【Wall Street Journal】SITTING ON THE DOCK OF THE BAY
The naming of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is no coincidence—immediately drawing a connection with California’s own greater bay area, the epicenter of pioneering new industries that single-handedly led the world into a new tech-driven era.
Similarly, the GBA is also a critical crossroads, where the currents of modern-day globalization and international trade winds intersect and intensify. The GBA aims to harness the region’s collective strength, prompting the question: Will the GBA be the next Silicon Valley?
ASIA’S BAY AREA
The GBA is a region of significant potential, an “economic superzone in both scale and its capabilities for trade, capital markets, savings and innovation,” says Don Kanak, chairman of Eastspring Investments, a global asset management company. “Its scale in exports is already legendary—the container throughput of GBA ports is greater than that of the U.S. and U.K. combined. What’s not as well appreciated is the GBA’s emergence as a huge market, with middle class and affluent consumption and investment needs.
“From a capabilities angle, the GBA is a capital markets, savings and innovation powerhouse,” continues Mr. Kanak, pointing out that IPO proceeds raised by the GBA stock exchanges in 2018 were about 45% more than the New York Stock Exchange and almost five times that of the London Stock Exchange.
Though the GBA acronym is new, on a practical level cities across the region have been working as a semi-integrated hub for decades.
For many years, Hong Kong has thrived as the unofficial ‘capital of capital markets’, its laissez-faire systems making it a center of free trade and business, which it maintains even today despite an increasingly protectionist global trade environment.
Hastened by the formation of the GBA, the region as a whole is shifting to high-value manufacturing, says Mr. Kanak.
Shenzhen has emerged as the regions’ intellectual property center, registering over half of China-based patent applicants, while Hong Kong has emerged as a hotbed for fintech innovation.
The Greater Bay Area Homeland Development Fund recently launched by Hong Kong’s business community will further boost tech innovation in the region with a planned capital volume of over US$12 billion.
CONNECTIVITY AND ECONOMIC OPPORTUNITY
“Better connectivity will bring better economic opportunity,” says University of Hong Kong professor and director of Enright, Scott and Associates Consultancy Michael Enright. “For the first time, there’s a realistic possibility of Hong Kong having a real domestic market and hinterland and not being as limited by space constraints or the business and employment opportunities of a small and specialized economy—the GBA initiative is opening up new horizons for Hong Kong.”
According to Professor Enright, even if the region’s GDP growth declines to 5% per year from the last decade’s 8.25%, the region’s GDP will still double to over USD 3.2 trillion by 2032.
Professor Enright sees a population shift from migrant workers to highly skilled technical workers creating new demand for consumer goods and services.
At the same time, increased connectivity via the Hong Kong-Zhuhai-Macao Bridge, the Guangzhou-Shenzhen-Hong Kong Express Rail Link and massive infrastructure investments in Guangdong are bringing markets, production and consumers ever closer together.
“Hong Kong has been consistently ranked number one in Asia for its judicial independence”
RULE OF LAW
The GBA has the potential to become the most diversified urban cluster in the world. Under the “one country, two systems” principle, Hong Kong and Macao enjoy a high degree of executive, legislative and judicial autonomy.
This rule of law is critical to the GBA’s success. Long a leader in international trade and investment arbitration, Hong Kong’s legal system is based on British common law—one of the key aspects that makes the city such an attractive place for international businesses.
Under our common law, there is a wealth of cases or legal precedents that explain the scope of the law,” says lawyer Joseph Kwan, a partner at Deacons. “Hong Kong has been consistently ranked number one in Asia for its judicial independence, with the highest courts’ judgments cited by final appellate courts in other jurisdictions. All this shows the confidence and respect that people and senior judges in other countries have in the judicial system of Hong Kong.”
HONG KONG AS A REGIONAL MAGNET
Equipped with “one country, two systems”, Hong Kong has a key role to play in the success of the GBA, and efforts must be made to promote coordinated and complementary economic development within the larger economic region, says Ayesha Lau, managing partner of Hong Kong, KPMG China.
“Within the GBA plan, Hong Kong plays a unique part,” she says. “Long established as a finance hub, the city draws upon a talent pool rich in diversity and experience. Hong Kong’s enhanced connectivity when it comes to capital, infrastructure, intellectual property and trade will help make the city a regional magnet for wealth management.”