GBA Brief

Ever increasing circles: the secret sauce for Guangdong’s growth

What does the Magic Circle mean to you? For the legal profession in the UK it’s the most prestigious of their law firms. For magicians, it’s their trade union (motto indocilis privata loqui or ‘don’t tell anyone how you do it’). But in China it is one of the ingredients making the Greater Bay Area into such a powerful economic proposition.

The GBA has made headlines as the world’s newest megalopolis. But what really makes it different is its clustered constellation of cities. And this is where the magic circle comes into play.

In fact there are really two magic circles in the GBA – an inner ring and an outer ring – both shaped by the region’s urban geography and economic history.

The ‘inner-ring’ encompasses Hong Kong, Shenzhen, Dongguan, Guangzhou, Foshan, Zhongshan, Zhuhai and Macau. These are the fulcrum in the GBA’s development plan. Fringed by ribbons of road and rail connections, these cities are also home to the main administrative centres, as well as most of the advanced manufacturing base and higher-end services firms. 

The ‘outer-ring’ comprises Zhaoqing, Jiangmen and Huizhou, the urban districts more towards the edges of the region. These are the parts of Guangdong province that aren’t quite as heavily developed, where land and labour costs are lower. Many of the heavier industries are starting to congregate there, as well as the more labour-intensive manufacturing. 

Although the cities in the two groups have a different tiering in economic terms, there isn’t a hard boundary between their two circles. In fact, the outer-ring is being plugged back into the core through a series of overlapping clusters that link it to members of the inner group. 

The blueprint for Zhaoqing in the northwest is to work more closely with neighbouring Guangzhou and Foshan, for instance, while Huizhou in the northeast is counting on collaboration with nearby Shenzhen and Dongguan.

Fifteen years ago the cities of Guangdong were the worst connected of China’s main urban clusters, according to Michael Enright, a professor at the University of Hong Kong and an expert on global competitiveness. But that has changed radically after years of investment in the roads and railways that now criss-cross the region, helping to cement the cluster effects that make the regional economy so compelling.

Enright has spent years looking at the GBA’s cities, heading up the publication of another major report on their future earlier this year. He says that one outcome of all the infrastructure investment is that commuters can move between the main cities in the inner-ring in an hour or less, which is a key threshold in travel time. Another important parameter is no more than three hours of travel time to anywhere within the outer-ring, keeping the local economy compact. The density of development inside the circle is crucial because investment inside the ring benefits all of its cities, not just those in the immediate vicinity. 

Enright’s view is that these short distances and high densities are unrivalled elsewhere, including economic powerhouses like the Yangtze River Delta, where the travel times between cities such as Shanghai, Hangzhou and Nanjing are longer.

Neo Wang, HSBC’s co-chief executive in Guangdong, said something similar to the Brief last month, when he described how a manufacturing client told him that Shenzhen is the only place where he can source all the key components that he needs within a one-hour radius. 

“Don’t talk about smart cities, talk about smart regions” was how Enright summed it up in a presentation at an HSBC conference in Shenzhen last week. “The GBA can do things that simply can’t be done in more dispersed geographies.”