Jimmy Chiang recalls growing up in Hong Kong and visiting his father’s family in Jiangmen, 115km away in China’s Guangdong province. They would set out early in the morning and arrive at their destination late at night. “Today, it’s two hours: a ferry to Zhuhai then a highway. It’s all very different,” he says.
Chiang is an associate director-general of Invest Hong Kong (InvestHK), the government department responsible for attracting and facilitating foreign direct investment into the city. His involvement in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is more than just personal, and Chiang is keen to showcase Hong Kong’s vital role in a 56,000 sq km region with 86mn people and a GDP of about $1.96tn in 2021.
One of the 11 major cities included in the GBA, Hong Kong has a multitude of comparative strengths and can leverage its unique “one country, two systems” advantages to play an outsized role in regional development. A magnet for investment, the GBA was home to 25 companies listed in the Fortune Global 500 in 2021, compared with 24 in the New York Bay Area and 10 in the San Francisco Bay Area.
The Hong Kong Special Administrative Region is not just the most cosmopolitan of the GBA cities, says Chiang, it is also one of Asia’s most important international financial centres. “Hong Kong has a unique role under the ‘one country, two systems’ policy,” he says.
While the Chinese central government has said it will continue to support Hong Kong’s traditional roles as a financial, trade, legal and transport hub, China’s 14th five-year plan opens new doors. “There are additional roles for Hong Kong to play,” says Chiang.
Plans include establishing the city as an international aviation hub, a centre for innovation and technology , a regional centre for intellectual property (IP) trading and a platform for international cultural exchange between China and the rest of the world. The World Intellectual Property Organization ranked the Shenzhen-Hong Kong-Guangzhou science and technology cluster as the world’s second largest in its Global Innovation Index 2021, after Tokyo-Yokohama. The GBA is followed in the index by Beijing, Seoul and San Jose-San Francisco clusters.
While Hong Kong, like the rest of the world, has had to contend with economic turmoil caused by the Covid-19 pandemic, it has also proven its resilience in the past, such as during the Sars outbreak in 2003 and the Global Financial Crisis in 2008. The city’s economy can be expected to emerge quickly from the impact of the pandemic after quarantine restrictions further loosen.
Channel to China
Hong Kong has been a conduit linking China and the rest of the world for more than a century — and that is set to continue under the GBA plan. “If you talk to multinational corporations, they have many different channels to China, but with our systems and institutions they gain an edge to build their China business through Hong Kong,” says Benson Cheng, a partner at PwC in Hong Kong who advises clients on GBA strategies.
Over the past couple of years, Cheng says he has witnessed a sea change in attitudes toward the GBA. “When we talk to clients, their direction has shifted from one of questioning and waiting for the GBA to now embracing it positively,” he says.
“The level of embracing the GBA agenda is sort of everywhere now,” Cheng adds. “It is not only for those institutions such as digital banks but also for different players.”
One of the key objectives is to develop the entire GBA into a globally influential IT hub. The Hong Kong SAR Government has committed over $19.2bn to support the development of IT over the past five years, boosting R&D, providing funding schemes for start-ups and other innovative companies, building better infrastructure, including the expansion of Science Park and Cyberport, as well as taking forward the under-construction 87-hectare Hong Kong-Shenzhen Innovation and Technology Park.
Innovation at the Core
Gary Ng, who is also a PwC partner with GBA experience, says the pandemic has in some ways accelerated a digital transformation in the region. “People have been unable to travel and this has forced clients to innovate, through pushing developments such as electronic payments across borders,” he says.
Ng believes the GBA is driving the digital agenda faster than before. “Policymakers are promoting financial integration within the GBA to help people who live and work in different areas,” he says. Ng foresees an accelerated development of cross-border payment solutions for both individuals and corporates, which include exploring use cases of central bank digital currencies such as e-CNY and e-HKD.
Chiang is exploring ways for InvestHK to cultivate this enthusiasm. “We are committed to nurturing IT talent and improving the start-up ecosystem,” he says. “And we have achieved good results: last year, a survey showed there were more than 3,700 start-up companies. That is a 68 per cent increase over 2017. We are also running our flagship StartmeupHK event to support development by matching investors with start-ups, R&D and talent.”
The quest for talent is made easier by Hong Kong hosting five of the world’s top 100 universities, according to the Quacquarelli Symonds World University Rankings in 2023. The five are the University of Hong Kong (in 21st place in the ranking), the Chinese University of Hong Kong (38th), the Hong Kong University of Science and Technology (40th), City University of Hong Kong (54th) and Hong Kong Polytechnic University (65th).
Chiang says he is often asked by prospective investors about where in the GBA they should set up their businesses — and why they should choose Hong Kong. “It’s simple,” he says. “There are certain business advantages that are quite unique to Hong Kong and are not shared by the other GBA cities at this moment.”
Overall, Chiang says, Hong Kong has “very strong institutions”, such as its legal system. A second factor is economic freedom in terms of the ease of doing business. Another draw is the low and simple taxation regime, with a 16.5 per cent corporate income rate and no VAT/GST, capital gains tax or import-export duties. Hong Kong has sophisticated capital markets, with no restrictions on inflows and outflows of capitals. It also has access to IPOs, private equity, venture capital and angel investors.
Naturally, other GBA cities have their own attractions and, as Cheng points out, setting up subsidiaries anywhere in the GBA contributes to stronger integration and still benefits Hong Kong as well as the region as a whole.
Outsized Importance
Even though Hong Kong is a relatively small domestic market, with just 8 per cent of the GBA’s total population, its global connectivity helps the city punch far above its weight. “Hong Kong’s digital bank licensing regime attracted a lot of mainland organisations, not because of Hong Kong’s 7.4mn people,” says Ng. “It’s because of our international presence. Hong Kong can help Chinese domestic companies go global — we have that role to play.”
Ng says a lot of what Hong Kong has to offer is all about trust. “Investors appreciate the infrastructure that has been built up over decades, including laws and regulations and the legal system that allow institutions to have the trust to invest into business here.”
Cheng adds that mutual recognition of professional qualifications — whether in legal, accounting or other professional services — across the GBA will promote further integration.
Hong Kong’s advantages in terms of limited red tape and gateways to international markets are “last but not least”, Chiang adds. “There are more than 1,400 multinational companies with a regional headquarters in Hong Kong. That’s quite a cluster of the global business community, enabling investors to develop connections and live in a cultural melting pot.”
