Hong Kong’s key role in the Greater Bay Area (GBA) has been further defined and underlined in a Central Government document released on 18 February. The “Greater Bay Area Outline Development Plan” provides guidance on the coordinated economic development of Hong Kong, Macao and the nine cities in Guangdong Province that make up the GBA.
“We are very pleased to see the release of the GBA Development Plan, which fleshes out the framework released in July 2017,” said HKGCC Chairman Aron Harilela. “We have long stressed the importance of a holistic approach, so it is very encouraging to see this blueprint that ensures all 11 cities can capitalize on their individual strengths.”
The plan acknowledges the long-term cooperation between Hong Kong and Guangdong, which has been turbo-charged since the GBA initiative was announced in 2014, yielding “remarkable results.”
“Hong Kong has always had a special connection with Guangdong Province, and the two regions have mutually benefitted from each other’s strengths,” Harilela said. “The Development Plan provides us with valuable guidance in building a vibrant world-class city cluster.”
The GBA project ultimately envisages a technology-driven region on a par with Silicon Valley and the Tokyo Bay Area. The area is already an economic powerhouse, with a population of 70 million and a GDP of around 10 trillion RMB, according to the Development Plan.
“The key ingredients in the GBA are the complementary roles played by Hong Kong, Guangdong Province and Macao – especially in the areas of technology, finance and tourism,” said HKGCC Deputy Chairman Peter Wong.
“The guidance laid out in the Development Plan means that the GBA cities can more effectively utilise these complementary advantages to achieve synergy.”
A crucial document
There are many reasons why Hong Kong businesses should pay close attention to the Development Plan. It has been driven by President Xi Jinping, and the use of “Outline” in its title signifies that it is of high-level importance. We can expect that the local governments in the Mainland will closely follow its guiding principles.
The plan also sets out a clear timetable with short- and long-term goals. By 2022, “the framework for an international first-class bay area ... should essentially be formed.” This means better coordination in regional development and reasonable division of labour among the cities. And by 2035, this area “should be fully developed” as a globally competitive, innovation-driven economy, with its internal markets highly connected.
Core city role
Hong Kong is named as one of the four “core cities” of the GBA, along with Macao, Shenzhen and Guangzhou.
The plan emphasizes Hong Kong’s status as international leader in sectors including finance, transportation, trade, logistics, aviation, and innovation and technology. It also sees the city as an international legal and dispute resolution centre. The wide range of industries listed means that there are tremendous opportunities for Chamber members.
“At HKGCC, we stand ready to leverage our international expertise and to cooperate with other cities in the GBA,” said Chamber CEO Shirley Yuen. “By sharing our extensive experience in areas such as finance and transport, we can build the GBA into a world-class bay area.”
The development also dovetails with the ambitions of the Belt and Road Initiative, as the overseas experience of Hong Kong businesses can help GBA companies in their efforts to “go global.”
Technology and finance
Developing the GBA as an international innovation and technology hub is one of the most important aims of the initiative. To facilitate this, Hong Kong higher education institutions and enterprises carrying out R&D will be better able to access Central Government funding.
Another specific measure is a plan to enhance the management of the cross-boundary use of medical data and bio-samples, such as blood, that are needed for R&D.
Hong Kong’s role as a financial centre is also highlighted, with an aim to “vigorously” develop special financial products and services. These include measures such as establishing a platform to serve the financing needs of the Belt and Road Initiative, support for cross-border cooperation among insurance companies, and expansion of the cross-boundary use of RMB.
Wong, who is also Deputy Chairman and Chief Executive of the Hongkong and Shanghai Banking Corporation Limited, said that the Hong Kong banking sector is already involved in the development of the region. “At HSBC, we have been helping our customers to grasp the opportunities that are emerging across the GBA.”
Green GBA
Developing Hong Kong as a green finance centre is another aim, with plans to set up an internationally recognised green bond certification institution. In fact, ecological concerns run throughout the Plan, which aims to create a circular economy across the region.
“Lucid waters and lush mountains are invaluable assets,” according to the Plan. Concrete proposals to protect these assets include stricter implementation of regulations, a blacklist system for polluters, and severe penalties for offenders.
“Hong Kong’s small size means that we need the rest of the GBA to make the circular economy work in practice,” said Yuen. “This is a perfect example of how cooperation is not just beneficial, but essential, for GBA cities if we are to fulfill our potential.”
Sector specifics
Aviation and ports are key sectors for Hong Kong’s participation in the GBA. The city’s role as an international aviation hub will be enhanced, while Hong Kong’s high-end maritime services can be developed to serve the whole GBA.
The plan also allows for greater cooperation in medical and healthcare services. Providers in Hong Kong will be allowed to set up facilities on the Mainland through sole proprietorship, joint ventures and cooperation.
Of interest to many Chamber members will be the provision to support “micro, small and medium enterprises from Hong Kong and Macao to realise their development potential on the Mainland.” This includes the extension of local subsidies and support to cover eligible entrepreneurs.
“We are very pleased to see this recognition of the important role of SMEs, who are the backbone of the Chamber and of the Hong Kong economy,” said Yuen. “HKGCC appreciates any measures that will help smaller companies to expand their markets.”
