Hong Kong: Gateway to the Greater Bay Area
Hong Kong, already one of the world’s leading international financial centres, has another important role – as a key component of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), home to more than 71 million people and an economy the size of a large country, like Australia or Korea. The Hong Kong Special Administrative Region is set to play an outsized role as the international standard bearer in the GBA.
To realise the full potential of the GBA, each component leverages its comparative advantages. Guangzhou, for example, leads in manufacturing, while Shenzhen boasts advanced information technology skills. Macao, meanwhile, has status as a global tourism and leisure centre.
For Hong Kong, according to James Lau, Secretary for Financial Services and the Treasury, its key role within the GBA is financial services, noting that the sector accounted for 18.9 per cent of gross domestic product in 2017 with just 6.8 per cent of the workforce. “Financial services is really Hong Kong’s bread and butter, supporting the running of the whole economy,” he says.
Global companies can leverage Hong Kong’s status as international financial, transportation and trade centres. “The GBA development is creating many new opportunities,” says Stephen Phillips, Director-General of Invest Hong Kong (InvestHK). “InvestHK provides confidential and customised services for overseas companies planning to set up and expand into the GBA via Hong Kong.”
The GBA has fostered optimism even when economic outlook is clouded. A recent survey by KPMG suggested that economic uncertainty is having a limited impact on the city’s employment market, with sentiment buoyed by the GBA development. “Business leaders in Hong Kong believe the key to building on the city’s economic success lies in continuing to leverage its competitive advantages as an international financial centre and a hub for professional services, trade, logistics and transport,” says Ayesha Lau, Managing Partner, Hong Kong, KPMG China.
Meanwhile, Hong Kong’s international business community has been galvanised by the GBA and its representatives are closely watching its development. “Our China affairs group is building relationships in the GBA and seeking real opportunities,” says Tara Joseph, president of the American Chamber of Commerce in Hong Kong.
Research by the Australian Chamber of Commerce Hong Kong (AustCham) shows how the GBA can benefit from Hong Kong’s success as a global financial centre. “The GBA development plan is supported by Hong Kong’s role as an international centre for finance, asset management, transport, trade, arbitration and legal services,” says Andrew Whitford, chair of AustCham’s GBA committee. “In return, the continued development of GBA offers Hong Kong an opportunity to leverage and scale its strengths and comparative advantages,” he says.
Hong Kong’s unique position as a gateway between the international market and Mainland China remains a major advantage. Global companies have pinpointed Hong Kong's vital position in the GBA development. “The city’s world-class higher education system and international flow of information and knowledge will help position the city well as a key node within the initiative,” says Maaike Steinebach, general manager of Visa Hong Kong and Macao, a global payments company.
Companies like Visa acknowledge the need for GBA governments to harmonise laws and regulations across the area in order to further facilitate trade and business. “It is important to create an enabling policy environment, maintaining a level playing field, and fostering partnerships in the region,” says Ms Steinebach. “For example, we are pleased to see the Hong Kong Monetary Authority deepening bilateral exchanges and fintech co-operation with their Shenzhen counterparts.”
The connections run deep. Hong Kong’s strengths, together with its well established university system and advantages in both basic and applied research, help complement Shenzhen’s ability to test and capitalise ideas into production. “Furthermore, Hong Kong’s development into a venture capital hub can mutually benefit Shenzhen’s status as a centre for start-ups and entrepreneurship,” says Ms Lau at KPMG China.
Furthermore, Hong Kong’s development into a venture capital hub can mutually benefit Shenzhen’s status as a centre for start-ups and entrepreneurship.
Managing Partner, Hong Kong, KPMG China
Technology and innovation is regarded as one of the greatest areas of potential, and since the announcement of the GBA initiative, schemes aimed at fostering collaboration, including the Hong Kong-Shenzhen Innovation and Technology Park, have flourished. “The GBA’s fintech industry is expanding fast, both in Hong Kong and the Mainland,” says Ms Lau.
Companies such as Gekko Lab, a Hong Kong start-up that provides due diligence services for market professionals through artificial intelligence says the GBA initiative enabled it to “almost immediately set up an R&D office in Shenzhen,” says founder Ric Cheng. “We can work with the right talents in Shenzhen, while benefiting from Hong Kong’s proximity to our financial institution partners.”
Same as many reform programmes, there are areas of the GBA development that demand refinement. While Derek Barton, managing director of Barr + Wray, which builds commercial swimming pools and associated plant, praised Hong Kong for providing insights and networking opportunities to local market, he would like to see a smoother flow of goods and services between Hong Kong and Mainland China. Kevin Fitzgerald, Asia managing director at Xero, the accounting software provider, would like to see a cross-boundary e-invoicing framework to allow businesses to exchange information and facilitate e-payments in three currencies used in the GBA.
For companies ahead of the curve, cross-boundary coordination is improving. Peter Yuen, Hong Kong managing partner at Fangda Partners, a law firm with teams in Beijing, Shanghai, Shenzhen and Guangzhou says staff often work together on cross-boundary transactions and disputes, and increasingly on GBA-related matters. “I anticipate that Fangda’s offices will continue seamless cooperation on more GBA-related matters,” he says.
The GBA is a massive project in progress. Along the development plan and priorities as set out in the “Outline Development Plan” announced in February this year, also considering the needs and voices of the industries, measures are being devised and implemented by phases to ensure the effective integration and prosperous growth of the economy.
Hong Kong, as a free port with well-recognised rule of law, will play an instrumental role in connecting the GBA to the world. “Since we came here, we have already completed more than 60 projects in all sizes across the region,” says Mr Barton at Barr + Wray. “All these projects wouldn’t come to fruition if we hadn’t opened an office here in Hong Kong.”
By leveraging the distinctive strengths of its member cities, the GBA is poised to become a key economic growth pillar for China and a world-class metropolis in the coming decade. “As one of the world’s top three financial centres, Hong Kong is a strategic platform for fundraising and financial and professional services that companies from around the world can tap into for their regional operations and in pursuit of projects in the GBA,” says Mr Phillips at InvestHK.