Shenzhen took the GBA’s top spot in economic terms last year, announcing Rmb2.42 trillion (or HK$2.87 trillion) in GDP for 2018. That was a smidgen ahead of Hong Kong’s HK$2.85 trillion for the same period. Rannie Lee – HSBC’s Co-Chief Executive in Guangdong province – gives us three reasons why Shenzhen’s economy is going to keep growing.
Shenzhen is a city with an open culture
Shenzhen is a new city and it’s always been open to outsider. Among all the tier-one cities it has the most flexible household registration system, which is essential for attracting newcomers and migrant workers. It is also stepping up its talent policy. Take myself as an example. I am originally from Hong Kong yet I didn’t have to apply for a work visa or undergo a medical check-up when taking up my current role here. They’ve actually revised their policy, making it easier for non-locals to work in Shenzhen. This kind of evolution allows the city and its economy to benefit from talent from all over China.
The locals are entrepreneurial and increasingly middle class
Shenzhen is an entrepreneurial city and much of itseconomy is in the hands of privately owned enterprises, which have long been exposed to brutal market competition. Market forces will continue to drive innovation and private sector firms will likely account for most of its growth in future.
As a result, a lot of wealth is being created and the implication is that Shenzhen is no longer a purely manufacturing or producer economy, but also a consumption market. There’s a whole segment of the population that’s shifted from working in factories to working in offices. Their needs and demands have also evolved to a point at which they are looking for more of a middle-class lifestyle. That could be as simple as buying luxury brands, eating imported organic food or sending their kids to study abroad.
At HSBC we are seeing the same trend in how they are looking for higher quality, international solutions in everyday financial services and wealth management as well. Of course, with an economy based more on technology and innovation, there also comes a need for a wider range of businesses in the services sectors, which also presents opportunities to local and foreign companies.
The city, and especially its free trade zone in Qianhai, is a key part of the plan for the GBA
The vision set out by the plan is both ambitious and sweeping: to shift this regional economic dynamo up a gear, creating a powerhouse of global significance by strengthening economic partnerships between nine cities in Guangdong province, as well as Hong Kong and Macau.
The GBA’s success will depend on the ability of talented people to work across the ‘Area’. We expect tax incentives for Hong Kong residents, such as those we already see in the Qianhai free trade zone, as well as capital account measures to make it easier for them to open a bank account or set up a mobile wallet in Guangdong.
The zone in Qianhai is Shenzhen’s connecting point with Hong Kong, where innovations can be tested in areas like cross-border fund flows. Through Qianhai, foreign players can directly invest in white-listed industries, mainly related to professional services. People working in the Qianhai zone can also benefit from lower income tax, for instance, enjoying the same tax rate as Hong Kong.
For the moment Qianhai is a major construction site. But companies have already started employing people there, including HSBC, which has established the first securities joint venture to be majority-owned by an international bank in the zone. Soon there will be a train line linking Qianhai and Hong Kong. Currently there are many buildings yet to be completed. But the attraction is there because of the potential tax benefits for companies and individuals. That said, those details need to be worked through.