Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
André Woolgar, Business and Policy Intern
China seeks to reinvent the Pearl River Delta for the 21st century, branding the region the ‘Greater Bay Area’ and agreeing an Outline Development Plan in February 2019. We take a closer look at the ambitious vision which will be at the heart of China’s future growth plans.
The Pearl River Delta has long been a centre for trade and manufacturing in China. The region encompasses Guangdong province, including the cities of Shenzhen, Guangzhou, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou and Zhaoqing, as well as the Special Administrative Regions of Hong Kong and Macau.
Some 70 million people live in an area of 56,000km2- equivalent to the population of the UK living in an area smaller than the Republic of Ireland. In 2018, the combined GDP of the region reached US$1.38 trillion – 12 per cent of China’s total.
During the first phase of the economic reform of China, starting in 1979, this region was the hub of China’s manufacturing clout, and became a centre for foreign investment. Today, it produces 37 per cent of China’s exports.
According to a recent study by PwC, Macau and Hong Kong are heavily focused on services, with 90 per cent of their economies services-driven. Meanwhile, the current economy of Guangdong Province is more manufacturing focused than the national average, at 43.2 per cent.
The challenge
China’s economic growth is slowing. Analysts surveyed in a recent Reuters poll have predicted a growth rate of around 6 per cent in 2019 which, if realised, would represent China’s slowest rate of expansion in 30 years.
A key factor in the slowdown is structural change in China’s economy. It’s rapid growth in recent decades has created an emerging middle class which is shifting the economy into a more services-focused, consumer model and away from the industrial, manufacturing based economy which fuelled its success. China needs to develop sectors likely to drive future growth, which include digital technologies and financial services.
The need for change was evident at this year’s China Development Forum on 23-25 March, which was noticeable in that it was the first time Hong Kong’s Chief Executive, Carrie Lam, was invited to make a speech to the delegates. She described the troubled waters that Hong Kong had entered into in recent years, citing the shortage of land and labour.
The Chief Executive also mentioned the decline of Hong Kong’s port on the global stage. In the early 2000s, it was the world’s number one container port by throughput. By 2018 it was seventh.
Hong Kong could no longer “rest on its laurels”, Lam said.
The plan
The plan, therefore, is to integrate the nine cities of Guangdong province together and with Hong Kong and Macau, in order to make one of the biggest city-clusters in the world.
Each city in the Greater Bay Area has their own strengths which the plan will seek to build on, as outlined in an HSBC study of the region. Hong Kong supports a thriving financial industry, while Shenzhen is the centre for technology, with global corporations such as Huawei, ZTE and internet giant Tencent based here. Guangzhou is a major trading centre and Huizhou is one of China’s main cities focusing on green energy. Tourism and leisure sectors are focused on Macau.
Work is already underway to integrate the infrastructures of these cities. The Guangzhou-Shenzhen-Hong Kong Express Rail Link, which links these cities to China’s wider high-speed rail network, opened in September 2018. The Hong Kong-Zhuhai-Macau Bridge – a 55km long behemoth which is the longest open-sea fixed link in the world, costing US$18.8 bn – opened in October 2018.
Further plans are in development to increase the integration of the region even more. These include two further bridges to cross the Pearl River Delta: one between Shenzhen and Zhongshan, and one to alleviate traffic pressure across the Humen Pearl River Bridge, further upstream.
Guangzhou’s government seeks to connect into Dongguan’s metro system, giving them an easy link to this centre of manufacturing, as well as a new international airport, increasing the number of people who are able to access the region and its high-value exports.
With regards to financial opportunities, companies in the Greater Bay Area will be allowed by the government to issue yuan-denominated bonds. There is also strong growth, particularly in the emergent green bonds market, with the value of investments arranged and issued in Hong Kong already reaching $11billion last year, triple the amount issued in 2017.
“Seize the opportunities”
By 2030, the Chinese government hopes that the region’s economy will reach US$4.6 trillion in size, surpassing those of the San Francisco Bay Area, the New York Metropolitan Area and the Greater Tokyo Bay area.
At the Thirteenth National People’s Congress in March, the Chinese Premier, Li Keqiang, stated that he hopes that the scheme would help all cities in the Greater Bay Area “(seize) the major opportunities presented by the Belt and Road Initiative… giving better play to their strengths, and deepening mutually beneficial cooperation with the mainland in all fields.”
He also said that the new arrangement does not alter the relationship between China, Hong Kong and Macau, stressing that China will continue to adhere to guidelines of one country two systems. Nevertheless, concerns have been raised by local policy makers and academics as to Hong Kong’s ability to maintain its political identity and the rule of law as economic integration progresses. Other headwinds that the Greater Bay Area project could run into include uneven distribution of talent, with cities like Hong Kong and Macau more likely to attract young professional labour than others, and regional rivalry over infrastructure investment.
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