Enthusiasm for the Greater Bay Area among executives in the region continues to grow, explained Maggie Lee, Partner, Head of Capital Markets Development Group, Hong Kong, KPMG China. According to the third annual survey conducted by KPMG, HKGCC and HSBC last year, 80% of the respondents expected the economy of the GBA to grow faster than the rest of China – an increase on the previous survey.
Speaking at a Chamber webinar on 7 April, Lee added that 96% of the executives who participated in the survey expected the GBA initiative will help their own company to achieve revenue growth. Access to a larger market is the key motivation for those investing in the GBA, followed by the need to be closer to business partners.
Lee also noted that businesses are changing the way they look at the region. “Many companies, especially MNCs, had in the past separated their business coverage geographically into Hong Kong and Mainland China,” she said. “Many of them are now looking at the GBA as a whole and as an integrated region.”
The release of the Outline Development Plan for the GBA last year also seems to have assuaged some of the earlier worries about the initiative. Lee noted that in the first survey, many respondents raised concerns about the competition between the different cities: “Now, this is out of the picture, and businesses don’t have that worry any more.”
Besides greater alignment on tax and other regulations in the three jurisdictions involved, corporates hoped to see the establishment of a central GBA office to coordinate policy interpretation, Lee added.
Also speaking at the webinar, David Harrity, Head of Growth Propositions, Commercial Banking Hong Kong, HSBC, said that the results of the survey were very compelling and reflected the positive outlook among businesses for this very ambitious plan.
He gave the example of how one client was taking advantage of the opportunities opening up as a result of the GBA development. This company – a mid-cap corporate organization – operating in the industrial segment came to Hong Kong to raise the finance to buy a company in the United States.
“They are very positive about their ability to grow and tap into international markets,” Harrity said. “They have headquarters in Shenzhen, production facilities in Dongguan and an offshore financing platform in Hong Kong, and with that they expanded internationally to buy the company in the U.S. That, in a nutshell, is an example of how companies are going outbound.”
He noted that the healthcare and education sectors are seeing a lot of growth, and that technology plays a crucial part across all sectors helping them to upgrade. Financial services is a major sector for Hong Kong with growth potential across the rest of the GBA, and also one where technology is changing the environment.
“We are very aware that there is a lot of competition from non-traditional banks – including the emergence of virtual banks – and there are a lot of players in Guangdong,” he said. “That is keeping us on our toes.”
Sustainability is also an important part of the GBA plan, and companies are now looking to see how that will affect their sector. “There are various new business models emerging around recycling and efficiency, which are also creating new opportunities,” Harrity said.
Claudia Xu, Chief Commercial Officer, Hong Kong Science and Technology Parks Corporation, said that the Science Park was Hong Kong’s flagship centre for innovation and technology, supporting start-ups on the path to commercialisation. “Our role is to offer a location and connections with the whole ecosystem including universities, research institutes, investors and governments.” It also hopes to serve as a pool for innovative talent to serve the whole GBA.
The GBA is creating big new opportunities for Hong Kong, as a result of its economic size and the improving connectivity across the region. Besides traditionally strong sectors, there will also be new roles for Hong Kong such as facilitating data and information flow, and new types of financial services.
Xu gave the example of a medical devices company based in the Science Park to show how the GBA can contribute to their success. “They will not be able to grow into a big company if they stay in Hong Kong, because the market is small, and we don’t have the manufacturing capability. So we help them to link with Mainland entities, also with companies with medical manufacturing capabilities.”
Then, these companies can also come back to Hong Kong for an IPO. “This is a mini ecosystem where we can help start-ups in Hong Kong and the other cities in the GBA.”
Mainland manufacturers welcome the opportunity to collaborate with Science Park companies, Xu added, as it gives them the ability to upgrade their facilities.
The Covid-19 outbreak has changed the global business environment since the survey was conducted, but the speakers agreed that – although it was still too early to assess the full impact – they did not expect the coronavirus to change the business outlook regarding the GBA.
“Corporates feel that GBA is a longer-term strategy rather than a short-term plan of a few months,” said KPMG’s Lee.