What’s the Greater Bay Area and how can I do more business there?
That was the basic proposition of HSBC’s GBA Connections conference at the end of June, when 60 clients from 13 countries came to Hong Kong for two days of presentations and debate, plus a day in-between of company visits in Shenzhen, reached by a 15-minute trip on the bullet train.
The Brief was there as well, keeping track of what came up in conversation.
The GBA: a new concept that is still taking shape
The large majority of attendees had visited Hong Kong on business trips in the past, often several times, but the wider region was new to them as a concept.
Broader knowledge of the Greater Bay Area was still relatively limited: most knew that Shenzhen was a city on the rise and they were aware of Macau as a casino destination, but the other cities in the region were largely unknown.
Stuart Tait, HSBC’s Head of Commercial Banking in Asia-Pacific, acknowledged the relative novelty of the GBA as a concept in his opening remarks, but he argued that HSBC is taking the lead in introducing its clients to what they should see as a major opportunity. Companies should grab the chance to get in early as the GBA gains altitude, he urged.
A later session introduced the building blocks of the plan, including its titling as one of the key strategies of China’s leader Xi Jinping, which means that it will be getting more of a push from policymakers.
Attendees wanted more detail about how things were going to work across the three main jurisdictions (Hong Kong, Macau and mainland China), although the speakers predicted that more practical policies will come with time, aligned with the guidelines in the outline plan that was published in February.
One example was the way that the authorities are starting to subsidise income taxes for people from Macau or Hong Kong coming to work in the nine mainland cities – a new measure announced last month. That means Hongkongers working across the border will pay 15% in tax, roughly equivalent to what they would pay on their salaries in their home market, for instance.
Small in size, but bigger in impact
The Greater Bay Area was described as a small area geographically, but as an economy that’s already the same size as Canada’s.
Its contribution to China’s economy is also outsized at 12% of national GDP and 37% of its exports, but with the potential to grow much bigger.
Why was HSBC so confident that this growth is going to happen? In part, it’s down to history, Tait said, highlighting how the GBA has its roots in the Pearl River Delta, the manufacturing zone that powered much of China’s boom in the late 1980s and 1990s.
Those 25 years of extraordinary economic achievement largely came about from the bottom up, often from businesses with limited value-add. Imagine what might be achieved from major new investment in next-generation sectors, he said, plus a more coordinated approach that draws on the different skills and experience of the GBA’s cities.
Politics matters, and there are other challenges as well
The political picture loomed large in the keynote address at the conference, which discussed the implications of Donald Trump’s priorities on the GBA’s prospects, particularly the trade and tech rows between Washington and Beijing. As China’s leading region for exports, and as home to some of its high-tech champions, most notably Huawei, the GBA is a more-than-interested party in how these disputes are resolved.
Most of the three days were focused on the commercial opportunities in the GBA, although the political backdrop was difficult to disregard completely. Participants hoped the trade and tech rows would soon be resolved, even if a timeframe was difficult to pin down. But in the meantime, the tensions are pushing the Chinese to generate more of their growth from consumption in their domestic economy, where the GBA will be a key driver. They have also intensified the focus on homegrown technology and innovation, two areas where the Chinese are determined to get more self-sufficient. Both trends should open new opportunities for trade and investment, it was thought.
In fact, most of the questions on the sidelines of the conference were about the details of getting things done in the GBA, rather than the bigger-picture politics. Queries included how many driving licences were needed to cross the HK-Zhuhai-Macao Bridge; how companies cope with the different data privacy laws across the region; and how much longer the telecom providers will levy data roaming charges on customers who move about the GBA.
All in all, that was a reminder that the practicalities usually outweigh the politics when businesses are looking for new markets.