GBA Brief

HSBC connects more of the dots at its Greater Bay Area gathering…

HSBC’s GBA Connections event in Hong Kong last month brought together a wide range of clients: the Brief spoke to the CFO of a British-based firm of architects, the head of a family investment office in the Middle East, the boss of an American semiconductor equipment maker, and the head of a toy licensing business from Europe – to name just a small selection. 

All of them had an interest in understanding the GBA better – but what stood out as takeaways from the conference?

Connectivity, clusters and circles

All conferences need buzzwords and this one was no different. Connectivity was an early contender for number one spot, with ‘city clusters’ and the ‘one-hour living circles’ deserving special mentions too. 

Presenters described how the density of the 11-city economy was crucial to its future growth, powered by the four ‘core engines’ of Macau, Hong Kong, Guangzhou and Shenzhen. Simply put, none of the cities in the GBA is too far away from any of its counterparts, with new roads, bridges and railways shrinking distances ever further. 

Helen Wong, HSBC’s chief executive for Greater China (photographed), made the point in more practical terms, outlining how the GBA brings together many of the same skillsets that exist in the US but which are far more dispersed geographically: namely finance (New York), tech (San Francisco), manufacturing (the Midwest) and entertainment (Las Vegas). 

Another way of understanding the GBA’s connectivity is how it helps companies launch new products. Each and every activity could be completed within not much more than an hour’s radius, Wong said.

“Perhaps the enterprise starts out with research at one of Hong Kong’s universities or science parks. Then it moves on to prototyping one of its new product ideas on a manufacturing line in Shenzhen,” she suggested. “The product then comes back to Hong Kong for further refinement before a market-ready version is taken to Dongguan for mass production. The goods are shipped to overseas markets from one of the world-class container ports in Nansha or Shenzhen. Maybe the business starts to do well, so it needs more trade finance, which it sources from Hong Kong. If it really prospers, maybe it does an IPO here too. And when that happens, the management team heads off for a weekend of celebrations in the casino resorts in Macau!”

It’s all about technology

Another major theme was how the GBA is at the forefront of technological change. All the usual suspects came up: particularly AI, facial recognition, Big Data and 5G.  

The spread of social media and the ubiquity of WeChat – Tencent’s messaging app – was also discussed, including a presentation from Tencent’s WeChat Pay on how the payment app was spreading into virtually every consumer-facing sector.  

Later in the week there was feedback from visits to companies in Shenzhen, including a trip to DJI, the world’s top-selling drone maker. The overall impressions of Shenzhen’s main business districts were positive as well, with a greener, more open feel than most people had been expecting. Others remarked on a local business culture with greater freedom to test out ideas. “There seems to be so much scope for experimentation, much of which would have been strangled by regulation in my home market,” was one piece of feedback.

Discussion moved on to the inevitable question of whether the GBA is going to ‘overtake’ Silicon Valley. Shenzhen already has a claim to be the best place to build hardware, it was suggested, although it’s not as competitive in software, where the Californians are still king.

A different response was that software expertise isn’t as concentrated in Silicon Valley as it once was, and that places like Florida’s Space Coast, Boston and Austin have claims to leadership in particular applications.

But other delegates took the bait, arguing that Shenzhen would soon be top dog because of the ferocious work ethic in the local workforce, the readily available pool of capital for innovative companies, and the single-minded support of a government that wants the GBA to be a world-beater

Indeed, the obsession with tech was even spreading to investors in Hong Kong, who are typically more focused on “surer things” like property, another contributor suggested. What’s changed is that people have seen the successes of the ‘unicorns’ at companies like Ping An, as well as the new reach of the tech businesses backed by giants such as Tencent (both of which are based in Shenzhen). “The unicorns are key – they are getting everyone interested in tech as an investment,” he argued. 

And don’t forget the GBA as a market

Another theme was how the GBA should be on company checklists as a marketplace, thanks to its 70 million, increasingly better-off consumers. 

GDP per head in the region is now $23,000, more than double China’s national average, and well above that of a middle-income country. That means that talk of the region testing out ways of freeing China from the ‘middle income trap’ (countries that lose their competitive edge in exports because of rising wages) is missing the point. In fact, the GBA has escaped the trap already. 

There was an interesting session focusing on one of the main beneficiaries of China’s consumer boom, with an early executive at Alibaba talking about how it won the e-commerce wars in China. Alibaba isn’t based in the GBA, but the presentation was revealing in outlining how its commercial approach kept changing in pursuit of profit. Nor was it ever a case of simply copying a business model that had worked in the West. In fact Alibaba triumphed by doing the opposite, crushing rivals like eBay by tailoring its approach to the local marketplace.

Along similar lines, one of the final sessions looked at the GBA’s consumers, and in particular its millennials, a group that is willing to spend more than its parents. There was agreement on some of the crossover with the same generation in other countries, but also recognition of a greater preference for shopping online in China, and an almost universal expectation to be able to pay for goods and services digitally.

Work-life balance was also mentioned, with the claim that work always takes precedence for younger professionals in the GBA (with talk of the ‘9-9-6’ culture in the local tech sector, of 9am to 9pm working hours, 6 days a week).

That work ethic isn’t something that applies to the millennials in my workforce, one business boss from Europe whispered to the Brief…

As for how corporate life is a multi-city affair in the GBA, perhaps the best example was given by Neo Wang, HSBC’s co-CEO for Guangdong. He explained how a typical day might see a staff meeting at 9am in Guangzhou, followed by a client lunch in Shenzhen. Then it was time to catch the bullet train to Hong Kong for a regional meeting in mid-afternoon, before heading back across the border to get home by 8pm.

Welcome to the future, perhaps…