou. Beijing wants to fashion them into what it calls a “Greater Bay Area” to rival San Francisco, New York and Tokyo as a powerhouse of innovation and economic growth.
But the challenges of integrating Hong Kong, a politically fraught financial centre, and Macau, the world’s most lucrative casino gambling destination, into President Xi Jinping’s China are almost as complicated as building the world’s longest sea bridge in a region that is regularly hit by typhoons.
An animated advertisement produced by the Hong Kong government promises that it will be “simple and convenient” to drive across the bridge to Macau. But first, it explains, drivers must obtain three separate permits from the Hong Kong, Macau and mainland Chinese governments, buy special car insurance for the mainland and Macau, and register their documents with the government of the mainland city of Zhuhai — a process that will take at least 12 working days.
The rigmarole over the driving permits encapsulates the depth of the challenge facing Beijing, as it seeks to integrate three different political and customs entities, with their own very different legal systems, tax rates and controls over people, goods and capital.
“The policy is to aim to develop this whole region into a single market,” says Arnold Cheng, who heads the office handling the Greater Bay Area at John Swire & Sons, the conglomerate that owns Cathay Pacific, Hong Kong’s flag carrier, and a string of other property and trading businesses across the region. “If we can have more synergy between the cities and more integration, we can make our pie bigger and every city can benefit from that.”
Along with the Belt and Road Initiative, a signature project for Mr Xi, Beijing sees the Greater Bay Area as a way not just to further integrate Hong Kong and Macau, which were handed back by the UK and Portugal respectively in the late 1990s. It is also hoping to turbo-charge growth in one of the country’s most economically vibrant regions and accelerate the nationwide transition from manufacturing and exports to services and domestic demand.
The Greater Bay project covers an area containing nearly 70m people with a $1.5tn economy, bigger than G20 countries including Australia, Indonesia and Mexico. HSBC expects the region’s economy to nearly double to $2.8tn by 2025.
But, to unlock the next phase of growth, Beijing will have to lower barriers to the movement of people, capital and information. That looks tough, at a time when Mr Xi has been tightening control over society and the economy, and the trade war with the US has put Chinese policymakers on the back foot.
The idea behind the Greater Bay Area plan is to capitalise on the region’s impressive infrastructure and expertise in finance, manufacturing and technology by dropping trade barriers, promoting cross-border business and eventually creating a single market.
“The government wants to use the Greater Bay Area to close the [technological] gap on the US, Japan and other developed nations,” says Edmond Wu, an economics professor at the South China University of Technology in Guangzhou, the provincial capital. “There is a culture of innovation because Guangdong province and Shenzhen have always been the cradle of reform in China.”
Guangdong, which contains the nine mainland cities involved in the plan, is the workshop of the world, exporting $670bn of goods last year, more than any other province in China. Its economy is more driven by private enterprise than any other in the country and is home to the most billionaires.
It incorporates sprawling industrial centres like Dongguan and Foshan, home to many of the region’s factories, and Shenzhen, China’s Silicon Valley and the base for technology giants from dronemaker DJI to telecoms equipment producers Huawei and ZTE to Tencent, which operates the WeChat app.
The region boasts an impressive logistics network, with three of the world’s 10 busiest container ports — in Hong Kong, Guangzhou and Shenzhen — and thriving international airports in all three cities, as well as the new bridge and high-speed rail links. Hong Kong and Shenzhen are major financial centres, with companies raising $29bn on the two cities’ stock exchanges last year — and cross-border capital flows enhanced by the recently launched Stock and Bond Connect schemes which allow mainland investors limited access to Hong Kong’s capital markets and vice versa.
The Greater Bay Area plan is being overseen by Han Zheng, a member of the standing committee of the politburo, the Chinese Communist party’s top leadership body. His involvement signals the political importance of the project to Beijing and highlights the desire to bring semi-autonomous Hong Kong, where opposition to Beijing’s rule has become deeply entrenched, under closer party control.
But the success of the project will come down to entrepreneurs like Joseph Tse, as much as the officials tasked with driving integration. An economics professor from Hong Kong, two years ago he set up a robotics company in Shenzhen called Matebot, which is developing robots that can act as social companions to the elderly population in fast-ageing China.
He hopes the plan will lower trade, tax and other cultural barriers between Hong Kong and the mainland, enabling him to make the most of each city’s advantages. “There are still a lot of things to be resolved,” says Prof Tse, who has to battle long queues at immigration as he travels from his home in Hong Kong to Shenzhen every week.
Economists at HSBC say that the Greater Bay Area is a “compelling example of how the clustering of talent, capital and industries will drive higher value-added production and fuel consumption to secure long-term sustainable growth”. Mr Cheng of Swire cites the example of Cathay Pacific, which he believes can expand its customer base in Guangdong. But Prof Tse warns that “the devil is always in the detail,” as he explains his struggles with bureaucratic bank staff and civil servants in the mainland. “They say we welcome you — using their mouth only.”