Quality living circle
Creating an education and talent hub is key to developing a “quality living circle” in the GBA. This means enhanced cooperation in education, not just among universities and vocational colleges, but also primary and secondary schools. The nine Mainland cities are encouraged to follow the successful example of the two SARs with respect to attracting high-end international talent.
Regarding manpower, the plan recognizes that more measures are needed to enable the flow of talent across the border. Specific suggestions include further liberalisation under the CEPA framework to allow Hong Kong professionals and enterprises to enjoy national treatment. It also proposes expanding the mutual recognition of professional qualifications.
“Our recent Chamber missions to GBA cities have showed us that, from the point of view of transport, the ‘quality living circle’ is already well established,” said Harilela. “What we hope to see soon is smoother people flow and recognition of professional qualifications to make this living circle a reality.”
Looking ahead
The Development Plan acknowledges that there will be challenges ahead, in particular the GBA’s different customs, legal and social systems. It also points to competition between cities in some areas, a mismatch of resources in others, and some economies, such as Macao, that are relatively homogenous.
The Plan also does not include a lot of immediately actionable policies. However, this is to be expected. What is likely is that the areas mentioned in the Plan will be the first to see firm policies emerge in the near future.
“The Hong Kong business community now has an unrivalled opportunity to have its voice heard on the GBA,” said Harilela. “Together, we can come up with policy proposals that will shape the development of the GBA, and help Hong Kong and our neighbours continue on the path to prosperity.
Chamber Exploring GBA Opportunities
Since the Greater Bay Area was first announced, HKGCC has organized a wide range of events to inform our members about the initiative. We have also arranged business missions to all nine of the Mainland cities in the GBA, including repeat visits to a number of them.
“These missions are very popular with our membership, as it lets them see the changes on the ground and meet with key government officials and local businesses,” said China Committee Chairman Petrina Tam.
In January, a Chamber delegation visited Foshan, taking advantage of the new high-speed rail link.
“The delegates were amazed at the transformation in the manufacturing sector,” Tam said. “Several years ago, we also visited factories in this area and the impression was that it was still very labour-intensive and low-tech. Now, the factories are highly automated, very neat and clean, and using advanced technology.”
Across the GBA, there are opportunities emerging from major infrastructure projects and the rapid growth of innovative private companies. So there is tremendous scope for Hong Kong investors and businesses to share their expertise, Tam added.
PC Yu, HKGCC General Council Member, noted that the Mainland cities in the GBA make up one of the most open and economically vibrant regions in China.
“This means that the GBA is well placed to give new impetus to the growth of Hong Kong,” he said. “Hong Kong businesses must grasp these opportunities and proactively take part in the development of the GBA to create a better environment for ourselves.”
To help members do just that, the Chamber has set up a GBA Working Group, with Yu as its Convenor.
“We set up the Working Group in recognition of the huge importance of this initiative and to keep our members up-to-date on the latest developments,” Yu explained.
Yu has also led several Chamber missions to the region in recent years. “Participants on these visits reported that they had gained a clearer and deeper understanding of the characteristics and positioning of the cities in the Bay Area,” he said.
He also noted the rapid improvements in areas that had previously been known for traditional manufacturing.
“The emerging industrial clusters of Jiangmen that are bringing new growth to the west bank of the Pearl River are a great example of the success of the GBA to date,” Yu said.
In the year ahead, HKGCC will continue its programme of GBA events, including a series of roundtables and a major GBA Forum on 10 April. The next mission is to Longgang in Shenzhen on 12 April.
“Longgang is a typical GBA success story, having evolved from an industrial area into a high-tech manufacturing cluster,” Tam said. “We are really looking forward to seeing its transformation, and to tap the wealth of opportunities that are emerging.”
GBA Initiatives for Hong Kong
On 1 March, Chief Executive Carrie Lam announced eight new measures approved by the Central Government relating to Hong Kong’s participation in the Greater Bay Area (GBA). The new measures will facilitate the flow of people and goods within the GBA.
Key developments among the measures announced are income tax rebates, and the relaxation of the counting method in respect of the 183-day rule. The changes address some of the major concerns of those in Hong Kong wishing to work in all nine cities within the GBA.
Personal income tax is higher in the Mainland with a top rate of 45% compared with 17% in Hong Kong. To attract talent, the Free Trade Zones of Qianhai and Hengqin initiated tax rebates to attract Hong Kong talent to work there. This concession will now be extended to all nine Mainland cities within the GBA — Guangzhou, Shenzhen, Zhuhai, Huizhou, Dongguan, Foshan, Zhaoqing, Jiangmen and Zhongshan — and will be applicable to talent in selected high-end industries.
“We are delighted that the Central Government has listened and responded to our suggestions and the worries of the Hong Kong business community to extending the tax provisions to all nine Mainland cities in the GBA,” said Chamber Chairman Aron Harilela.
Regarding the 183-day rule, previously, Hong Kong people who live in the Mainland for at least 183 days out of a year would need to pay taxes on all their income earned anywhere in the world. The relaxation stipulates that stays of less than 24 hours within the Mainland will not be counted.
“The income tax issue has been one of the main hurdles for companies wishing to do business or send their talent to the Mainland to develop business,” said Chamber CEO Shirley Yuen. “These new measures will definitely help ease employers and employees’ worries about the tax burden. The Central Government is expected to continue to roll out measures to further facilitate the flow of people, capital and goods within the region to unlock the GBA’s true potential.”