The cities of the Greater Bay Area were at the heart of modern China’s first economic revolution, when Hong Kong money spurred the rapid growth of the manufacturing industry in Shenzhen after Deng Xiaoping, China’s then paramount leader, made it the nation’s first special economic zone in 1980.
But pushing the Pearl River Delta, as the region is also known, to the next level will require much more complicated, and potentially risky, reforms.
The toughest challenge is how to integrate Hong Kong, a free port with its own customs regime and a semi-democratic system, into mainland China, where Mr Xi has been cracking down hard on critics and intensifying capital controls for fear of financial instability.
Many Hong Kongers are already afraid that their city of 7m is losing its unique identity as Beijing deepens its control over the local government.
A senior Hong Kong official, who asks not to be named because of the sensitivity surrounding the issue, admits that it will be very difficult to improve the “flows of information and capital” between the city and the mainland without the city losing its “uniqueness”.
Beijing was supposed to release guidelines on the integration of the Greater Bay Area last year but officials are struggling to come up with concrete proposals to drive the economy forward without upsetting the delicate political balance in Hong Kong, according to people familiar with the discussions.
Lawrence Ho, who owns one of Macau’s six casino groups and is a member of the Chinese People’s Political Consultative Conference, a high-level official body that advises Beijing, says that, if the project is to succeed, the government needs to ease the flow of people and capital across the borders between Hong Kong, Macau and the mainland.
Despite the political opposition from many Hong Kongers, he warns that the city “can’t stand on its own”.
The Hong Kong government official says that, when they are published, the Greater Bay Area guidelines are unlikely to make a big bang. Rather, the project will be a “living animal”, with investors “going in, finding policy constraints, and then raising their hands to ask for help” from the authorities.
Beijing has said it will abolish work permit requirements for Hong Kongers in the mainland, and give them access to state healthcare and education. Meanwhile, Hong Kong investors have proposed building housing for Hong Kongers in Guangdong, to take advantage of lower property prices and improved transport links. Meanwhile Tencent is developing electronic IDs that would make it easier for Hong Kongers and Macau residents to cross the border to the mainland.
But this ad hoc approach may not be enough to convince many investors to part with their cash. “Companies are interested in the potential of the Greater Bay Area project,” says Jens Hildebrandt, the head of the German chamber of commerce in China. “But they’re still missing specific plans and actions.”
The project is similar to the Belt and Road and other grand Communist party initiatives, which Yu Jie, a China expert at the London School of Economics, calls “fluid in nature, opaque in implementation and flexible in the measures used to deliver projects”.
“Crossing the river by feeling the stones”, as Deng Xiaoping called this approach to economics, has worked for China in the past. But it is harder to improvise as the scale of the economic and political “contradictions”, as the Chinese Communist party likes to call them, increase.
“The battle Beijing is fighting is that if they want more access to Hong Kong’s markets and capital, they have to open up but the movement over the past few years has been in the opposite direction,” says Christopher Balding, a professor who recently left China after nine years teaching at the Peking University HSBC Business School in Shenzhen, warning that he no longer felt “safe” debating business and economic issues amid Mr Xi’s crackdown on dissent.
Ultimately, Mr Balding expects the need for new sources of economic growth — and the political imperative to further bind Hong Kong and Macau to the mainland — to triumph over the complexities. “There’s a very strong economic argument to be made for the increased integration of Hong Kong with other cities in the region and it’s going to happen, it’s just a question of how long it takes,” he says.
Additional reporting by Nicolle Liu in Hong Kong
Hong Kong: autonomy under threat from Beijing, warn critics
Many large Chinese, Hong Kong and foreign companies have rushed to praise the Greater Bay Area in the hope of winning favour with Beijing, as well as promoting genuine business opportunities. But the reception has been much cooler from ordinary Hong Kongers, who have seen their freedoms and autonomy chipped away in the past couple of years, despite Beijing’s promise to let the city keep its civic freedoms, at least for 50 years after the 1997 handover by the UK.
Critical Hong Kong booksellers have been kidnapped by mainland agents, political protesters have been jailed and outspoken politicians ousted from the city’s Legislative Council. Pro-democracy advocates in Hong Kong have attacked the Greater Bay Area as a political project to turn the freewheeling financial centre into “just another mainland city”.
Kwok Ka-ki, a legislative councillor from a pro-democracy party, calls the Greater Bay Area the “bell tolling the death” of the One Country, Two Systems arrangement under which Hong Kong is supposed to have a “high degree of autonomy”. He worries that by trying to force Communist central planning on Hong Kong, Beijing will destroy the free-market approach that allowed it to thrive.
One of the most visible signs for Beijing’s opponents is the rail station in West Kowloon, above, which opens later this month, connecting the city to the mainland’s high-speed network. Chinese law enforcement officials will control a large border crossing facility inside the station, after Beijing leased the land in a process criticised by lawyers as a violation of Hong Kong’s autonomy. “Hong Kong’s legal system is no longer truly independent,” says Mr Kwok. “This is just the beginning. Integration is accelerating.”
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